Chapter XXXIX: Section CLXXXII: Variations of the Rate of Discount

The fact that in commerce, etc., the rate of interest on capital loaned for short periods of time (discount) is subject to great fluctuations, while the mortgage rate of interest, for instance, remains the same throughout, depends on similar causes.[182-1] Yet there are contingencies in trade which, when taken immediate advantage of, promise enormous profits, but which may disappear within a month; risks of the most dangerous kind which can be conjured only by the immediate aid of capital. These are both sufficient grounds of a high rate of interest. Again, there are times of the profoundest calm in the commercial world, during which capitalists are perfectly willing to make loans at a low rate of interest, provided they are sure to be able to get back their capital with the first favorable breeze that blows. Agriculture is too immovable to come opportunely to the assistance of capitalists, here as a receiver and there as a loaner of capital. As the cycle of its operations is gone through usually only in a series of years, sudden influxes or outflows of capital would cause it the greatest injury.[182-2]

[Footnote 182-1: _Nebenius_, Oeff. Credit, I, 74 ff. Thus,
Hamburg discount towards the end of the last century
fluctuated between 2-1/2 and 12 per cent., while the capital
invested in agriculture brought an interest almost
invariably of 4 per cent. (_Büsch_, Geldumlauf, VI, 4, 19.)
At the same time, in Pennsylvania, the usual rate of
interest was 6 per cent. per annum, and the rate of discount
not unfrequently from 2 to 3 per cent. a month. (_Ebeling_
Geschichte und Erdbeschreib. von Amerika, IV, 442.) During
the crisis of 1837, it happened that 1/4 per cent. a day was
paid. (_Rau_, Archiv. N. F. IV, 382.) In the Prussian ports,
during the crisis of 1810, it is said that in July the rate
of discount was 2-1/2 per cent. a month. (_Tooke_, Thoughts
and Details, I, 111.) In Hamburg and Frankfort the rate of
discount rose in the spring of 1848, but declined in June to
2; until December it was 1-1/4, until the summer of 1849,
3/4 per cent. (Tüb. Zeitschr., 1856, 95.) Rate of discount
in France, about 1798, at least 2 per cent. a month.
(_Büsch_, loc. cit., IV, 52.) Half a year previous, capital
employed in the purchase of land paid an interest of from 3
to 4 per cent. Legal interest was 5 per cent.; discount, at
most, 6 per cent.; in very prosperous times 8-9, per cent.
(_Forbonnais_, Recherches et Considérations, I, 372.)]

[Footnote 182-2: Remarkable case in _Cicero's_ time in which
bribery, carried on on a large scale, raised the rate of
discount from 4 to 8 per cent. _Cicero_ ad. Quint. M, 15;
ad. Att. IV, 15.]