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ON THE STOCKS, OR PUBLIC FUNDS. terest of 5 per cent. On paying down
the money, the lender receives a bill, MR EDITOR,
bond, or acknowledgment, for the aAs I have no doubt of your desire to mount; by which acknowledgment, contribute to the instruction, as well he is entitled to draw yearly from the as the amusement, of every individual public revenue £5 of interest, but among your readers, who pays down re on the express condition, that he is not gularly his half-crown for your month- to demand repayment of the principal, ly bill of fare, I shall make no apology or sum lent, unless government is willfor troubling you with a few remarks ing to repay it. The person who thus on the subject that stands at the head possesses the bill or acknowledgment, of this paper. There are few topics of is said to be a holder of £100 of 5 per conversation perhaps more frequently cent. stock, and the money lent upon introduced, and, at the same time, less that bill constitutes a part of what is generally understood, than that of the called the national debt, because it is Public Funds, and I know few subjects in fact borrowed by the nation, and on which the uninstructed can derive the interest is paid out of the taxes. so little information from books. Sys- It is obvious, however, that few pertems of political economy, and pro
sons would be disposed to lend money found disquisitions on the national on the condition of never being allowdebt, are indeed every day issuing from ed to demand repayment, even though the press; but in none of these that I they were quite certain of receiving have met with, not even in the lumi- annual interest, and of transmitting nous pages of the Edinburgh Review, the right to that interest to their poswhich, of all other works, is supposed terity. To remedy this inconvenience, by its admirers to go to the bottom of therefore, the lender who wishes to every subject, will ordinary readers find employ the sum which he lent to goany explanation of the first simple prin vernment in
way, though he ciples of the Public Funds ? It is for cannot directly demand repayment, is the instruction of such readers, then, at liberty to sell his bill to any body that I would now beg leave to occupy who will purchase it, and for any sum a page or two of your Magazine ; and that another may be willing to pay
for though I am quite aware, that my ob- it. In doing so, he merely sells to a servations will cut a very sorry figure second person the right which he himbeside the nervous declamation of Ido- self possessed to the annual interest of loclastes, or the sarcastic humour of £5, and that second person is of course Timothy Tickler, I am nevertheless at liberty to dispose of his right to ancertain, that I will render a very ac other in the same way. This transacceptable service to many, and these tion, in general, is called a transfer of not the least respectable of your read- stock ; and in the particular case which ers, if I can throw so much light up. I have supposed, the one is said to sell, on the subject as may enable them to and the other to buy, a £100 of 5 per understand the prices of the Stocks, as cent. stock. If 5 per cent. be considergiven in the public papers.
ed as a fair and equitable interest for It is perhaps hardly necessary to re- money lent, it is obvious, that such a mark, that in every war in which this bill as I have now been speaking of, or, country has been engaged since the Re- in other words, that £100 of 5 per cent. volution, the amount of the annual stock, is just worth £100 sterling. It taxes has been found inadequate to de- is possible, however, that in certain fray the expenses of government. To circumstances, the holder of that bill supply the deficiency, our rulers have may receive more, or be obliged to take generally had recourse to loans, that is less for it than £100. If two or three to say, they have borrowed money from individuals, for example, have each a such individuals as were able and will. sum of money which they are anxious ing to lend it, giving these individuals to lay out at interest, but find it diffia security for the payment of a certain cult to do so, a competition will naannual interest. To explain the na- turally take place among them to be ture of this transaction, I shall take a come the purchaser of the bill in quesvery simple case. Suppose, then, that tion, which will always secure to the £100 is the sum which government holder £5 of yearly interest. The wishes to borrow, and that an indivi- possessor of the bill will of course take dual offers to lend that sum at an in- advantage of this competition, and raise
his price, say, to £105. The purchaser, will gain or lose by the transaction, therefore, pays £105 for £100 of 5 per according as they can dispose of these cent. stock, or he lays out his money bills, for more or less than £100. If at an interest of £5 for every £105, the buyers are numerous, compared which is at the rate of something more with the quantity of bills; that is, if than 4 per cent. If, on the other there be a great number who are anxihand, however, the possessor of the ous to have their money laid out at inbill or stock is anxious to dispose of it, terest, they will be tempted perhaps to while few are willing to buy it, he will give, as was before supposed, £105 for be forced to offer it for less than £100, every bill; for though, by doing so, say, £95. The purchaser, in this case, they will haveonly 44 per cent. for their pays £95 for £100 of 5 per cent. stock, money, still it may possibly be more or he lays out his money at an interest than they can draw for it in any other of £5 for every £95, which is at the way, while the security is better than rate of something