CHAPTER II.
The Earliest National Debt.—History of Tontines.—Of the Money Interest, its Origin, Extravagance, and Folly.—Royal Exchange.—First Irredeemable Debt.—Tricks of the Brokers.—Jobbing in East India Stock.—False Reports.—Importance of the English Funds.—Picture of the Alley.—Systematic Jobbing of Sir Henry Furnese, Medina, and Marlborough.—Thomas Guy, a Dealer in the Alley.
The Earliest National Debt.—History of Tontines.—Of the Money Interest, its Origin, Extravagance, and Folly.—Royal Exchange.—First Irredeemable Debt.—Tricks of the Brokers.—Jobbing in East India Stock.—False Reports.—Importance of the English Funds.—Picture of the Alley.—Systematic Jobbing of Sir Henry Furnese, Medina, and Marlborough.—Thomas Guy, a Dealer in the Alley.
The creation of a national debt has been attributed to the Dutch, but is really due to the Venetians. The immediate treasury of the Doge was exhausted; money was necessary; and the most eminent citizens of that great republic were called upon to redeem the credit of their country. A Chamber of Loans was established, the contributors were made creditors, four per cent. was allowed as interest, and she,
“Who once held the gorgeous East in fee,And was the safeguard of the West,”
“Who once held the gorgeous East in fee,And was the safeguard of the West,”
“Who once held the gorgeous East in fee,And was the safeguard of the West,”
“Who once held the gorgeous East in fee,
And was the safeguard of the West,”
resumed her credit, and increased her power.
So fruitful a source of wealth was not allowed to fall into desuetude. The Florentine republic, experiencing a deficiency in her revenue, established a mount, allowed five per cent. interest, and, says Sir William Blackstone, these laid the foundation of our national debt. The Dutch were not long following the example. When the great persecution occurred, which forced the Spanish Jew—the aristocracy of the chosen race—from the place of his nativity, he brought with him to Holland the craft and the cunning of the people. He taught the Dutch to create an artificial wealth; and the people of that republic, by its aid, maintained an attitude of independence, which rendered them so long the envy and the hatred of the proud states which surrounded their territory. Their industry increased with the claims upon them. They cultivated their country with renewed perseverance; they brought the spices of the rich and barbarous East to the shores of the cultivated and the civilized West; they opened new sources of profit; their merchant-vessels covered the waters; their navy was the boast of Europe; their army was the scourge of the great Louis in the height of his pride and power. The markets of Holland evinced a full activity; the towns of Holland increased in importance; and the capital of Holland became the centre of European money transactions, partly in consequence of the great bigotry which banished the Jew from Spain.
When, therefore, the chief of that small yet powerful republic was called to sit upon an English throne, he brought with him many of those whose brains had contrived and whose cunning had contributed to produce these great changes; and from his reign, whatever evils may have arisen from a reckless waste of money, there commenced that principle which, for a century and a half, has operated on the fortunes of all Europe,—which proclaimed that, under every form and phase of circumstance, in the darkest hour of gloom as in the proudest moment ofgrandeur, the inviolable faith of England should be preserved towards the public creditor. Up to this period, the only national debt on which interest was acknowledged was that sum which had been seized on in the Exchequer; and even these dividends were irregularly paid. Many debts had been incurred by our earlier kings, but all the promises and pledges which had been given for their redemption were broken directly the money was gained; and it remained, we repeat, for William, whatever his errors may have been, to establish the principle, that faith to the public creditor must be inviolate.
The reign of William was productive of all modes and methods of borrowing. Short and long annuities, annuities for lives, tontines, and lotteries, alike occupied his attention. The former are still in existence, the two latter have fallen to decay. The lotteries have been expunged from the statute-book, and their evils will be fully developed at a fitting period; while to the brain of a Neapolitan, and the city of Paris, William was indebted for the knowledge of the tontine. Lorenzo Tonti, in the middle of the seventeenth century, with the hope of making the people of France forget their discontents in the excitement of gambling, suggested to Cardinal Mazarin the idea of annuities, with the benefit to the survivors of those incomes which fell by death. The idea was approved by the Cardinal and allowed by the court. Parliament, however, refused to register the decree, and the scheme failed. Tonti again endeavoured to establish a society on this plan, and to build by its means a bridge over the Seine; but the unfortunate inventor christened it Tontine, and not a man in Paris would trust his money to a project with an Italian title. A complete enthusiast, he allowed Paris no rest on his favorite theme, and proposed to raise money for the benefit of the clergy in the same way. The Assembly reported on the scheme, and the report contained all that could flatter the projector’s vanity, but refused a permission to act on it; and again it was abandoned. The idea, however, which could not be carried out for the people, which was refused for the benefit of the city, and not allowed for the clergy, was claimed as a right for the crown; and in 1689, Louis XIV. created the first tontine to meet his great expenses. From this period they became frequent; and William was too determined to humble the pride of his rival, not to avail himself of this among other modes of raising funds.[1]
The moneyed interest—a title familiar to the reader of the present day—was unknown until 1692. It was then arrogated by those who saw the great advantage of entering into transactions in the funds for the aid of government. The title claimed by them in pride was employed by others in derision: and the purse-proud importance of men grown suddenly rich was a common source of ridicule.
