SECTION CLXXXIV.. History of the Rate of Interest.

HISTORY OF THE RATE OF INTEREST.

Among barbarous nations, the loaning of capital is wont to happen so seldom, and to be limited so strictly to near relations, that it does not yet occur to any one to stipulate for a regular compensation therefor.[184-1] But, however, when they pass from this state to interest proper, the rate must be, of course, very high.[184-2] The premium for insurance is here very great, the possibility and inclination to accumulate capital exceedingly small. Even of the existing supply of capital, a great part remains idle, because the faculty and the institutions necessary to concentrate it and permit it to flow are wanting. (§ 43.) The unskillfulness of labor is more than overcome by the excess of fertile and naturally productive land, of rich sites still unoccupied, the cream of which, as it were, needs only to be culled. Population is indeed sparse, but the usually prevailing absence of freedom of the lower classes prevents wages claiming the full benefit of competition.[184-3] This last circumstance is especially important.[184-4] For a given amount of the national income and of rent, every depression of wages must obviously raise the rate of interest, and every enhancement of wages lower it.[184-5]

The rate of interest usual in these countries must not however be calculated from the data furnished by these usurious rates and fixed rates of interest, simply. In Germany, the rate of interest promised by princes in the 13th and 14th centuries was usually 10 per cent. The Frankfort municipal loans made by Jews in the 14th century bore interest at the rate of 9, 11-2/3, 13, 18, 26, and even 45 per cent. (Kriegk, F.'s Bürgerzwiste, 343, 539.) The rate of interest in the purchase of annuities continually declined between 1300 and 1500, especially in the time of the emancipation of manual laborers. Old Base documents give, between 1284 and 1580, as the highest rate, 11-3/9, and as the least, 5 per cent. The latter became more and more usual later, especially in the sale of house-rents (Hauszins), so that in 1841 all annuities (Renten) might be canceled by a payment of their amounts multiplied by 20. Until the beginning of the 15th century, in the city, the rule was 6 to 7 per cent.; outside of it, 8 to 10 per cent. (Arnold, Geschichte des Eigenthums in den deutschen Städten, 222 seq., 227 seq.) According to the Bremen Jahrb. of 1784, 164 seq., the rate of interest in the case of Handfesten, in 1295, = 10 per cent., gradually sank: in the 15th century it was never over 6-2/3; after 1450, generally 5; in 1511 only 4 per cent. In 1441 ff., in Augsburg, people were satisfied with a business profit of 7-2/3 per cent., while the usual rate of interest paid by house-rent, etc. was 5 per cent. (Hegel, Augsb. Chr., II, 134 seq., 157.) Handsome tables in the rate of interest in the purchase of annuities for all Germany, from 1215 to 1620, give as the rule, 7 to 10, scarcely ever over 15 per cent., in M. Neumann, Geschichte des Wuchers, 266 ff. For the upper Rhine, compare Mone's Zeitschr., 26 ff. Among the Fathers of the councils of Constance and Basil 5 per cent. was considered equitable. Compare F. Hammerlin, 1389-1457, De Emtione et Venditione unius pro viginti. Russian interest at 40 per cent., according to the laws of Jaroslaw (ob. 1054 after Christ). Karamsin, Russ. Gesch., II, 47.]