USURY. This word comes from the Latin Usura, or as it is more frequently used, Usurte in the plural number. The Latin word signifies money paid for the use of money lent. The old word in use in England to signify what we now call interest, seems to have been Usury. But usury now means taking more interest for the loan of money than the law allows. A good deal on the subject of usury is contained in the arguments and judg ments in the case of the Earl of Chester field and others v. Sir Abraham Jansen (2 Vez., 125).
Interest is money which is paid for the use of other money, called principal. The general practice is this : the borrower agrees to pay a fixed sum yearly, half yearly, or quarterly, for each 1001. lent, until the money lent is returned. When this is not the case, and when the money paid for the loan depends upon the success of an undertaking, or any casualty not connected with the duration of life, it is called a dividend : when the money and its interest are to be returned by yearly instalments, and paid off in a certain fixed number of years, it is called an annuity certain ; but when the payment is to depend upon the life of any person or persons, it is called a life-annuity. [AinguiTy.] But by whatever name the proceeds of money may be called, the rules of calculation are the same in every case except that of a life-contingency.
The amount of money which persons are willing to pay for the temporary use of money depends upon a variety of cir cumstances. When profits are high, the rate of interest will also be high. When, on the contrary, money capital is abund ant in proportion to the calls for it, the competition of those persons who possess money, and who derive an income from it, will lower the rate of interest in the money-market. They will lend money at a low rate of interest to traders, who again will meet each other in competition in their various occupations, and must be content with such a rate of profit as will repay the low rate of interest for which they have bargained, together with such a compensation for their risk, skill, and trouble in its management as the degree of competition at the time will allow. If some new channel for the employment of money should be opened which holds out the promise of higher profits, a compe tition among borrowers will ensue, the effect of which will be to raise the rate of interest until it assumes its due propor tion to the rate of profits ; and as there never can, generally speaking, be two rates of profits at the same time (at least for any long period), in the same market, the effect of the additional call for capital to supply the partial demand that has been supposed, will be to raise profits and inte rest generally. An increase of money ca
pital, either absolutely or relatively to the means for its employment, will obviously have the contrary effect of lowering its value in use, that is, reducing the rate of interest and profits.
It would be difficult to imagine any circumstances relating to the loan of money, which must not resolve themselves into the conditions here proposed ; and it is therefore difficult to see wherein con sists the wisdom of governments in limit ing the rate of interest ; and yet the fact of has usually been the rule, and the absence of restriction as to the rate of interest the exception. The circumstance of the laws which regulate and limit the rate of interest in this country having been made by those who were among the class of borrowers rather than that of lenders, may perhaps afford some explanation of the views of the legislature in putting restrictions on the trade in money. That these restrictions nowever were, and so far as they exist still are, unfavourable both to lenders and borrowers, and more unfavourable to the borrowers than the lenders, may easily be demonstrated. In the year 1787 Mr. Bentham wrote his Defence of Usury,' and showed, in a manner which one would have thought adapted to produce general conviction, the mischief of such restrictions so far as the law was ope rative, and the inefficacy of the law to prevent altogether what are denominated usurious transactions. But the minds of men are slow in surrendering a prejudice or a false judgment to the attacks of true principles ; and for many years the efforts of Mr. Bentham and others remained fruitless. The system of restriction has however of late been modified in some important particulars, so that within cer tain limits, as regards time, the rate of interest among the mercantile classes may now be said to depend upon what may be considered the market value of money, which is thus allowed to bear its due pro portion to the current and usual rate of profits. A statute passed in 1545 limited the rate of interest to 10 per cent. per annum ; in 1624 the rate was lowered to 8 per cent., in 1660 to 6 per cent, and by the statute 12 Anne, at. 2, c. 16 (1713), it was further reduced to 5 per cent., beyond which rate, with the recent exception above referred to, it has been illegal to charge since that time, under the penalty of forfeiting for every offence three times the amount of the money lent.