understand how the stipulation of a part of this excess of profits in
favour of the lender, is equitable and lawful.

Ignorance of the true part which cash plays in human transactions, is
the source of the most fatal errors. I intend devoting an entire
pamphlet to this subject. From what we may infer from the writings of
M. Proudhon, that which has led him to think that gratuitous credit was
a logical and definite consequence of social progress, is the
observation of the phenomenon which shows a decreasing interest, almost
in direct proportion to the rate of civilisation. In barbarous times it
is, in fact, cent, per cent., and more. Then it descends to eighty,
sixty, fifty, forty, twenty, ten, eight, five, four, and three per cent.
In Holland, it has even been as low as two per cent. Hence it is
concluded, that "in proportion as society comes to perfection, it will
descend to zero by the time civilisation is complete. In other words,
that which characterises social perfection is the gratuitousness of
credit. When, therefore, we shall have abolished interest, we shall have
reached the last step of progress." This is mere sophistry, and as such
false arguing may contribute to render popular the unjust, dangerous,
and destructive dogma, that credit should be gratuitous, by representing
it as coincident with social perfection, with the reader's permission I
will examine in a few words this new view of the question.

What is _interest_? It is the service rendered, after a free bargain, by
the borrower to the lender, in remuneration for the service he has
received by the loan. By what law is the rate of these remunerative
services established? By the general law which regulates the equivalent
of all services; that is, by the law of supply and demand.

The more easily a thing is procured, the smaller is the service rendered