The guy made his money at the market, 'nuff said?
From our post "Investing Tips from the World's Richest Economist":
The Arbitrage King
Ricardo made his money primarily as a stockjobber, handling his own accounts, rather than as a broker . A stockjobber might be compared to a specialist on the floor of the New York Stock Exchange who handles large sums of stock and constantly makes a market in specific issues. During the early nineteenth century, most transactions involved government bonds, known as consols, although great chartered companies such as the Bank of England and the East India Company issued shares. Otherwise, there were no corporations or corporate stock at this time....Ricardo’s Golden Rules Of Investing
Ricardo made most of his money early on as an arbitrager of government debt. He played the forward market, which was ten times bigger than the cash market. A contemporary wrote of Ricardo: “He is said to have possessed an extraordinary quickness in perceiving in the turns of the market any accidental difference which might arise between the relative price of different stocks [government bonds].” His transactions would tend to be short-term and he would “realise a small percentage upon a large sum,” typically £200 to £300 a day. He wrote a friend, “I play for small stakes, and therefore if I’m a loser I have little to regret”. ...
Ricardo never wrote down his trading techniques, but business associates said that he held scrupulously to his two “golden rules”: “Cut short your losses” and “Let your profits run on.” He also took advantage of undervalued and overvalued situations, based on the observation that the investing public often exaggerates events, and he may at times have engineered these overbought and oversold conditions, as noted above....I'm pressed for time so I won't do the formal inflation adjustment, here's a quick rule of thumb. Buying power for the 19th and 20th centuries should be multiplied by 20 for each century or a total of 40 for the 200 years.
Taking the midpoint of Skousen's estimate, £725,000 we get £29,000,000. As the pound was convertible to dollars (via the gold standard) through much of the period at 4.80 we get (and remember this is very rough) $139,200,000. Various inflation calculators might give a result double this.
Cut your losers and let your winners run indeed.
Thanks to a sharp-eyed reader we can access the monumental biography (the index alone took thirteen years to write) by economist Piero Sraffa.
I tackled this immense work of scholarship during a mis-spent youth and did not get through it.
Here is the whole thing thanks to the Online Library of Liberty.
As the winner of the 1982 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel George Stigler was to write:
"Ricardo was a fortunate man... And now, 130 years after his death, he is as fortunate as ever: he has been befriended by Sraffa."Here's the volume that interests us right now (Click for various formats):
Ricardo in Business - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 10 Biographical Miscellany [1795]
Part of: The Works and Correspondence of David Ricardo, 11 vols (Sraffa ed.)
Ricardo in Business
Of the beginnings of Ricardo’s life in business we know only what the Memoir tells us, namely that ‘at the age of fourteen his father began to employ him in the Stock Exchange, where he placed great confidence in him, and gave him such power as is rarely granted to persons considerably older than himself.’1 It would seem that by the beginning of 1793 (being just under twenty-one) he was doing some Stock Exchange business of his own, since his name appears at this time in the Stock Ledgers2 as a holder of government Funds. The earliest of the accounts opened in his name is that of the Three per cent Consols, where he is entered on 29 January 1793 as purchasing £1150 of stock in two lots, and selling on the same day £1056 to A. Ricardo, his father.3
When he married in December 1793 against the will of his parents, we know that he was thrown ‘upon his own resources, as he quitted his father at the same time.’4 He was not, however, left entirely without support. All the biographers agree in saying that influential friends in the City came to his assistance. Thus Mallet in his Diary writes: ‘His friends who felt warmly for him then, as they have ever done since, gave him their countenance and support, and set him up as a stock-broker, the usual resource of people who have no capital. Mr. Ricardo’s whole property when he married did not exceed £800’.5 But neither Mallet nor any of the later biographers has revealed the identity of these friends. Fortunately, however, the obituary of Ricardo in the Sunday Times,1 which has so curiously been overlooked, makes it possible to identify them: ‘Renounced and disinherited, Ricardo was not without friends. An eminent banking-house in the city (Lubbocks and Forster, we believe) knowing his character, and hearing how he had been used, sent for him, told him that as they had every confidence in him, he need be at no loss for money; for if he continued prudent, “they would honour any check which he pleased to draw upon them”. This support and his own talents were quite enough for Ricardo, he immediately began business and in the course of a very few years was a richer man than his father.’ Some confirmation of this is found in the fact that Lubbock and Forster were Ricardo’s bankers throughout his life.2
When Ricardo started in business with his father, the stock-brokers and stock-jobbers met in the Stock Exchange Coffee House at the corner of Threadneedle Street and Sweeting’s Alley, having moved there from ’Change Alley in 1773. This was a loose kind of organization, anyone being admitted on payment of 6d. per day.
