Note 193-4 — Chapter IV

How many merchants would have avoided bankruptcy here if they had been allowed to borrow at 8 per cent.! The established rate of 5 per cent. was certainly too low, considering the great demand for capital and the want of confidence at the moment, to permit capital to be loaned at that rate. Many saw themselves compelled to sell their merchandise or evidences of state indebtedness at a loss of 30 per cent., in order to meet their obligations. But the person who, to anticipate the receipts due in 6 months, for instance, consents to suffer a loss of 30 per cent., pays, in a certain sense, interest at the rate of 60 per cent. a year. Compare Tooke, Considerations on the State of the Currency, 60, and History of Prices, II, 163, on the Crisis of 1825-26. Since the Bank, least of all, could exceed the legal rate of interest, numberless applications were made to it in times of war in order to obtain the difference between the legal rate and the rate usual in the country. (Thornton, Paper Credit of Great Britain, ch. 10.) Prussia, November 27, 1857, suspended the usury laws for 3 months, on account of the commercial crisis, except the provisions relating to pawn-broker and minors.