CHAP. IV.
OF STOCK LENT AT INTEREST.
The stock which is lent at interest is always
considered as a capital by the lender. He
expects that in due time it is to be restored to
him, and that, in the mean time, the borrower
is to pay him a certain annual rent for the use
of it. The borrower may use it either as a
capital, or as a stock reserved for immediate
consumption. If he uses it as a capital, he
employs it in the maintenance of productive
labourers, who reproduce the value, with a
profit. He can, in this case, both restore the
capital, and pay the interest, without alienating
or encroaching upon any other source of
revenue. If he uses it as a stock reserved for
immediate consumption, he acts the part of a
prodigal, and dissipates, in the maintenance
of the idle, what was destined for the support
of the industrious. He can, in this case, neither
restore the capital nor pay the interest,
without either alienating or encroaching upon
some other source of revenues such as the property
or the rent of land.
The stock which is lent at interest is, no
doubt, occasionally employed in both these
ways, but in the former much more frequently
than in the latter. The man who borrows in
order to spend will soon be ruined, and he
who lends to him will generally have occasion
to repent of his folly. To borrow or to lend
for such a purpose, therefore, is, in all cases,
where gross usury is out of the question, contrary
to the interest of both parties; and
though it no doubt happens sometimes, that
people do both the one and the other, yet,
from the regard that all men have for their
own interest, we may be assured, that it cannot
happen so very frequently as we are sometimes
apt to imagine. Ask any rich man of common
prudence, to which of the two sorts of
people he has lent the greater part of his stock,
to those who he thinks will employ it profitably,
or to those who will spend it idly, and he
will laugh at you for proposing the question.
Even among borrowers, therefore, not the
people in the world most famous for frugality,
the number of the frugal and industrious
surpasses considerably that of the prodigal
and idle.
The only people to whom stock is commonly
lent, without their being expected to make any
very profitable use of it, are country gentlemen,
who borrow upon mortgage. Even they
scarce ever borrow merely to spend. What
they borrow, one may say, is commonly spent
before they borrow it. They have generally
consumed so great a quantity of goods, advanced
to them upon credit by shop-keepers
and tradesmen, that they find it necessary to
borrow at interest, in order to pay the debt.
The capital borrowed replaces the capitals of
those shop-keepers and tradesmen which the
country gentlemen could not have replaced
from the rents of their estates. It is not properly
borrowed in order to be spent, but in
order to replace a capital which had been spent
before.
Almost all loans at interest are made in
money, either of paper, or of gold and silver;
but what the borrower really wants, and what
the lender readily supplies him with, is not
the money, but the money's worth, or the
goods which it can purchase. If he wants it
as a stock for immediate consumption, it is
those goods only which he can place in that
stock. If he wants it as a capital for employing
industry, it is from those goods only that
the industrious can be furnished with the tools,
materials, and maintenance necessary for carrying
on their work. By means of the loan,
the lender, as it were, assigns to the borrower
his right to a certain portion of the annual
produce of the land and labour of the country,
to be employed as the borrower pleases.
The quantity of stock, therefore, or, as it is
commonly expressed, of money, which can be
lent at interest in any country, is not regulated
by the value of the money, whether paper
or coin, which serves as the instrument
of the different loans made in that country,
but by the value of that part of the annual
produce, which, as soon as it comes either from
the ground, or from the hands of the productive
labourers, is destined, not only for replacing
a capital, but such a capital as the
owner does not care to be at the trouble of
employing himself. As such capitals are commonly
lent out and paid back in money, they
constitute what is called the monied interest.
It is distinct, not only from the landed, but
from the trading and manufacturing interests,
as in these last the owners themselves employ
their own capitals. Even in the monied interest,
however, the money is, as it were, but
the deed or assignment, which conveys from
one hand to another those capitals which the
owners do not care to employ themselves.
Those capitals may be greater, in almost any
proportion, than the amount of the money
which serves as the instrument of their conveyance;
the same pieces of money successively
serving for many different loans, as well
as for many different purchases. A, for example,
lends to W L.1000, with which W
immediately purchases of B L.1000 worth of
goods. B having no occasion for the money
himself, lends the identical pieces to X, with
which X immediately purchases of C another
L.1000 worth of goods. C, in the same manner,
and for the same reason, lends them to
Y, who again purchases goods with them of
D. In this manner, the same pieces, either
of coin or of paper, may, in the course of a