In 1801 it was decided to reorganize the Stock Exchange and to convert it into a ‘subscription room’; admission to be by ballot and the subscription for membership 10 guineas per year.1 There were some five hundred members and, unlike the old Stock Exchange Coffee House, the general public were not admitted. The new building in Capel Court was opened in the following year, and Ricardo, who had been a member of the Committee for General Purposes in 1801, was elected to the new committee at a general meeting held on 8 February 1802; but he resigned shortly after2 and was not a member of the Committee in any subsequent year. He took however an active part in the clearing up of two spectacular frauds on the Stock Exchange, both of them based on the dissemination of false news about the war, that of 5 May 1803 and the Cochrane hoax of 1814; Ricardo being on the latter occasion a member of the Committee for the Protection of Property against Fraud.3
Already at the time when the Stock Exchange was in Sweeting’s Alley stockbrokers were divided into two distinct groups, although the distinction was not nearly as sharp as it has become since: the brokers who acted on behalf of clients, and jobbers who dealt on their own account with brokers or between themselves, and who made a market by being always willing to quote prices at which they would deal. Bargains were made both for cash and for time, the latter being for the settling days, of which there were about eight in the year.4 Transactions for time were by far the most important; one writer says that they were ten times as large in volume as those for cash.5 At the time, business was almost exclusively in government Funds, apart from the stock of the great chartered companies such as the Bank of England and the East India Company.
Ricardo was himself a jobber; and as one would expect there is not much documentary material available bearing on his business. All that is preserved among his papers is a few files of correspondence, referring to the distribution of bankrupts’ assets among the creditors. Some picture of Ricardo’s business turnover, however, may be obtained from the Stock Ledgers which, for several of the government Funds, were kept by the Bank of England and are preserved at the Bank’s Record Office. Among these, separate volumes were kept for the jobbers, whose accounts were much more active than those of members of the public. This arrangement of the ledgers has made it possible to abstract Ricardo’s transactions without excessive labour. The stock that has been selected is the Three per cent Consols, which was by far the most important of the Funds (representing more than half the National Debt in the year 1800).1 It was in this stock that Ricardo’s earliest transaction was recorded on 29 January 1793 (as we have seen above, p. 67). From that date until 21 January 1794 his purchases totalled £16,068 and his sales £15,543, leaving him with a balance of stock of £525. Unfortunately there is a gap in our information, since the volume containing the transactions from 1794 to the middle of 1798 is missing at the Bank of England Record Office.2
Ricardo’s transactions from 5 July 1798 up to the closing of his account in the Jobbers’ Stock Ledgers in 1818 are set out on an annual basis in the Table on p. 72 below. His total purchases for each year are given, and also the balance of stock held by him at the end of the year (a date to which no particular significance attaches) to show the difference between purchases and sales.1
The stock acquired by Ricardo has been distinguished according as it was obtained by transfer or by subscription. The former represents purchase of stock from an existing holder; the latter new stock obtained through the process of paying up in full the scrip of the latest Loan, thus transforming it into registered stock.2 During the period of several months while the instalments on the Loan were being paid, the scrip (or, more usually, the ‘Omnium’ as described below, p. 77) circulated virtually as a bearer security until, when fully paid, new stock was issued and inscribed. The stocks issued for the Loan were normally of types already in circulation, and whenever the price of the partly paid scrip fell below the corresponding level of the fully-paid stock, it was profitable for the jobber to buy up the former, pay up the outstanding instalments (for which appropriate discount was allowed) and sell the fully-paid stock. This operation was often possible since, while stock was held by permanent investors, scrip was largely in the hands of speculators and subject to greater fluctuations.
