PATER'S CHATS WITH THE BOYS.

Otago Witness, Issue 3313, 12 September 1917, Page 57

PATER'S CHATS WITH THE BOYS.

WHAT THE WAR LOAN SUGGESTS. Very often a minister gives out a text which is just a peg upon which to hang observations which at first do not seem to have any connection with it; and so with my text to-day, for the war loan brings up past history such as, I think, teachers ought to draw attention to in our schools. JEWS AND GOLDSMITHS.

What have these to do with war loans? Simply this: It is less than 300 years ago since public finance was organised as a National Debt, for up to 1693 " a debt was always regarded as something ephemeral. It was to be paid off as soon as possible. And when such debts were incurred through disaster or under a special strain, their abnormal character was always insisted upon, they were or repudiated within a limit of time, shortened by every expedient to the least possible, and never regarded as capable of indefinite extension." This quotation is from Hilaire Belloc's added volume, bringing Lingard's History of England up to date. Briefly, up to 1693, there was no permanent National Debt. How, then, were public loans raised? Through Jews and goldsmiths, and by officers of the Sovereigns. Here, again, I'll quote, this time from " The Stock Exchange," one of the Home University Library series, published at Is 3d net, with which should be read "The Stock Exchange," one of the "People's Books" (published now, I suppose, at 9d net), for these two books are complementary, and read together give a good general knowledge of consols and the workings of national finance. The quotations—the parts omitted do not affect the sense of what is given—is as follows:— " The profitable business of money changing was monopolised by Henry I, John, Henry 111, and some of their successors, who established the office of Royal Exchange in London at Old Change, near St. Paul's, and in other towns. This official had the exclusive privilege of exchanging gold coin for silver, and foreign for English money. The King farmed out the office, or shared 3n the profits, and the office in each town was called the Exchange. . . . The office, which had fallen into disuse, was revived by a proclamation of Charles I, much to the dissatisfaction of the goldsmiths, Avho had been making good profits by culling out heavy coins bv melting or for sale to the Dutch Mint. . . . Another trade, that of

money-lending, was monopolised by the Jews from the Conquest until their expulsion in 1290, when the Lombards succeeded to the craft, and proved equally usurious, their rates being proportionate to their risks. There was also a legal rate of interest—lo per cent, from 1571 to 1624; then 8 per cent, until 1651: and 6 per cent, until 1714, after which it was fixed at 6 per cent, for England and 6 per cent, for Ireland. The term 'usury' denftted any rate of interest above that which the law sanctioned and enforced. After Chaides I's time the goldsmiths became the principal dealers in money, though reinforced by the Jews, whom Cromwell readmitted to England. Then . . . ' the goldsmiths, who were previously only money-changers, now became also money-borrowers, and allowed interest on the sums they borrowed.

They lent money to the King on the security of tho taxes. The receipts they issued * for the money lodged at their

houses circulated from hand to hand, an& were known by the name of of goldsmiths' notes. These mav be considered as the first kind of bank notes issued in England.' The banking goldsmith* made way vapidly, and attracted large quantities of cash, which enabled them to advance money to Cromwell and Charles II at high rates in advance of the revenues. . . . Here, in fact, we have a small beginning of the modern system of investment by deposit in banks' After the Restoration it is written, ' King Charles 11, being in want of money, these goldsmith bankers took 10 per cent, on him barefacedly and by private contracts. On many bills, orders, tallies, and debta of that King they got 20, sometimes 30, per cent., to the great dishonour of the Government.' In 1667, when the Dutch fleet sailed up the Thames, there occurred the first recorded ' run' on our banks. The alarm was allayed by a Royal proclamation. . . . But in 1672 the Exchequer was closed, and the King repudiated a debt of 1,328,526, which ha had borrowed of the goldsmiths at 8 pet cent. This shameless act caused wide distress. ' Not merchants only, but widows, orphans, and others became suddenly deprived of the whole of their property. They came in crowds to the bankers, but could obtain neither the principal nor the interest of the money they had deposited.' Ultimately the King compounded after the manner of Central American Republics. He refused to pay the principal, but granted a patent to pay 6 per cent, out of his hereditary excise. Then after six years he again suspended payment. This goldsmiths' debt, or bankers' debt, was reconsidered in the years following the Revolution." In 1703 a composition was effected, the Government paying 3 per cent, instead of 6 per cent., with the proviso that it could wipe out the debt at any time by paying hall the amount originally lent. Briefly, then, before the institution of the National Debt all exchanging and lending was done by Jews, the Lombards, the Royal Exchangers, and the goldsmiths: and by thetime of the revolution of 1688 the goldsmiths had become the principal bankers. But the repudiation of his debt* by Charles II showed that it was a precarious thing to lend money to kings. PARLIAMENT AND THE WHIGS. After the revolution, instead of the King getting life allowances, or getting money by forced loans and benevolences, selling titles and other devious means, Parliament voted money for national purposes from year to year, and William 111 and his successors, not knowing the English language thoroughly—George I talk English at all—and being dependent upon Parliament for their throne, to the Whigs-, financial control passed into Parliament, in which the Whigs were the dominant party.

Someone has said that a National Debt is the first stage of a nation towards civilisation. If that is so,. German Kultur has pushed the nations a long way along the road towards perfection, and we owe otic first steps on that road to William 111 and has Whig advisers, and to the introductiou of what the Jacobites and Tories contemptuously referred to as "Dutch finance." In June, 1693, the National Debt was founded, for it became a permanent institution j and in July, 1694, tha Bank of England was established; but both events were the outcome of William's connection with the Continent and attempts to bring back the exiled Stuarts—■ the latter another reason for Jacobites and Tories hating. the innovations, for they saw that the bank supplied the Government with money to prevent the return of the Stuarts, and a return of the Stuarts meant a repudiation of the debt and the ruin of the Whigs. Again, as tha Whigs, while finding it easy to borrow money for a heavy war expenditure and to levy taxation mainly on land to pay the growing interest, the Jacobites and Tories, on the other hand, saw the power or London and of the moneyed interest increased at the expense of the country gentlemen. The revolution then introduced a new system of l-aising money, and "its unexpected effect was to create a powerful new body of support for William, bound to the- revolution and to his throne by quite a new type of material interest," % material interest "destined not only to make fortunes and bankruptcies, but also to give a marvellous impetus to the growth of credit, trade, and capital." My space is filled again, and I have said nothing about how the bank was founded, though its foundation was bound up in the institution of the National Debt. That, and a general outline of developments up to the present time, must stand over for mv next Chat.

Last week, too, I promised a Chat upon the parties in the German Reichstag. That 1 have written, but it can stand over for another fortnight, for now is the time to interest our young people in our National Debt.