…but from the economic point of view the loan itself could never be considered responsible for previous necessities that it had not created and which, to some extent it relieves.

Frédéric Bastiat
Pamphlets II
Part 4 of 5, The Plane

Here is a new illustration of the characteristics of a loan further to the fixed capital formation by Jacques of a plane that Guillaume would like to use. It allows Frédéric Bastiat to underline three aspects of capital, namely:

  • it produces interests legitimately
  • the interest is not detrimental to the borrower
  • the interest is perpetual

The chosen quote pertains to the second point et reminds us that it is vain to kill the messenger when he announces something we do not like. Too often, I see people who are sincere and assess a deplorable economic situation affecting one or the other and then are up in arms against the action of a third person as if it were responsible for the situation. When some unfortunate person borrows with interests, the alternative choice is usually not to receive the money he needs for free but to not receive anything at all, which does not help moving out of his financial dire straits. If the loan is contracted freely, it is necessarily beneficial to the borrower despite the interests to be paid. We can also see in passing that, the more available capital there is in an economy, the cheaper it is, which is the reason why those who do not have any still benefit from the abundance of capital, even if it is owned by someone else.

Other quotes from Capital and Rent:
Introduction – Part 1 of 5 – The sack of wheat – The house – The plane – Part 5 of 5

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