interest is falling. Our federal bonds have hitherto remained depressed-I mean since the close of the war-mainly from three causes. Ist. The strength and revenue resources of the government were not sufficiently well appreciated. Governments need advertising, as well as individuals. The war advertised ours, somewhat; but our statisticians and bankers, in` spite of their desire to magnify our country's resources, have actually, from maltreatment, succeeded in belittling them (0). 2nd. Taxation has been excessive, and although it is being somewhat reduced, the reduction is neither material nor rapid enough (1). 3rd. The bonds are funded at terms of time entirely too short. This is an error of administration, however, which, happily, under the act of April 12, 1866, is susceptible of being remedied by the Treasury at any time. In a word, I regard the outstanding bonds of the United States even upon the conditions of liquidation now attached to them, as not only the most secure, but the most profitable investment within the whole range of present observation.

With reference to the above predictions, it should be borne in mind that I leave entirely out of view whatever effect may be produced by such a change in the now prevalent conviction concerning the tendency of the rate of interest, as the views herein expressed, or the facts as they develop themselves, may serve to bring about.

VIII. SOPHISMS.

I have only space to notice a few that occur to me at the moment of writing.

I. It is not true, as held by Professor Perry (Letter to Hon. G. W. Smith, July 11, 1871, published in Rep. of Com. on Interest, Nat. Ins. Con., 1871) and others, that the supply of "legal-tender paper money," or, indeed, any kind of money, permanently affects the rate of interest. There is, indeed, an interval of time following new and redundant issues of money (whether specie, as when Spain was flooded with gold and silver, following the discovery of America; or paper, as when, during the late war, the United States treasury took advantage of new emissions of currency to "fund" certain bonds at lower rates of "interest") when the rate of "interest" rises. But so soon as the rise in prices which inevitably follows, suffices to employ all

the currency emitted, which it is soon bound to do, this temporary phenomenon disappears. See, on this subject, Essay in the New York New Nation, June 25, 1864.

The employment of the term "money" as synonymous with capital, in this connection, by Prof. Perry, must also be regarded as erroneous. Aristotle's objection to usury, on the ground that money could not grow, might possibly have some reason for its basis if the growth of all capital, or its power to stimulate growth, were as restricted in degree as the growth, or the power to stimulate it, which pertains to money. Live stock, corn, timber, cotton, wool, etc., will grow and increase solely by the operation of natural forces, as heat, air, moisture, etc. It is true that these forms of capital will grow more surely and rapidly if to the forces of nature is supplemented the labor of man; nevertheless, they will grow and increase without it. And even gold, silver, iron, houses, ships, and other inorganic commodities, though incapable of growth, arc, nevertheless, susceptible of such application as to render them potent instruments to stimulate the growth of animals and plants. But money, when it ceases to become capital, as it might, if hoarded, or if issued in excess of the current demand for its employment, is utterly incapable either of growing by itself, or of contributing toward the growth of other things. It is solely from the fact that capital will enhance in quantity by growth, while it is in the hands of the borrower, that interest is defensible. I differ from the accomplished professor with great reluctance, but, in this respect, I am compelled to take issue with him (q).

2. The rate of "interest" is a term improperly used when applied to the rate (often lasting but a few hours) which indicates the temporary loanable value of capital in a stock or money market. It is properly used only when applied to the permanent loanable value of capital.

3. To ascertain the average rate of "interest" in a country, a practice has obtained of adding together the rates current at a number of places, and dividing the quotient by the number of places. This is erroneous, the amount loaned at the given rate in cach place being a necessary element in the calculation.

4. A certain Mr. O'Callaghan published a work against usury, which, in 1856, had passed through no less than five editions in New York. There are here certain journalists

who make it a specialty to periodically advocate the establishment of an illimitable, irredeemable, interchangeable, elastic paper currency which, they claim, will permanently reduce the rate of interest. There is a society in New York, called the American Anti-Usury Society, which maintains that the giving of interest" subverts moral principle," "prevents the estab lishment of truth and righteousness among men," fosters monopoly, crushes commerce, destroys liberty, tramples on the poor, exalts the rich, and, in short, is responsible for the most terrible political and social evils. There is no answer to be made to such people. The only way is to let them alone. I would, however, say to the working classes whom they address, and, I regret to be obliged to believe, seriously affect, with their blatant nonsense, that to attack interest is to attack credit, and also to attack that divine law which commands animated nature to develop and increase; for interest is mediately born both of credit and of growth.

NEW YORK, May, 1872.

ALEX. DELMAR,

Late Director of the Bureau of Statistics of the United States.

To H. S. OLCOTT, Esq.,

Secretary National Insurance Convention, New York.