These figures would not include all Ricardo’s dealings in the Consols, for many speculative transactions would be closed before the end of the account thus giving rise to no transfer of stock.3 In any case throughout the period of
RICARDO’S TRANSACTIONS IN THE ‘THREE PER. CENT. CONSOLS’ FROM 1798 TO 18181 | ||||||||||
Year | Quantity of stock acquired | Balance of stock in hand on 31 Dec. | ||||||||
By purchase | By sub-scription | Total | ||||||||
1 To make up for the gap in the Consols Ledgers for the earlier years (see above, p. 70) similar information is supplied, with some overlap in dates for comparison, for the Three per cent Reduced, where Ricardo’s account starts on 27 April 1796. In 1800 this stock represented one-sixth of the National Debt. | ||||||||||
£ | £ | £ | £ | |||||||
1798 | 384,000 | 324,000 | 708,000 | 18,000 | ||||||
1799 | 653,000 | 200,000 | 853,000 | 28,000 | ||||||
1800 | 474,000 | 396,000 | 870,000 | 10,000 | ||||||
1801 | 596,000 | 990,000 | 1,586,000 | 2,500 | ||||||
1802 | 716,000 | 95,000 | 811,000 | 19,000 | ||||||
1803 | 691,000 | 202,000 | 893,000 | 20,000 | ||||||
1804 | 923,000 | 321,000 | 1,244,000 | 42,000 | ||||||
1805 | 1,133,000 | 923,000 | 2,056,000 | 13,000 | ||||||
1806 | 1,761,000 | 930,000 | 2,691,000 | 61,000 | ||||||
1807 | 2,023,000 | 540,000 | 2,563,000 | 45,000 | ||||||
1808 | 2,429,000 | 159,000 | 2,588,000 | 30,000 | ||||||
1809 | 2,207,000 | — | 2,207,000 | 102,000 | ||||||
1810 | 2,543,000 | 4,000 | 2,547,000 | — | ||||||
1811 | 2,278,000 | 60,000 | 2,338,000 | 46,000 | ||||||
1812 | 1,694,000 | 954,000 | 2,648,000 | 78,000 | ||||||
1813 | 1,476,000 | 2,242,000 | 3,718,000 | 84,000 | ||||||
1814 | 1,743,000 | 1,216,000 | 2,959,000 | 163,000 | ||||||
1815 | 1,288,000 | 500,000 | 1,788,000 | 130,000 | ||||||
1816 | 1,232,000 | 73,000 | 1,305,000 | 295,000 | ||||||
1817 | 456,000 | — | 456,000 | 46,000 | ||||||
1818 | 159,000 | — | 159,000 | 85,000 | ||||||
£ | £ | £ | £ | |||||||
1796 | 14,775 | 84,625 | 99,400 | 250 | ||||||
1797 | 21,000 | 72,000 | 93,000 | 2,000 | ||||||
1798 | 15,000 | 68,000 | 83,000 | — | ||||||
1799 | 174,000 | 14,000 | 188,000 | — | ||||||
1800 | 61,000 | 216,000 | 277,000 | 176 | ||||||
1801 | 93,000 | 254,000 | 347,000 | 4,000 | ||||||
Ricardo’s activity the security most widely dealt in and the usual counter for speculation was the Omnium of the latest government Loan, which circulated from hand to hand without the necessity of any entry in the Stock Ledgers. Accordingly no record of such dealings has remained.