more than 54 per if they lent their money to private incent. For simplicity of illustration, dividuals or companies. In this case, I have supposed, that £100 is the sum the contractors would gain 5 per cent. borrowed by government, and that of upon the loan, or £50,000 on the whole course there is just one bill to be dis- ten millions. If, on the other hand, posed of, or transferred by, the lender. however, comparatively few persons If it be supposed, however, as is really are found disposed to lay out their the fact, that the loans generally a money at 5 per cent., the contractors mount to several millions, the necessi- may be obliged to offer their bills for ty which the lenders are under of sell- less than £100, say, as before, £95. In ing their bills, or, in other words, this case, the contractors lose 5 per transferring their stock, will be more cent. on the loan, or £50,000 on the apparent. The transaction between whole ten millions. It is easy to see, government and the lenders, is pre- from this view of the subject, how the cisely the same in the case of millions price of stock is liable to fluctuation, as in that of a hundred, and it is un from accidental circumstances. I shall necessary, therefore, again to illustrate not attempt to enumerate these ; but the general principle of that transac- it may be worth while to point out tion. It is evident, however, that even how it is affected by peace and war, as the most opulent merchants, who are these two states of the country are gegenerally the lenders, cannot be sup- nerally found to have the greatest inposed to have such a command of fluence in raising or depressing the money as to be able to advance ten or value of stock. In the time of war, twelve millions to government at once. then, the price of stock is comparative When they contract for a loan, there ly low, because, in such a state of fore ; that is, when they agree to lend things, it is likely that government to government the sum required, they will be under the necessity of borrowgenerally pay the money by instal- ing; and as every loan produces new ments, or partial payments, at certain bills, the quantity of those to be disintervals, say one million a-month, posed of, or, in other words, the suptill the whole is advanced. In the ply of the market, will be increased. mean time they sell, or transfer the bills The price, therefore, will fall, for the or securities which they receive from same reason that the price of corn falls government, to those who may have after a plentiful harvest. In time of money to lay out at interest, and who peace, again, the price of stock is comof course will be disposed to purchase paratively high, because, in such a such bills, so that the sale of the bills state of things, the taxes are likely to of the first instalment may enable them be sufficient to defray the expenses of to pay the second. In this way, go- government without any loans, and vernment securities or bills become ar- consequently no new bills are to be ticles of commerce, and their price is disposed of, or the supply, though not regulated like that of any other article, positively diminished, ceases to be augaccording to the supply and demand. mented. For the same reason, the If we suppose, as before, that the con- price of stock in the time of war is tractors for the loan, that is, the ori. materially affected by the nature of the ginal lenders, receive from government intelligence that comes from the scene a £100 bill for every £100 sterling that of action. If that intelligence be unthey lend, bearing 5 per eent., they favourable, stock will fall, because
there is a prospect either of protracted ing the stock, the bargain is generally warfare, or of the necessity of more vie implemented by A paying to B, or regorous exertions on the part of govern- ceiving from him, the £2, or whatever ment; in both which cases, new loans may be the sum of loss or gain. In may be necessary, and consequently a such a case as this, it is obviously A's new supply of bills will be thrown in- interest that the price of stock should to the money market. On the other fall, and as obviously B's interest that hand, should the intelligence be fa- it should rise, between the day of the vourable, the price of stock will rise, bargain and that of settling, and hence because the prospect of successful the temptation held out to both to cirtermination of the war renders it prob- culate reports favourable to their own able that there will be no new loan, particular views. B, or the buyer, is and consequently no new supply of usually denominated a Bull, as expresstock. It is this variation in the price sive of his desire to toss up; and A, or of stock that gives room for the nefa- seller, a Bear, from his wish to tramrious practice of stock-jobbing. That ple upon, or tread down. The law, of practice consists in raising and circu- course, does not recognise a transaction lating reports, calculated to raise or which proceeds on a principle of gamdepress the price of stock, according to bling; but a sense of honour, or, what the particular views of the individual. is perhaps nearer the truth, self-inIf he wishes, for example, to sell his terest, generally secures the payment stock or bills, he endeavours to propa- of the difference, as the person who regate some report or other, favourable fuses to pay his loss, is exhibited in to the issue of the war, and the esta- the Stock Exchange under the desigblishment of peace, in order, if pose nation of a lame duck, a disgrace which sible, to raise the price of stock; and is considered as the sentence of banishif he wishes to buy, he propagates re
