A large part of money savings, however, takes the con tractual form. The saver may take out an insurance policy. He may deposit in a savings bank (or commercial bank with a savings department) and get from 2 to 4 per cent interest, the bank in turn buying bonds of corporations, or making loans on mortgage security at a higher rate of in terest. He may loan to a business man or to a house builder, taking notes and mortgages, or he may buy bonds and mort gages from a corporation. In all these cases the money loaned is transferred to another, and if wisely invested, will produce new incomes. Money saved can be made to yield an income only by being spent—that is, invested in some way.' § 6. Classes of borrowers. A distinction is usually made according to the purpose of the borrower, between two main classes of loans: consumptive and productive loans. Con sumptive is the adjective usually applied to a loan made for the direct use of one's self (or of one's dependents). It is borrowing by a spender, and virtually undoes, negatives, 1 Some reservoirs of small savings in the United States in 1914 are here indicated.
Savings bank a depositors, 11,100,000; deposits $ 5,000,000,000 Postal savings, deposits 50,000,000 b Building & L. Asso. members 2,800,000 0; assets 1,250,000,000 Insurance (assessment) policy holders 8,800,000 0; assets 195,000,000 Insurance, ordinary and industrial policy holders 38, 200,000 0; assets 4,700,000,000 Total $11,195,000,000 a Do not include savings departments or interest-bearing time de posits of commercial banks, which doubtless are large.
b Estimated; postal savings in the United States have been increas ing at the rate of about $1,000,000 a month since the beginning of the portals savings plan in January, 1911.
c The same person may be counted more than once in these statistics.
It is estimated (by Le Moniteur des Interets materiels) that the net additional issues (i.e., not including conversions) of securities (cor porate and public) in the world between 1896 and 1913 was as follows 3 years, 1896-1898, average $1,700,000,000 yearly 6 years, 1899-1904, average 2,000,000,000 yearly 3 years, 1905-1907, average 3,100,000,000 yearly 8 years, 1908-1913,. average 4,000,000,000 yearly the act of the abstainer. This was almost the only kind of borrowing before the development of modern money mar kets. Among the many varieties of circumstances in real life several types of consumptive borrowers are distinguish able: (1) the victim of chance, (2) the chronic improvident, (3) the prodigal, (4) students or apprentices, and (5) ab staining users, or becoming-owners.
§ 7. Victims of mischance. Some kinds of misfortune are comparatively rare, are difficult if not impossible to pro vide against, and fall with overwhelming weight upon the unprepared victim. Such misfortunes are fires, floods, hur
ricanes, earthquakes, failure of crops through drought, ex cessive rain, pests, hail and windstorms; such are bodily acci dent through burns, cuts, falls, crushing weights and strains, which partially or completely, temporarily or permanently, disable from labor, or cause the death of a breadwinning mem ber of the family. Such also are many industrial accidents as the cutting off of the usual employment through failure of the sources of materials, loss of vessels in transit, brigandage, war, etc. In all such cases the victim's condition suddenly falls below the accustomed and the normal. Sometimes im mediate food, fuel, and clothing are a necessity of bare exist ence. One standing face to face with starvation can not be worse off a year hence ; nearly always there is some ground to hope that if the present misfortune can be relieved, fate will be kinder in future. One who expects to be better pro vided in the future will choose to pay a premium for a loan. When the present misfortune is far short of star vation, and is but a certain measure of inconvenience, the same kind of a motive exists, tho in a lesser degree. A loan at such a time, it must be remembered, is but the choice of the least of evils. If the person can not borrow he is tempted to increase his too small present income by convert ing, pledging, or selling, his control over future income. He may do this at great cost (equivalent to a large discount) by treating the present tangible wealth as if it were income, eating up the seed corn, and neglecting repairs on house and field and tools. Or he may exchange his durative wealth to get a larger present control of enjoyable goods. This, at a forced sale or in an unfavorable market, he can do only at low prices, much lower than must be paid to replace To one faced with such a choice the pawnbroker with his exacting terms must at the moment appear as a benefactor. He has not created the distress; he appears to offer the best way out of it. A defect of this alternative is that the loan is not made in a true market. There exists no true market for making such loans. The necessitous borrower usually is forced to make an isolated trade where he is in no position to higgle, where he must make the utmost concession to a hard bargainer. Such opportunities attract and develop a class of grasping usurers, "the loan sharks," who hold the victims of chattel mortgages in a veritable serfdom. The hard bargain is made still harder by other arbitrary and dis honest exactions for renewing the loan. Tho the object pledged may be of little value to others, it often has a per sonal and sentimental value (as an heirloom or a keepsake) so that the borrower will make great efforts to prevent its for feiture.