Wealth rapidly acquired has been invariably detrimental to the manners and the morals of the nation, and in 1692 the rule was as absoluteas now. The moneyed interest, intoxicated by the possession of wealth which their wildest dreams had never imagined, and incensed by the cold contempt with which the landed interest treated them, endeavoured to rival the latter in that magnificence which was one characteristic of the landed families. Their carriages were radiant with gold; their persons were radiant with gems; they married the poorer branches of the nobility; they eagerly purchased the princely mansions of the old aristocracy. The brush of Sir Godfrey Kneller, and the chisel of Caius Cibber, were employed in perpetuating their features. Their wealth was rarely grudged to humble the pride of a Howard or a Cavendish; and the money gained by the father was spent by the son in acquiring a distinction at the expense of decency. They were seized upon by the satirist and the dramatist as a new object of ridicule; and under various forms they have become a stage property. The term which they had chosen to distinguish them became a word of contempt; and the moneyed class was at once the envy and the laugh of the town. Nor was it until that interest became a great and most important one, that the term assumed its right meaning, or that the moneyed contended with the landed interest on a more than equal footing. The former have always clung to the house of Brunswick; the latter have often used their exertions against it. In time, however, the moneyed became a landed interest, and vied in taste as well as magnificence with the proudest of England’s old nobility. Among these was Sir Robert Clayton, director of the Bank, whose banqueting-room was wainscoted with cedar, whose villa was the boast of the Surrey hills, whose entertainments imitated those of kings, whose judicious munificence made him the pride of that great city to the representation of which he was called by acclamation. But there were other and less reputable directors of the great Bank; and a pamphlet, published shortly afterwards, drew public attention to acts which either prove that morality in one commercial age is immorality in the next, or that some of the governors of the corporation were wofully deficient in the organ of conscientiousness.
In the Royal Exchange, erected for less speculative and more mercantile pursuits, were the early transactions of the moneyed interest in the funds carried on. In 1695, its walls resounded with the din of new projects; nor could a more striking scene be conceived than that presented in the area of this building. The grave Fleming might be seen making a bargain with the earnest Venetian. The representatives of firms from every civilized nation—the Frenchman with his vivacious tones, the Spaniard with his dignified bearing, the Italian with his melodious tongue—might be seen in all the variety of national costume; and the flowing garb of the Turk, the fur-trimmed coat of the Fleming, the long robe of the Venetian, the short cloak of the Englishman, were sufficiently striking to attract the eye of the painter to a scene so varied. There, too, the sober manner of the citizen formed a strong contrast to the courtier, who came to refill his empty purse: and there also, as now, might be seen the broken-down merchant, pale, haggard, and threadbare, haunting the scene of his former glory, passing his now valueless time among those who scarcely acknowledged his presence, and, as he had probably dined with Duke Humphrey, supped with Sir Thomas Gresham.
“Trampling the Bourse’s marble twice a day,Though little coin thy purseless pockets line,Yet with great company thou art taken up,For often with Duke Humphrey dost thou dine,And often with Sir Thomas Gresham sup.”
“Trampling the Bourse’s marble twice a day,Though little coin thy purseless pockets line,Yet with great company thou art taken up,For often with Duke Humphrey dost thou dine,And often with Sir Thomas Gresham sup.”
“Trampling the Bourse’s marble twice a day,Though little coin thy purseless pockets line,Yet with great company thou art taken up,For often with Duke Humphrey dost thou dine,And often with Sir Thomas Gresham sup.”
“Trampling the Bourse’s marble twice a day,
Though little coin thy purseless pockets line,
Yet with great company thou art taken up,
For often with Duke Humphrey dost thou dine,
And often with Sir Thomas Gresham sup.”
