Rensselaer Union, Volume 7, Number 18, Rensselaer, Jasper County, 21 January 1875 — Speculating on Borrowed Money. [ARTICLE]

Speculating on Borrowed Money.

The usual rate of interest in the West is 10 per cent., and it is generally believed that this is the correct measure of the value of money. If the measure of -the value of a commodity is what it will bring this is true; but if’ the true measure of value is what the article can be made to yield it is not true. Experienced capitalists and business men give it as their mature opinion that there is no kind of property as valuable as money loaned at 10 per cent. —which is tantamount to saying that the average yield of industries, enterprises and speculations is less than 10 per cent, on the amount invested, or,mother words, that money is not really worth 10 per cent. There are several considerations that strengthen this conclusion. Money loaned at 10 per cent, will double itself in seven and a halt years; SIO,OOO will grow into $20,000 in that time, and $20,,000 will grow into $40,000. That the average investment in business ventures and industries will not dqthis is too well known to need a demonstration. While a hundred-men who loan money at 10 per cent., compounded, will, with prudent management, double their fortunes in seven and a half years, 100 men who borrow money at _ that rate will fail, in spite of all the prudence and foresight they may exercise, to double theirs. So far from it, fifty of theni, if not more, will break. There is nothing more, clearly established by the experience of business than the fact that a man who conducts his enterprises on borrowed capital—whose only resources, or chief resources, are the products of bills drawn on his shipments —will, in four cases out of five, come to bankruptcy, and a farmer who mortgages his farm‘for half its value to secure money at 10 per cent, in the hope that its net yield will par the interest and principal will, in four out of fives-be sold out. These gjain and wellknown facts appear to prove that the average annual product of money invested in commerce, speculation, industry and agriculture is not 10 per cent., and that, while it may bring that price, it is not really worth it. iJf all classes of borrowers in the West could % brought to appreciate this important fact, it would be worth millions to this region. There is a world of financial philosophy in it. Nothing is more absurd, and in the long run more disastrous, than the delusion that a man can get rich by borrowing money to speculate on; it is the secret of four-fifths of the cases of bankruptcy that occur in business and of the Sheriffs’ sales that take pl%ce in the country. —St Lov.it Republican. ■ No man can read about all these burglaries without determination to have his wife sleep on the front side of the bed.