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great number of lenders； and by that means produces lowness of
interest。 We must now consider how far this encrease of commerce
diminishes the profits arising from that profession； and gives rise to
the third circumstance requisite to produce lowness of interest。
It may be proper to observe on this head； that low interest and
low profits of merchandize are two events； that mutually forward each
other； and are both originally derived from that extensive commerce；
which produces opulent merchants； and renders the monied interest
considerable。 Where merchants possess great stocks； whether
represented by few or many pieces of metal； it must frequently happen；
that； when they either become tired of business； or leave heirs
unwilling or unfit to engage in commerce； a great proportion of these
riches naturally seeks an annual and secure revenue。 The plenty
diminishes the price； and makes the lenders accept of a low interest。
This consideration obliges many to keep their stock employed in trade；
and rather be content with low profits than dispose of their money at
an under…value。 On the other hand； when commerce has become extensive；
and employs large stocks； there must arise rivalships among the
merchants； which diminish the profits of trade； at the same time that
they encrease the trade itself。 The low profits of merchandize induce
the merchants to accept more willingly of a low interest； when they
leave off business； and begin to indulge themselves in ease and
indolence。 It is needless； therefore； to enquire which of these
circumstances； to wit； low interest or low profits； is the cause； and
which the effect？ They both arise from an extensive commerce； and
mutually forward each other。 No man will accept of low profits； where
he can have high interest； and no man will accept of low interest；
where he can have high profits。 An extensive commerce； by producing
large stocks； diminishes both interest and profits； and is always
assisted； in its diminution of the one； by the proportional sinking of
the other。 I may add； that； as low profits arise from the encrease of
commerce and industry； they serve in their turn to its farther
encrease； by rendering the commodities cheaper； encouraging the
consumption； and heightening the industry。 And thus； if we consider
the whole connexion of causes and effects； interest is the barometer
of the state； and its lowness is a sign almost infallible of the
flourishing condition of a people。 It proves the encrease of industry；
and its prompt circulation through the whole state； little inferior to
a demonstration。 And though； perhaps； it may not be impossible but a
sudden and a great check to commerce may have a momentary effect of
the same kind； by throwing so many stocks out of trade； it must be
attended with such misery and want of employment in the poor； that；
besides its short duration； it will not be possible to mistake the one
case for the other。
Those who have asserted； that the plenty of money was the cause of
low interest； seem to have taken a collateral effect for a cause；
since the same industry； which sinks the interest； commonly acquires
great abundance of the precious metals。 A variety of fine
manufactures； with vigilant enterprising merchants； will soon draw
money to a state； if it be any where to be found in the world。 The
same cause； by multiplying the conveniencies of life； and encreasing
industry； collects great riches into the hands of persons； who are not
proprietors of land； and produces； by that means； a lowness of
interest。 But though both these effects； plenty of money and low
interest； naturally arise from commerce and industry； they are
altogether independent of each other。 For suppose a nation removed
into the Pacific ocean； without any foreign commerce； or any knowledge
of navigation： Suppose； that this nation possesses always the same
stock of coin； but is continually encreasing in its numbers and
industry： It is evident； that the price of every commodity must
gradually diminish in that kingdom； since it is the proportion between
money and any species of goods； which fixes their mutual value； and；
upon the present supposition； the conveniencies of life become every
day more abundant； without any alteration in the current specie。 A
less quantity of money； therefore； among this people； will make a rich
man； during the times of industry； than would suffice to that purpose；
in ignorant and slothful ages。 Less money will build a house； portion
a daughter； buy an estate； support a manufactory； or maintain a family
and equipage。 These are the uses for which men borrow money； and
therefore； the greater or less quantity of it in a state has no
influence on the interest。 But it is evident； that the greater or less
stock of labour and commodities must have a great influence； since we
really and in effect borrow these； when we take money upon interest。
It is true； when commerce is extended all over the globe； the most
industrious nations always abound most with the precious metals： So
that low interest and plenty of money are in fact almost inseparable。
But still it is of consequence to know the principle whence any
phenomenon arises； and to distinguish between a cause and a
concomitant effect。 Besides that the speculation is curious； it may
frequently be of use in the conduct of public affairs。 At least； it
must be owned； that nothing can be of more use than to improve； by
practice； the method of reasoning on these subjects； which of all
others are the most important； though they are commonly treated in the
loosest and most careless manner。
Another reason of this popular mistake with regard to the cause of
low interest； seems to be the instance of some nations； where； after a
sudden acquisition of money or of the precious metals； by means of
foreign conquest； the interest has fallen； not only among them； but in
all the neighbouring states； as soon as that money was dispersed； and
had insinuated itself into every corner。 Thus； interest in SPAIN fell
near a half immediately after the discovery of the WEST INDIES； as we
are informed by GARCILASSO DE LA VEGA： And it has been ever since
gradually sinking in every kingdom of EUROPE。 Interest in ROME； after
the conquest of EGYPT； fell from 6 to 4 per cent。 as we learn from
DION。
The causes of the sinking of interest； upon such an event； seem
different in the conquering country and in the neighbouring states；
but in neither of them can we justly ascribe that effect merely to the
encrease of gold and silver。
In the conquering country； it is natural to imagine； that this new
acquisition of money will fall into a few hands； and be gathered into
large sums； which seek a secure revenue； either by the purchase of
land or by interest； and consequently the same effect follows； for a
little time； as if there had been a great accession of industry and
commerce。 The encrease of lenders above the borrowers sinks the
interest； and so much the faster； if those； who have acquired those
large sums； find no industry or commerce in the state； and no method
of employing their money but by lending i