A new impulse had been given to trade, and the nation was beginning to feel the effect of the Revolution. William had already tried his power in the creation of a national debt: jobbing in the English funds and East India Stock succeeded; and the Royal Exchange became—what the Stock Exchange has been since 1700—the rendezvous of those who, having money, hoped to increase it, and of that yet more numerous and pretending class, who, having none themselves, try to gain it from those who have.
The charter granted by William to the Corporation of the Bank of England is the first instance of a debt bequeathed to posterity. Annuities had hitherto been the mode of raising supplies; and the day, therefore, which witnessed the establishment of the Bank is worthy of notice, as being also the day on which William laid the foundation of an irredeemable national debt.
It was soon found that the duties appropriated to the various payments of interest and annuities were insufficient to meet the claims. In 1697, the national debt amounted to twenty millions, and the revenue was deficient five millions. The payment in consequence grew uncertain, and the moneyed men of the day, watching the course of events, made large sums out of the distresses of government. “The citizen,” says an old writer on the subject, “began to decline trade and turn usurer.”
To prevent this, a law was passed against the stock-brokers and jobbers, which limits the number of the former, enacts some severe regulations, and makes some severe remarks upon the entire body.
At this period the broker had a walk upon the Royal Exchange devoted to the funds of the East India and other great corporations; and many of the terms now in vogue among the initiated arose from their dealings with the stock of the East India Company. Jobbing in the great chartered corporations was thoroughly understood. Reports and rumors were as plentiful then as now. No sooner was it known that one of the fine vessels of the India Company, laden with gold and jewels from the East, was on its way, than every method was had recourse to. Men were employed to whisper of hurricanes which had sunk the well-stored ship; of quicksands which had swallowed her up; of war which had commenced when peace was unbroken; or of peace being concluded when the factories were in the utmost danger. Nor were the brains of the speculators less capable than now. If at the present day a banker condescends to raise a railway bubble 50 per cent., the broker of that day understood his craft sufficiently to cause a variation in the price of East India Stock of 263 per cent.; and complaints became frequent that the Royal Exchange was perverted from its legitimate purpose, and that the jobbers—the term was applied ignominiously—ought to be driven from a spot polluted by their presence. Mines of gold, silver, and copper were so temptingly promised, that the entire town pursued the deception. Tricksand stratagems were plentiful; the wary made fortunes, and the unwary were ruined.
In 1698, the dealers and jobbers in the funds and share market, annoyed by the objections made to their remaining in the Royal Exchange, and finding their numbers seriously increase, deemed it advisable to go to ’Change Alley, as a large and unoccupied space, where they might carry on their extensive operations.
“The centre of jobbing is in the kingdom of ’Change Alley and its adjacencies,” said a pamphleteer a few years after. “The limits are easily surrounded in about a minute and a half. Stepping out of Jonathan’s into the Alley, you turn your face full south; moving on a few paces, and then turning due east, you advance to Garraway’s; from thence, going out at the other door, you go on still east into Birchin Lane; and then, halting a little at the sword-blade bank, you immediately face to the north, enter Cornhill, visit two or three petty provinces there on your way to the west; and thus, having boxed your compass, and sailed round the stock-jobbing globe, you turn into Jonathan’s again.”
The English funds were assuming a greatness they have ever since maintained. The Hebrew capitalist, who came over with William, had increased the importance of the jobbers by joining them. The English merchant—even at this early period—found that money might be gained in the new operation; and ’Change Alley, so well known in Parliamentary debates and the correspondence of the time as “the Alley,” was for a century the centre of all dealings in the funds. Here assembled the sharper and the saint; here jostled one another the Jew and the Gentile; here met the courtier and the citizen; here the calmness of the gainer contrasted with the despair of the loser; and here might be seen the carriage of some minister, into which the head of his broker was anxiously stretched to gain the intelligence which was to raise or depress the market. In one corner might be witnessed the anxious, eager countenance of the occasional gambler, in strong contrast with the calm, cool demeanor of the man whose trade it was to deceive. In another the Hebrew measured his craft with that of the Quaker, and scarcely came off victorious in the contest; while in one place, appropriated to him, stood the founder of hospitals, impressing with eagerness upon his companion the bargain he was about to make in seamen’s tickets.
It was soon felt practically that the air of England is cold and its climate variable. The more respectable among the jobbers, therefore, gathered beneath the walls of one of those coffee-houses which formed so marked a feature of London life in the eighteenth century, until the chance became a customary visit, and the coffee-house known as Jonathan’s became the regular rendezvous of all the dealers in stock, and consequently the scene of transactions as extensive as any the world ever witnessed.
