Adam Smith's Simplified Wealth of Nations, Book 1, Chapter 9b: Interest Rates

Chapter 9b: Interest Rates

The Effect of Laws on Interest Rates
16 A defect in the law may sometimes raise interest rates above what is needed by the country.

17When the law prohibits interest, it does not prevent it.

Montesquieu
Montesquieu

18 The lowest ordinary profit rate must always be something more than what is sufficient to compensate the occasional losses of employing stock.

19The lowest ordinary interest rate must be more than sufficient to compensate the occasional losses in lending.

20 In a country with maximum riches, where all businesses had maximum stock employed, the ordinary clear profit rate would be so small and interest rates so low. 21 The highest ordinary rate of profit among commodities, eats up the landlord's rent and leaves only the lowest wages. 22 The proportion of the usual market interest rate to the ordinary clear profit rate varies as profit rises or falls. 23 In countries fast advancing to riches, the low profit rate in commodities may compensate high wages.

24In reality, high profits tend much more to raise the price of work than high wages.


Words: 826
Next: Chapter 10a: Wages and Profit