Posts tagged ‘history’

Reaction and revolution

by David Birch

[Dave Birch] On 27 June 1693, the French Admiral Tourville’s combined Brest and Toulon squadrons ambushed the Smyrna convoy (a fleet of between 200–400 English and allied merchant vessels travelling under escort to the Mediterranean) as it rounded Cape St Vincent. The English and their allies lost nearly a hundred ships with a value of some 30 million livres, the equivalent of total French military spending on the Navy, tens of billions of euros in today’s money. The City of London judged it the worst financial disaster since the Great Fire, 27 years previously, and the financial sector was thrown into turmoil. The responses to this crisis resonate to this day. On the one hand, the government leapt into action and charged a committee to look into the problem of maintaining English sea trade routes in times of war. In 1696, William III set up a body of eight paid Commissioners “for promoting the trade of our Kingdom and for inspecting and improving our plantations in America and elsewhere”. This body was “The Lords Commissioners of Trade and Foreign Plantations” , commonly known as the Board of Trade, which did not constitute a part of the long standing Privy Council “Committee of Privy Council for Trade and Foreign Plantations”‘ , but was set up as a separate body, because that’s how governments do things. Incidentally, the “The Lords Commissioners of Trade and Foreign Plantations” existed until 1970, when it became part of the Department of Trade and Industry (DTI). In contrast, the private sector formed the Bank of England and the bank issued paper money.

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Super powers

by David Birch

[Dave Birch] A superpower is bogged down in a distant guerrilla war. The superpower must resupply its army, victorious for a generation, thousands of miles away from home and it’s become a very costly endeavour indeed. Support for the war at home is tentative, and is dividing both the people and the political leadership. The guerrillas are supported by the superpower’s greatest enemy, a nation that is providing both financial and military assistance. The war drags on and the casualties mount. Generals are disgraced. The rebels continue to gain momentum, even though they are occasionally beaten. Afghanistan? No. Vietnam? No, this is historian Kenneth Davis’ marvelous description of British North America in 1782.

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Technology is progressive, finance is cyclical

by David Birch

[Dave Birch] You might be familiar with the demise of Northern Rock (or Northern Crock as it is now known the length and breadth of the UK), the collapse that marked the start of the current financial crisis so far as the British were concerned. But you may be less familiar with the story of Benjamin and Abraham Goldsmid who formed a partnership in London at the turn of the nineteenth century. They started off as brokers and as foreign exchange dealers but, as told in E. Victor Morgan’s splendid “A History of Money” (Penguin, revised edition 1969), they moved on and began trading on their own account.

Aaron, the second son of Benedict Goldsmid, of Hamburg, settled in Leman Street, Goodman’s Fields, near Whitechapel Church, as a merchant… His son George was the father of two sons, Abraham and Benjamin Goldsmid, who, by their splendid capacities for business, strict integrity, and singular good fortune, succeeded in raising their firm from competitive obscurity to be the head and front of Change Alley.

[From The Rise of the House of Goldsmid]

They became well known as financiers and philanthropists who, as associates of the British prime minister William Pitt the Younger, provided financial support to the admirable cause of campaigns against the French during the Revolutionary Wars of 1792–99.

They were the first members of the Stock Exchange who competed with the bankers for the favors of the Chancellor of the Exchequer, and succeed in diverting into more legitimate sources the profits hitherto absorbed by the bankers.

[From The Rise of the House of Goldsmid]

I absolutely love that Victorian turn of phrase “diverting into more legitimate sources the profits hitherto absorbed by the bankers” and intend to use it on every occasion possible from now on. Anyway, the Goldsmids began to use short-term bank credit to fund long-term loans, a business that was splendid for some years, until the value of their assets fell in the market (their assets were government bonds) and the partnership collapsed in 1808 with massive debts. Rather than get paid off with a massive golden parachute and a huge pension, as is the fashion today, Benjamin adopted the more honourable exit strategy and hanged himself. His brother Abraham took over the business but then shot himself at Morden Lodge two years later in 1810. One parallel with modern times is that the government were big losers: the partnership owed nearly half a million pounds to the Exchequer (and this was back in the days when half a million pounds was serious money) as well as large amounts to other banks and creditors.

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