In 1701, the character of those who met in ’Change Alley was not very enviable. It was said, and said truly, that they undermined, impoverished, and destroyed all with whom they came in contact. “They can ruin men silently,” says a writer of the period, with great vehemence; “undermine and impoverish, fiddle them out of their money, by thestrange, unheard-of engines of interest, discount, transfers, tallies, debentures, shares, projects, and the devil and all of figures and hard names.”
Every thing which could inflate the hopes of the schemer was brought into operation by the brokers. If shares were dull, they jobbed in the funds, or tried exchequer bills; and if these failed, rather than remain idle, they dealt in bank-notes at 40 per cent. discount. These new modes of gambling seized upon the town with a violence which sober citizens could scarcely understand. Their first impulse was to laugh at the stories currently circulated of fortunes lost and won; but when they saw men who were yesterday threadbare pass them to-day in their carriages,—when they saw wealth, which it took their plodding industry years of patient labor to acquire, won by others in a few weeks,—unable to resist the temptation, the greatest of the city merchants deserted their regular vocations and speculated in the newly-produced stocks. “The poor English nation,” says a writer, “run a madding after new inventions, whims, and projects; and this unhappy ingredient my dear countrymen have in their temper,—they are violent, and prosecute their projects eagerly.”
No sooner had the members of the jobbing community taken their quarter in ’Change Alley, than the city of London was seized with alarm, and tried to keep the brokers at the Royal Exchange. They grew indignant at their deserting so time-honored a place, and bound them in pains and penalties not to appear in ’Change Alley. Pocket, however, triumphed over prerogative; brokers resorted where bargains were plentiful; ’Change Alley grew famous throughout England; but it was not till nearly a century and a quarter after its first transaction, and a quarter of a century after ’Change Alley ceased to exist as a sphere for the stock-jobbers, that the ancient and useless provision not to assemble in ’Change Alley was expunged from the broker’s bond.
Among those who employed their great fortunes in the manner alluded to was Sir Henry Furnese, a Director of the Bank of England. Throughout Holland, Flanders, France, and Germany, he maintained a complete and perfect train of intelligence. The news of the many battles fought at this period was received first by him, and the fall of Namur added to his profits, owing to his early intelligence. On another occasion he was presented by William with a diamond ring, as a reward for some important information, and as a testimony of this monarch’s esteem. But the temptation to deceive was too great, even for this gentleman. He fabricated news; he insinuated false intelligence; he was the originator of some of those plans which at a later period were managed with so much effect by Rothschild. If Sir Henry wished to buy, his brokers were ordered to look gloomy and mysterious, hint at important news, and after a time sell. His movements were closely watched; the contagion would spread; the speculators grew alarmed; prices be lowered 4 or 5 per cent.,—for in those days the loss of a battle might be the loss of a crown,—and Sir Henry Furnese would reap the benefit by employing different brokers to purchase as much as possible at the reduced price. Large profits were thus made; but a demoralizing spirit was spread throughout the Stock Exchange. Bankrupts and beggars sought thesame pleasure in which the millionnaire indulged, and often with similar success.
The wealthy Hebrew, Medina, accompanied Marlborough in all his campaigns; administered to the avarice of the great captain by an annuity of six thousand pounds per annum; repaid himself by expresses containing intelligence of those great battles which fire the English blood to hear them named; and Ramilies, Oudenarde, and Blenheim administered as much to the purse of the Hebrew as they did to the glory of England.
In the midst of these excitements arises a name which, to the dwellers in London, is well known. Thomas Guy, the Bible contractor, was a frequenter of ’Change Alley; and here, duly and daily, might be seen that figure, which the gratitude of his fellow-men has rendered familiar in the statue raised to his memory.
FOOTNOTES:[1]The tontine is simply a loan raised on life-annuities. In consideration of a certain amount paid by a certain number of persons, government grants to each a life-annuity. As the annuitants die, their shares are divided among the survivors, until the annuity granted to the whole becomes centred in the longest liver; at his death the transaction ceases.
[1]The tontine is simply a loan raised on life-annuities. In consideration of a certain amount paid by a certain number of persons, government grants to each a life-annuity. As the annuitants die, their shares are divided among the survivors, until the annuity granted to the whole becomes centred in the longest liver; at his death the transaction ceases.
[1]The tontine is simply a loan raised on life-annuities. In consideration of a certain amount paid by a certain number of persons, government grants to each a life-annuity. As the annuitants die, their shares are divided among the survivors, until the annuity granted to the whole becomes centred in the longest liver; at his death the transaction ceases.