ment from that scene of bustle and ports of a contrary tendency. It is business.* painful to think, that this abominable I have, in the preceding remarks, system is sometimes carried on by men, for the sake of simplicity, represented whose rank and station in society, to the transfer of stock, as carried on in say nothing of the obligations of mo a way somewhat different from that in rality and religion, might be expected which it is really conducted. I have to place them far above any such dis- considered the securities which governgraceful acts; but, in general, I be- ment gives to those from whom money lieve it is confined to men of desperate is borrowed as consisting of bills, and fortune and little character, who sub- these bills as uniformly bearing interest sist by a species of gambling, to which at 5 per cent. Neither of these statethe finance system of this country has ments, however, is, strictly speaking, opened a wide and extensive field. I correct, as I shall have occasion more allude to those men who make a prac- particularly to explain in a future comtice of buying and selling stock, with- munication ; but as my object in this out actually possessing any; and whose introductory paper was to simplify the transactions, therefore, are nothing subject as much as possible, for the more than wagers about the price of sake of those who are unacquainted stock on a certain day. To explain with it, I have chosen an illustration the nature of the transaction by an ex that appeared to me most elementary, ample, I shall suppose, that A sells to and which, if well understood, wilí B a government bill of £100, or a enable ordinary readers to comprehend £100 of 5 per cent. stock, to be de- with little difficulty, the more intricate livered on a certain future day, and parts of the subject, to which I shall that the price is fixed at £102. If, take the liberty hereafter to direct their when the day arrives, the price of stock attention. To many, I have no doubt, shall have fallen to £100, A would be my observations will appear not only able to purchase the bill in question sufficiently simple, but abundantly silfor £100, while, in consequence of his ly, and as containing nothing but what bargain, B would be obliged to pay every body knew before. Now, I do him £102 for it, so that A would gain boldly aver, that every body does not £2. If, however, stock had risen to know what I have above explained, and I £104, B would still be obliged to give only £102, so that A would lose £2; See Hamilton on the National Debt, but instead of actually buying and selle notes, p. 182, first edition. VOL. III.
RICARDO AND THE EDINBURGH
solemnly protest against the sneers and ciety they would be produced, or what sarcasins of those who do, because it is previous steps would be necessary to not for them I write, nor is it their bring matters to this happy consumapprobation that I care any thing a- mation, it is for Mr Ricardo and his bout. I write for the instruction of Reviewer to explain. As matters now plain honest country folks (who, by stand, the case is hopeless, for (page the way, constitute no inconsiderable 77,) no reduction would take place portion of your readers), and if I can in the price of corn, although landassist one old lady in judging when it lords should forego the whole of their is most advantageous to invest in, or rents.” In other words, although the sell out, of the funds, or save one present landlords should cease to be young gentleman from blushing, when landlords, and the present farmers be he is requested to read and explain the substituted in their place, still the newspaper report of the stocks, I shall land must be occupied by somebody, not consider my own trouble lost, or who will have an interest always opthe paper of your Magazine wasted. I posed to every other class of the comam, Sir, your obedient servant, munity, and will therefore be their 5th Oct. 1818.
T. N. necessary enemy, at the same time that
he would be their necessary friend ; for the parties could not subsist without
mutual assistance. If all that is meant In page 81, Edinburgh Review, No be, that the interest of landlords is al59, on Ricardo's Political Economy, ways opposed to that of every other are these words: “ It follows from class of the community, because they, these principles, that the interest of like every other trade, wish to make Landlords is always opposed to that of the most of their commodity, by letevery other class of the community.” ting their land as high as they can, What are these principles may be seen
“We need no ghost to tell us this, by those who shall study the book and Ricardo (or Reviewer)"; although it the review of it. This is the conclu- is to be hoped that there is no ghost or sion drawn from them, and sanctioned spiritof any description but would have by the authority of the Reviewer, had more candour than to put so very and of this I shall treat. Were a
trite an observation into so mischievous very long and intricate chain of rea a form, and to point against one, and soning to conclude with the inference, that an absolutely necessary class of that perjury and fraud were lawful in men, what is equally applicable to the common transactions of life, I every other. If more is meant than suppose it would not be necessary to meets the eye, let it be well observed, follow the chain. Such a conclusion that were the world to rise en masse, would be considered as equivalent to and put the present landlords hors de what mathematicians call Reductio ad combat in this interminable warfare, absurdum, or a Coroners Inquest, Felo others would rise in their place, and de se. If any man, or class of men,
