cent. interest, possibly, towards the eighteen
promised to investers. When money is not
borrowed, it is usually the practice to compel,
by ballot, a sufficient number of investers to
draw out the stagnating cash, by receiving
back the value of their shares. In this way,
the cash in terminating societies perpetually
stagnates, and from that cause alone, if there
were no other sources of mishap, it becomes
impossible, in ten years, to produce the return
that had been promised. In the case
mentioned above, investers would have to go on
paying their five shillings a month for full
twice ten years, before the seventy pounds
could be paid to them. In many instances,
two, three, or four years, have to be appended
to the limit, during which, borrowers and
investers have to go on paying, beyond the
term of their contract, before the mutual
service can be made complete. Great
disappointment is the result, and the invested
money comes back, after all, with two per
cent. rather than eighteen for its interest.
The defects of terminating societies have,
however, been found out, and few of them are
now established.

Let us now look back to our advertisement.
The society is of the terminating kind, and we
have seen some of the errors therein implied;
in the next place, observe the golden promise
it holds out, both to investers and to borrowers.
Those who invest are to get eighteen per cent.
for their money, but those who borrow it are
to pay only from one per cent, to five. And
yet, the only source of increase for the money
of investers, is the interest paid on it by the
borrowers! The operation described as the
sale of a thousand pounds, takes place in this
way. Money is in the hands of a society—and
woe to a Building Society when it has money
in its hands!—in order, therefore, that the
cash may not remain and stagnate, it is lent
out by a sort of auction. For example, the
loan of thirty pounds is to be sold; thirty-
three pounds is bid for it. That is to say, the
bidder for receipt of thirty pounds now on a
fit security, will repay thirty-three pounds in
instalments spread over ten years. In other
words, he will pay one per cent. interest.
Another then bids thirty-four pounds ten
shillings; that is to say, one-and-a-half per
cent. interest. Forty pounds ten shillings,
perhaps, it is knocked down at—three-and-a-
half per cent.—or forty-five pounds, which
would be five per cent.: and yet the people
who pay in this money to be invested for
their benefit, are told that they shall get
eighteen per cent, for it. The thing is
ridiculous, because impossible. The profit of the
investors can only be made out of the
borrowers; and, if every shilling invested be not
borrowed, that is so much loss to be deducted
from the calculations of the compound interest.
For this reason, a society can only flourish in
a district where cottages are being built; or
where, in other ways, there are investments
open which attract small amounts of capital,
and induce people to borrow at six or seven
per cent. with the certainty of making ten.
The most delicate operation in the conduct of
a Building Society is to keep up a correct
balance between the members who invest, and
the members who borrow. Every pound paid
in, and not lent out immediately, disturbs any
calculation of gain which roughly estimates
at compound interest the whole receipts of the
society; since, therefore, it is impossible that
small amounts for short periods should not
lie frequently idle, it is necessary to make an
abatement of perhaps one per cent. on this
account in all estimates of profit. This is not
often done. Then, again, the society requires
paid officers. The attorney and surveyor,
upon whom the directors depend for their
freedom from loss in lending, ought to be
fairly well paid: there is a secretary, there is
a room, and there are coals and candles. It
is a strange fact, but a true one, that in many
Building Societies, deduction is not made on
this account; or it is said roughly that fines,
entrance fees, and a few small charges to
borrowers contingent on a loan, cover these
items; but they do not. It will be seen, therefore,
that if the lenders, or investing members,
receive through the medium of their society,
five per cent. compound interest, the borrowers
have to pay seven, or seven-and-a-half—say
compound interest. Do not forget that a
man who borrows one hundred pounds at five
per cent. pays five pounds every year, and at
last has to raise the whole money again for
repayment. A man who borrows one
hundred at seven per cent. on the instalment
principle, pays, in the first month, at the rate of
seven pounds; but in the second month, the
whole sum due being lessened, there is less to
pay interest upon. After awhile he is paying
seven per cent. on fifty pounds,—three pounds
ten shillings only. Therefore, although he
pays, and must pay, a high interest on the
Mutual Benefit plan; yet, because the
borrower begins repayment immediately, and the
amount that he pays hire for dwindles
constantly, the result is in his favour. This fact,
together with the saving effected in the way
of law charges, and the great convenience of
the method of repayment, makes the
borrower's position advantageous. Every instalment
as repaid by him is immediately lent
out again elsewhere. No cash remains idle,
and the investers, by this method of uniting
small resources and supplying mutual wants,
may be exceedingly well pleased with the
fact that they get compound interest for their
money at five per cent. If they claim more,
either they do not get it, or they get it from
their borrowers; but if they ask too large a
price for the accommodation of their money,
there will be few candidates applying for it;
most of it will lie idle, and the society will
disappoint the hopes of all. Investers must
so manage, that it shall be worth their neighbours'
while to borrow, and borrowers must
so pay, that their friends shall find it worth