At the peace of Ryswick, the debts of England, according to Davenant, in his fifth discourse upon the public revenues and trade of England, stood at 17 552 544l. sterling; call it 17 millions and a half, as we have no occasion to calculate with exactness.
Of this debt the capital of 3½ millions was sunk, as he calls it; because 1 300 000l. was on lives at 14 per cent. and what was over to make up the 3½ millions, was intended to remain a perpetual burthen on the nation.
For paying the interest of this sum, no less than 400 000l. a year was necessary, which makes on the whole above 11 per cent.
But then it must be observed, that more than one third of the sum was upon lives at 14 per cent.: the debt due to the bank, of which we have spoken in another place, was 1 200 000l. for which was paid 100 000l. a year, including 4000l. allowed for the charge of management: the remaining million was upon lottery tickets, bearing about 8 per cent. the price at which the bank had lent.
The second branch of debts was near 11 millions, which, he says, were in course of payment; because they were secured upon branches of revenue engaged for discharging them. A part of this class of debts was to be extinguished in the year 1700: and whenever that was done, then a proportion of the appropriated taxes, amounting yearly to above a million sterling, was immediately to be taken off.
The third class of debts were those not provided for at all; which in the place referred to, he makes to amount to no more than 3 200 000l. but he afterwards finds his mistake, and that they in fact amounted to above 5 millions and a half, which makes the debts of England at the peace of Ryswick, to have been near 20 millions.
Was it then any wonder, that a man who wished well to his country, should prefer borrowing upon short funds at any expence whatever in the mean time, rather than at perpetual interest, when he found that parliaments could not be prevailed upon to allow any tax to subsist one instant after the discharge of the debts for the payment of which it had been appropriated?
Besides, there was very little to be gained by borrowing upon long funds and perpetual interest, as long as the lenders considered their advantage to consist principally in getting their capitals refunded.
The plain matter of fact was, that trade at that time was only beginning to take root in England, and demanded funds to carry it on. The use of banks had not then been discovered, for turning property into money. Circulation, consequently, was confined to the coin; and profits on trade were very great. All these circumstances rendred capitals of essential use; and the consequence was, to raise interest to an excessive height.
Compare this situation with the present. Were the capital of 140 millions sterling thrown by Great Britain, in a few years, into the hands of the present creditors; were France, on the other hand, to throw in as much, what trade could absorb it? Capitals now are only of value in proportion to the interest they bring; and so long as the interest paid on public debts is sufficient to keep circulation full, and no more, interest will stand as it is: when that ceases to be the case, as in time of war, we see interest begins to rise; and when, on the other hand, the interest paid, proves more than sufficient for the uses of circulation, as upon a return of peace, then, from the same principles, interest must diminish.