the same wholesome discipline would be of such a nature, or in such a state, have to be repeated without end, unthat their interest is always opposed less it be proposed that the whole mass to that of every other class of the of the people should assume the whole community, then that man, or class of mass of the land, and cultivate it, for men, are the natural and necessary the mutual benefit, by Committees. Inenemies of mankind; for the dis- deed, it is impossible to discover the position will follow the interest, and sense or use of this remark about the the conduct the disposition; and it opposition of interests, unless it be to would be for the interest of mankind make it the foundation of some such that such a class did not exist ; in scheme as this, which might, by paother words, that landlords did not rity of reason, be extended to every exist, and that there was no such thing other trade or profession. While matas landed property. Yet it is from ters remain on the present footing, and the land or soil that all the necessaries, property of all kinds continues to be conveniences, and material comforts acknowledged and respected, men will of life are obtained. How these would continue, as they have done since the be produced, in such a case, or what commencement of civilized society, to inducement there would be to produce buy and to sell, to let land and to take them, or under what new form of so it as they best can, those who give
themselves the trouble to think well harden but rather soften the heart. knowing, and those possessed of any On the other hand, he was possessed candour acknowledging, that this is not of more than mortal wisdom, who a general and eternal opposition of in- long ago observed," that a poor man, terests; but that while every man who oppresseth the poor, is like a pursues his own interest, and attends sweeping-rain which leaveth no food.” to his own affairs, under the restraint Whereas, to use a homely but expressive of the laws of God and his country, similitude, a rich man, like a wateringhe may leave the general result to Pro- pan in the hands of Providence, serves vidence, and rest assured, that this is to diffuse more generally and usefully not merely the best, but the only way the means of subsistence ; while the in which human affairs can be con envious absurdity of the human heart ducted. If political economists chuse grudges even existence to that which to depart from the common use of feeds it! as if the flesh of our bolanguage, and call this a perpetual dies should rise, in unballowed inopposition of interests, and, con- surrection, against the heart. All sequently, a state of perpetual hos- would be watering-pans, all would be tility, let them have the consistency to hearts ; but this is not the order of nacall it a general opposition of interests; ture nor of Providence, which must and let the rest of mankind admit ultimately prevail. After derangement that, if in one sense they be mutual shall have succeeded to derangement, enemies, in a more comprehensive and revolution to revolution-after view of the matter, they are mutual having exhausted all the forms of madfriends, and cannot do without one ness, of misery, of murder, and of another. The landlord, be his rent blood, it is only by returning to the great or small, cannot enjoy it without order and subordination of nature, communicating it with the merchant that wretched and weary mortals can upon 'change, the banker in his count- escape from anarchy and despotism, ing-room, the retailer in his shop, the and expect to find, if not happiness, mariner on the ocean, the weaver at at least safety and repose. We do not his loom, the smith at his forge, the deny, what we have often felt, that mason with his mallet, the carpenter there is such a thing as the proud with his chisel, the cobler in his stall. man's contumely, as well as the insoLet a man be ever so selfish, if he lence of office, and that nothing gewishes to enjoy his own, he cannot, nerates pride, and contumely, and insofor his heart, do it alone. This lence, more (although many things is equally true of the landholder, as much) than excessive wealth. But the stockholder, the merchant, the these are among the evils of a secondcapitalist of every description, nay, ary kind, inherent in the very nature of the man of no capital, who lives by of society. For the pride of birth, of his daily exertions. He cannot live genius, of talents, of bodily strength without making others live also. Nay, and dexterity, is as mortifying to huit appears to me, that, where there are
man nature as the pride of wealth. It many great landholders and great ca is only in the dust of death that all pitalists of other descriptions, there visible distinctions shall be levelled, the labourers of every description, the and envy as well as love and hatred manufacturers, the community at large, disappear. Thus it is that the intewill be in a much better situation, rests of the rich and the poor, the than where the same capital is divided high and the low, the producer and among a greater number, but none consumer, however apparently opposed, arising to wealth. For the wealthy are, in fact, linked together by an inman has many wants, and none of visible adamantine chain, which no them can be satisfied without the as ages nor oceans can interrupt, nor sistance of the poor. Even when the death, nor war, nor the utmost maligpoor cease, from age and infirmity, to nity of the human heart, pointed by be able to contribute to the other en its utmost ingenuity, destroy. And joyments of the rich, there is still one no wonder ; for it is formed and susremaining to which they can contri- tained by Him, whose weakness is bute, the indulgence of a benevolent stronger than man, and whose folly is disposition. And whoever has obser- wiser than man. vation and candour, will admit that,
He from heaven's height in this country at least, riches do not
All these their motions vain sees and de.