Of Ricardo’s day-to-day activity on the Stock Exchange, Mallet notes in his Diary: ‘He is said to have possessed an extraordinary quickness in perceiving in the turns of the market any accidental difference which might arise between the relative price of different stocks, and to have availed himself of this advantage, so as to realise as much as £200 or £300 in one day, by selling out of one, and buying into another stock, or vice versa. He is also said never to have carried his stock transactions to any speculative extent; but to have always, or generally, sold out on the turn of the market, so as to realise a small percentage upon a large sum.’1 There is a tradition that Ricardo’s successful dealings rested upon a scrupulous attention to what he called his own ‘golden rules’, namely: ‘Cut short your losses’ and ‘Let your profits run on’.2 In this connection Bowring quotes Ricardo as saying that ‘he had made his money by observing that people in general exaggerated the importance of events. If, therefore, dealing as he dealt in the stocks, there was reason for a small advance, he bought, because he was certain the unreasonable advance would enable him to realise; so when stocks were falling, he sold in the conviction that alarm and panic would produce a decline not warranted by circumstances.’1
In any case, once having started in business on his own, he was to prosper with remarkable quickness. Two years after his marriage, in the summer of 1795, we find him staying at Brighton with his family in an expensive style.2 In a letter of 1798 he speaks of how ‘bountiful’ Fortune has been to him;3 and in letters of 1802 he refers to ‘the ample means’ he possesses,4 and describes himself as ‘one of Fortune’s chief favorites’.5
The earliest mention of Ricardo’s business address as a stockbroker is in the directory for 1798,6 when it is given as 3 Capel-court, Bartholomew-lane. He appears next in the directory for 18087 as being at 16 Throgmorton-street. It is here that for a number of years he had his counting-house which is mentioned from time to time in letters to his friends, and where he went every morning after breakfast, and which he would leave at half-past-three to return home for dinner.8 In 1815, when he was preparing to retire from business, the directory9 shows him as having moved to 1 New-court, Throgmorton-street, and from 1817 to 1819 he is entered as of 4 Shorter’s court, Throgmorton-street: this last can have been little more than an address, since in those years he had ceased to be active on the Stock Exchange.
In 1802 (when, with the foundation of the new Stock Exchange, the records begin) Ricardo employed, as his authorized clerks, his brother Francis Ricardo and also G. Field; from 1803 to 1806 his brother Francis alone, from 1807 to 1810 another of his brothers, Ralph, and from 1811 to 1815 his own nephew William Arthur Wilkinson.10
During the Napoleonic Wars the Stock Exchange played a dominant role in the financing of Government expenditure.1 The Loan which was required every year was raised from contractors who relied on the Stock Exchange as the channel through which they could place the stock among a wide public over a period of time.2 The normal method was for the Chancellor of the Exchequer to invite competitive bids from would-be contractors. He would intimate the sum of money that he required, and the several stocks which he would give for every £100 of money subscribed. (For instance, in the Loan of £27 millions raised in June 1813, for every £100 subscribed there were given £110 in Three per cent Reduced, £60 in Three per cent Consols, and in addition 8s. 6d. in Long Annuity). In the Chancellor’s announcement, however, the amount of one of the stocks (in the above example the Long Annuity) was left undetermined, and bidding would take place in that stock; the competitor who was prepared to accept the smallest amount of it being awarded the Loan. Each of those who were preparing to bid for the loan formed a list of subscribers, who would be associated with him, would pledge themselves to take a share in the loan, and were liable to be asked by him to make an advance deposit. In making up these lists the contractors reserved shares for their friends and also for such influential persons as the Governor and Directors of the Bank of England.1
The principals would attend on the Chancellor of the Exchequer in Downing Street at an appointed time, usually on the morning of Budget day, the latest prices of the stocks being brought to them by runners from the City. They severally handed their sealed bids to the Chancellor, who proceeded to open them and forthwith assigned the Loan to the successful bidder.