NOTES.

(a) "They (the Jews) seemed to trade and acquire for his (the king's) profit as well as their own; for at one time or other, their fortunes, or a great part of them, came into his coffers." History of the Exchequer by Thomas Madox, chap. vii. § 1.

(b) This was on the conversion of the Pontifical 4 per cents, (market price 122) to 3 per cents, (market price 112) the first instance of voluntary funding to lower rates, I remember to have read of.

(c) See Social Science Review, 1. 193.

(d) Buckle, 1. 53. Consult also Mill, Fawcett and Hearn. (Hearn on Plutology). The theory alluded to in the text and which is fully treated in The Social Science Review, was caught sight of, but only caught sight of, by these illustrious economists.

(e) U. S. Censuses. Rev. I, 208.

For details according to census of 1860 see S. S.

(ƒ) Further to show the invalidity of the evidence embraced in Mr. Barnes' paper, it is neccessary to point out the fact that a large portion of the essay is devoted to the usury laws of the various states, a subject whose only connection with the topic under discussion is the remote one previously pointed out in this paper, viz: that legal rates during long periods of time rudely indicate market rates, and are thus, perhaps, of use to the historian. But when, as in Mr. Barnes' case, the subject is the market rate of interest within recent times, to quote the legal rate is simply irrelevancy. Not simply irrelevancy, in this case, either, for the compilation thus vainly paraded by Mr. Barnes, is merely a later revision of what is due originally to the industry of Col. J. B. C. Murray. (History of Usury, Philadelphia: Lippincott, 1866.) whom nevertheless, Mr. Barnes in his essay strangely fails even to allude to.

(g) Under this head is included such small risk as is noticed in the analytical diagram under the caption of Ultra-Social, and which is intended to embrace all those casualties not at present capable of being computed, as earthquakes, floods, &c.—in a word those not embraced in the field of insurance.

(h) The success of ten-hour, and recently of eight-hour strikes, is regarded as tending to confirm the belief that production is increasing its rate of gain over consumption in the United States.

(i) In 1803, out of $70,000.000 federal funded debt, $32,000,000 were held by foreigners, mainly English and Dutch. By the year 1818 the federal funded debt increased to $99,000.000. and the foreign-held portion fell to $25,500.000; but it is believed that the difference, and more, was invested by foreigners in other enterprises in this country.

(k) In 1830 the combined federal, state, county, and town taxes levied in the United States amounted to $32.837.383; population, 12.866.020. In 1860 the total taxes amounted to $150.241.346; population, 31,443.321. In 1870 the total taxes amounted to about $600.000.000; population, about 40,000.000. These taxes are divisible into three parts. Ist. That which is expended for the support of necessary government, including, of course, interest on the public debt. 2nd. That which is expended for

needful public works. 3rd. That which is expended wastefully or corruptly. So long as taxation does not exceed an amount requisite for the first two purposes specified, it is not believed that, in the long run, it will affect prices; but to the extent that it is expended uneconomically it must tend to enhance prices. While it is not believed that the taxes levied in this country either in 1830 or 1860 were expended uneconomically to any serious extent, the same cannot be said of those levied during the past seven years.

(1) In a single case (that of the New York Tammany ring) the amount of public treasures corruptly expended or stolen outright has been estimated at a sum sufficient to cover, for a year, the total expenses of the municipal government.

(m) in New York, several judges have been presented by the Bar Association (of lawyers) for impeachment on charges of corruption, and one of the number has resigned his office, pending the charges. There is no party bias entertained by the Bar Association.

(n) A practical plan was conceived and perfected by the writer, some years ago, for separating the element of risk from the interest and dividends of commercial and financial investments, by establishing a Credit Assurance Institution. The outline of this project, and some of the calculations upon which it is based, are given in The New York Financial and Commercial Chronicle, in August, 1865. The project, when matured, was submitted to, and met the approval of a number of leading capitalists in New York, but for lack of sufficient capital, it was, for the > time, at least, abandoned.

(0) See on this subject Debt and Resources of the People of the United States, Social Science Review, pp. 387-417.

(p) For a more complete review of the extent and progress of taxation in the United States, since the war, than is afforded by the tables in the official census, and also with reference to the effect of excessive taxation on prices, see the writer's Letter on the Finances, September, 1868, published quite generally throughout the United States, at the time, and his Address at Columbus, Ohio, August 25, 1870, published in the Statesman, and other journals. Both of these compilations have since appeared in pamphlet form, corrected.

(9) Capital, by persons wholly unused to reflect on the subject, is Kupposed to be synonymous with money." John Stuart Mill, Political Economy, ch. iv, § 1.