The first loans to Government, in a regular form, took the form of Tontines, so called from their inventor Lorenzo Tonti. A Tontine is a loan raised on life annuities. A number of persons subscribe the loan, and, in return, the Government pay an annuity to every subscriber. At the death of any annuitant, his annuity was divided among the others, until the sole survivor enjoyed the whole income, and at his death, the annuity lapsed. As an example, a Mr Jennings, who died in 1798, aged 103—leaving behind him a fortune of over two millions—was an original subscriber for £100 in a Tontine: he was the last survivor, and his income derived for his £100 was £3000 per annum. Our National Debt began in 1689—by that, I mean that debt that has never been repaid, and dealings in which, virtually founded Stockbroking as a business. The Bank of England started business on 1st Jan. 1695, and, from that time, we may date the methodical dealing in Stocks and Shares. Of course there were intermediaries between buyer and seller, and these were termed “Stock brokers.” They first of all did business at the Exchange, but as they increased in number their presence there was not desirable, and they migrated to ‘Change Alley, close by. These gentry are described in a little book, published in 1703, called, Mirth and Wisdom in a miscellany of different characters.[62]
“A Stock Jobber
“Is a Rational Animal, with a sensitive Understanding. He rises and falls like the ebbing and flowing of the Sea; and his paths are as unsearchable as hers are. He is one of Pharaoh’s lean kine in the midst of plenty; and, to dream of him is, almost, an Indication of approaching Famine. He is ten times more changeable than the Weather; and the living Insect from which the Grasshopper on the Royal Bourse was drawn, never leap’d from one Place to another, as he from one Number to another; sometimes a Hundred and a half is too little for him; sometimes Half a hundred is too much; and he falls seven times a Day, but not like David, on his knees, to beg pardon for former Sins, but to be made capable of sinning again. He came in with the Dutch, and he had freed us from as great a Plague as they were, had he been so kind as to have went out with them. He lives on the Exchange, but his Dwelling cannot be said to be the Place of his Abode, for he abides no where, he is so unconstant and uncertain. Ask him what Religion he professes, he cries, He’ll sell you as cheap as any Body; and what Value such an Article of Faith is of, his Answer is, I’ll give you as much for a Debenture, as the best Chapman thereabout shall. He is fam’d for Injustice, yet he is a Master of Equity in one particular to perfection, for he cheats every Body alike, and is Equal in all his Undertakings. The Den from which this Beast of Prey bolts out is Jonathan’s Coffee House, or Garraway’s; and a Man that goes into either, ought to be as circumspect as if in an Enemy’s country. A Dish of tea there, may be as dear to him as a good Purchase, and a Man that is over reach’d in either, tho’ no Drunkard, may be said to have drank away his Estate. He may be call’d a true Unbeliever, and out of the Pale of the Church, for he has no Faith. Is a meer Tolandist in secular Concerns, at the very minute that he is ready to take up any Goods upon Trust that shall belong to his Neighbour. St Paul’s Cathedral would be a Mansion-House fit for a Deity indeed, in his Opinion, did but the Merchants meet there; and he can give you no subtantialler a Reason for liking Salter’s Hall better than the Church, than because of its being a House of Traffick and Commerce, and the Sale being often held there. He is the Child of God in one Sense only, and that is by reason of his bearing His Image, but the Devil in many, for he fights under his Standard. To make an end of a Subject that is endless; he has the Figure of a Man, but the Nature of a Beast; and either triumphs over his Fellow Adventurers, as he eats the Bread of other People’s Carefulness, and drinks the Tears of Orphans or Widows, or being made himself Food for others, grows, at last, constant to one place, which is the Compter, and the fittest House for such an unaccountable Fellow to make up his Accounts in.”
Jonathan’s was, especially, the Coffee House which stock jobbers frequented. Addison, in the first number of the Spectator, says, “I sometimes pass for a Jew in the assembly of Stock Jobbers at Jonathan’s”; and Mrs Centlivre has laid one of the scenes in her Bold Stroke for a Wife, at Jonathan’s: where, also, was subscribed the first foreign loan, in 1706.
There was a Stock Exchange hoax in the reign of Queen Anne. A man appeared, galloping from Kensington to the City, ordering the turnpikes to be thrown open for him, and shouting loudly that he bore the news of the Queen’s death. This sad message flew far and wide, and dire was its effects in the City. The funds fell at once, but Manasseh Lopez and the Jews bought all they could, and reaped the benefit when the fraud was discovered. In 1715, too, a false report that the Pretender had been taken, sent the Funds bounding up, to the great profit of those who were in the secret of the hoax.
About this time the demon of gambling was rampant, every one wanted to find a short road to wealth; naturally, there were plenty of rogues to ease them of their money, but the most colossal stroke of gambling was the South Sea Bubble, the only parallel to which, in modern times, is the Railway Mania, in 1846.
The South Sea Company was started in 1711, to have the monopoly of trade to the South Seas, or South Coast of America, a region which was, even then, believed to be an El Dorado. As a trading company it was not successful, but, having a large capital, it dealt with finance. On 22nd Jan. 1720, a proposal was laid before Parliament that the Company should take upon themselves the National Debt, of £30,981,712, 6s. 6-1/2d. at 5 per cent. per annum, secured until 1727, when the whole was to be redeemable, if Parliament so chose, and the interest to be reduced to 4 per cent., and “That for the liberty of increasing their Capital Stock, as aforesaid, the Company will give, and pay into his Majesty’s Exchequer, for the purpose of the Public, and to be applied for paying off the public debt provided for by Parliament, before Christmas, 1716, the sum of three millions and a half, by four equal quarterly payments, whereof the first payment to be at Lady Day 1721.” On April 7, the South Sea Company’s Bill received the Royal Assent, the £100 shares being then about £300.
On April 12, the directors opened their books for a subscription of a Million, at the rate of £300 for every £100 Capital, which was immediately taken up, twice over. It was to be repaid in five instalments of £60. Up went the shares with a bound; yet, to raise them still higher, the Midsummer dividend was to be declared at 10 per cent., and all subscriptions were to be entitled to the same. This plan answered so well, that another million was at once raised at 400 per cent.; and, in a few hours, a million and a half was subscribed at that rate. The Stock went up higher and higher, until, on the 2nd of June, it reached £890. Then, so many wanted to sell, that, on the same afternoon, it dropped to £640. The Company set their Agents to work, and, when evening came, the Stock had been driven up to £750, at about which price it continued until the bank closed on the 22nd June.
Very soon, a third Subscription was started, at the rate of £1000 for every £100, to be paid in ten equal payments, one in hand, the other nine, quarterly. The lists were so full that the directors enlarged it to four millions Stock, which, at that price amounted to £40,000,000. These last subscriptions were, before the end of June, sold at about £2000 premium; and, after the closing of the transfer books, the original Stock rose to over £1000 per cent. At the same time, the first subscriptions were at 560, and the second at 610 per cent. advance.
This set every one crazy, and innumerable “bubble,” or cheating, companies were floated, or attempts made thereat. Speculation became so rampant that, on June 11, the King published a Proclamation declaring that all these unlawful projects should be deemed as common nuisances, and prosecuted as such, with the penalty of £500 for any broker buying or selling any shares in them. Among these companies was one “for carrying on an undertaking of great advantage, but nobody to know what it is.” Another was “for a wheel for perpetual motion, one million”; and another “for the transmutation of quick silver into a malleable fine metal.” Society was, for a brief time, uprooted.