II. BOOK. I would not, however, by all this be underflood to mean, that the one fpecies of expence always betokens a more liberal or generous fpirit than the other. When a man of fortune spends his revenue chiefly in hofpitality, he shares the greater part of it with his friends and companions; but when he employs it in purchafing fuch durable commodities, he often spends the whole upon his own perfon, and gives nothing to any body without an equivalent. The latter fpecies of expence, therefore, especially when directed towards frivolous objects, the little ornaments of drefs and furniture,jewels, trinkets, gewgaws, frequently indicates, not only a trifling, but a base and selfish disposition. All that I mean is, that the one fort of expence, as it always occafions fome accumulation of valuable commodities, as it is more favourable to private frugality, and, confequently, to the increase of the public capital, and as it maintains productive, rather than unproductive hands, conduces more than the other to the growth of public opulence. CHAP. THE CHAP. IV. Of Stock lent at Intereft. IV. HE ftock which is lent at intereft is always C HAP. confidered as a capital by the lender. He expects that in due time it is to be reftored to him, and that in the mean time the borrower is to pay him a certain annual rent for the ufe of it. The borrower may use it either as a capital, or as a stock referved for immediate confumption. If he uses it as a capital, he employs it in the maintenance of productive labourers, who reproduce the value with a profit. He can, in this cafe, both restore the capital and pay the interest without alienating or encroaching upon any other fource of revenue. If he ufes it as a stock referved for immediate confumption, he acts the part of a prodigal, and diffipates in the maintenance of the idle, what was deftined for the fupport of the induftrious. He can, in this cafe, neither reftore the capital nor pay the intereft, without either alienating or encroaching upon fome other fource of revenue, fuch as the property or the rent of land. The stock which is lent at intereft is, no doubt, occafionally employed in both thefe ways, but in the former much more frequently than in the latter. The man who borrows in order to spend will foon be ruined, and he who lends to him will generally have occafion to repent of his VOL. III. D folly. II. BOOK folly. To borrow or to lend for fuch a purpose, therefore, is in all cases, where grofs ufury is out of the question, contrary to the intereft of both parties; and though it no doubt happens fometimes that people do both the one and the other; yet, from the regard that all men have for their own intereft, we may be affured, that it cannot happen fo very frequently as we are fometimes apt to imagine. Afk any rich man of common prudence, to which of the two forts of people he has lent the greater part of his stock, to those who, he thinks, will employ it profitably, or to thofe who will spend it idly, and he will laugh at you for propofing the question. Even among borrowers, therefore, not the people in the world moft famous for frugality, the number of the frugal and industrious furpaffes confiderably that of the prodigal and idle. What they bor The only people to whom stock is commonly lent, without their being expected to make any very profitable use of it, are country gentlemen who borrow upon mortgage. Even they scarce ever borrow merely to fpend. row, one may fay, is commonly spent before they borrow it. They have generally confumed fo great a quantity of goods, advanced to them upon credit by fhopkeepers and tradefinen, that they find it neceffary to borrow at intereft in order to pay the debt. The capital borrowed replaces the capitals of those fhopkeepers and tradesmen, which the country gentlemen could not have replaced from the rents of their eftates. It is not properly borrowed in order to be spent, but in order order to replace a capital which had been spent c H A P. before. Almost all loans at intereft are made in money, either of paper, or of gold and filver. But what the borrower really wants, and what the lender really fupplies him with, is not the money, but the money's worth, or the goods which it can purchase. If he wants it as a stock for immediate confumption, it is thofe goods only which he can place in that stock. If he wants it as a capital for employing industry, it is from thofe goods only that the induftrious can be furnished with the tools, materials, and maintenance, neceffary for carrying on their work. By means of the loan, the lender, as it were, affigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country, to be employed as the borrower pleases. The quantity of stock, therefore, or, as it is commonly expreffed, of money which can be lent at interest in any country, is not regulated by the value of the money, whether paper or coin, which ferves as the inftrument of the different loans made in that country, but by the value of that part of the annual produce which, as foon as it comes either from the ground, or from the hands of the productive labourers, is destined not only for replacing a capital, but such a capital as the owner does not care to be at the trouble of employing himself. As fuch capitals are commonly lent out and paid back in money, they conftitute what is called the monied intereft. It is diftinct, not only from the landed, but from the trading and II. BOOK manufacturing interefts, as in thefe laft the owners themselves employ their own capitals. Even in the monied intereft, however, the money is, as it were, but the deed of affignment, which conveys from one hand to another thofe capitals which the owners do not care to employ themselves. Thofe capitals may be greater in almoft any proportion, than the amount of the money which ferves as the inftrument of their conveyance; the fame pieces of money fucceffively ferving for many different loans, as well as for many different purchases. A, for example, lends to W a thousand pounds, with which W immediately purchases of B a thousand pounds worth of goods. B having no occafion for the money himself, lends the identical pieces to X, with which X immediately purchases of C another thousand pounds worth of goods. C in the fame manner, and for the fame reason, lends them to Y, who again purchases goods with them of D. In this manner the fame pieces, either of coin or of paper, may, in the courfe of a few days, ferve as the inftrument of three different loans, and of three different purchases, each of which is, in value, equal to the whole amount of thofe pieces. What the three monied men A, B, and C, affign to the three borrowers, W, X, Y, is the power of making those purchases. In this power confift both the value and the ufe of the loans. The ftock lent by the three monied men, is equal to the value of the goods which can be purchased with it, and is three times greater than that of the money with which the purchases are made. Thofe loans, however, may be all per fectly |