First principles of political economy by Chapin Aaron Lucius 1817-1892

Author:Chapin, Aaron Lucius, 1817-1892. [from old catalog]
Language: eng
Format: epub, pdf
Tags: Economics
Publisher: New York, Philadelphia [etc.] Butler, Sheldon & company
Published: 1880-03-25T05:00:00+00:00

given b}' a prompt business man, will ordinarily command money at a low rate of interest, because of this convenience.

British consols, which represent the consolidated debt of England, run at from three to four per cent ntcrest, because they combine these three advantages in the form of investment the}^ offer. For the same reason our United-States bonds are eagerly bought up at a premium, though they bear only fom* or four and a half per cent interest.

3. The profits of industry vary at different times and in different countries, and affect the rate of interest. Here we look at the matter from the standpoint of the borrower. He must consider what he can afford to pay, and that evidentl}^ must depend on the profit he can gain by the use of capi' tal. If, as sometimes happens, a business 3'ields sc large profits that the capital is doubled in a year, one can well afford to pay twenty-five or even fiftj per cent for capital to be emploj^ed in such a business ; whereas, if through any cause a particular industry yields only three per cent of profit, one cannot afford to pa}^ even six per cent for capital to be embarked in that business.

4. The ratio between supply and demand of capital, more than any other one cause, determines the rate of interest. This is onl}^ a recognition of the principle of competition acting here as elsewhere. When the number of borrowers is large, and their wants are large, but the amount of capital available is small, the competition is sharp on the side of the borrowers, and they bid up on the rate of interest.

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