The Loan was payable in eight or ten monthly instalments of 10 or 15 per cent each,2 and discount was allowed for payment in advance of the due dates. The contractor normally obtained the stocks from the Minister on more favourable terms than were being quoted on the market at the moment; the percentage difference being called the ‘bonus to the contractor’.1 The scrip of the various stocks composing the Loan was usually transferred, until fully paid up, in the composite units in which the Loan was originally contracted. These were called Omnium,2 and quotation was in the form of a premium or discount per £100 subscribed. On payment of the first instalment (usually due two or three days after the conclusion of the bargain), subscription-sheets were issued to the subscribers; these contained on one side a receipt for the sum paid and spaces for indicating payments of successive instalments, and on the other side a form of assignment which when sold by the original subscriber would be signed by him without filling in the name of an assignee and thus endorsed would pass from hand to hand like a banknote.3 When the final instalment was paid up, the Omnium would be converted into its component stocks and these registered in the name of the last holder.4
As soon as the issue of a new Loan was in prospect, it was the practice for those who intended to bid for it and were drawing up lists of subscribers, to begin to ‘prepare’ the market for the Loan. This consisted in selling out the stock which they owned and also in making sales of stock of which they were not possessed. The sales would depress the price against the day of the contract, so as to make the new stock obtainable as cheaply as possible. They would hope to replace the stock they had sold by their share of the Loan.1 At this stage, therefore, it was the would-be contractors who were bears of the Funds. Afterwards the contractors and subscribers were gradually placing among investors the new Loan. In the process they received help from the Bank of England, which after the subscriber had paid the first two or three instalments usually made advances to help with the subsequent ones.2
The number of competitors for a Loan was inevitably limited by the difficulty of forming a list of substantial subscribers, and by the necessity for the contractors to be able to satisfy the Minister of their own financial standing. As to this latter point, we know, for instance, that when John Morgan wished to make a bid for the Loan of £18 millions for 1796 he wrote to the Chancellor of the Exchequer that he had at his bankers upwards of £300,000 and could have £200,000 more at a moment’s notice to deposit as a security.3 In the last four years of the war there was no effective competition at all and the Loan was usually divided between the various lists at an agreed price. It is therefore not surprising to find that Trower, when on one occasion he expressed disgust with the Funds (‘the less one has to do with them the better’), should have hastened to add: ‘Excepting upon those golden opportunities which Loans judiciously taken generally afford.’1
In the eighteenth century, before the system of competitive bidding had been introduced, the Loans had been raised directly from the public by subscription. This system lent itself to abuse; for the interval between subscription and allotment made it possible for the friends of the Minister to take advantage of the situation. Thus, when a Loan was issued in 1778 by this method, there was much delay in allotment, meanwhile the Funds fell, the new Loan went to a discount and the public received all that they had applied for. When, however, in 1781 a new Loan went to a premium, it was divided with regard to political influence and those who had suffered from the previous Loan had no opportunity of making good their loss.2 When subsequently the competitive system was introduced, the contractors of the Loan were mainly bankers and merchants. The members of the Stock Exchange sought to retrieve their position by organising a list of their own to compete for the Loan, but seem at first to have met with little success. The Table which followsp. 80 below shows the various groups which competed for the Loans from 1805 to 1820.
In 1806 we find for the first time the names of John Barnes, James Steers and David Ricardo as the would-be contractors bidding on behalf of the list of the Stock Exchange, although they did not secure the Loan on that occasion. They succeeded, however, in obtaining the Loan for £14,200,000 of the following year (1807), outbidding the Goldsmids, the Barings, and Robarts. Those who had previously acted for the Stock Exchange must have caused great dissatisfaction, whether by the eighteenth-century practice of profiting themselves at the expense of the subscribers, or by sheer inability to secure a share in the Loans for their constituents, if we are to judge by the surprised commendation showered on Ricardo and his brother-contractors in 1807 for the integrity of their conduct and for their equitable distribution of the Loan (of which the documents are given below, pp. 125–8).
Barnes, Steers and Ricardo on behalf of the Stock Exchange made bids for the Loans of the three following years, but in each case unsuccessfully. The Loan of 1808 was obtained by Baring Brothers, that of 1809 by Abraham Goldsmid, and that of 1810 jointly by the Barings and Goldsmid. This latter Loan, which was for £12 millions, was bid for on 11 May 1810. For every £100 advanced there were to be given £130 in Three per cent Reduced, and so much in Three per cent Consols as the bidding would determine. The successful contractors were willing to accept £10. 7. 6 in Consols; Barnes, Steers and Ricardo £12. 18. 0 and Robarts & Co. £13. 10. 0. This was the Loan which, after being at a premium on the first day, subsequently went to a heavy discount, resulting in large losses to the contractors and in the suicide of Abraham Goldsmid on 28 September 1810.
Ricardo with his partners was successful in obtaining the Loan of 1811, and from that date he was contractor for every Loan that was negotiated until the end of the war. The Omnium of the 1811 Loan went to a premium when it was contracted for (20 May), but fell to a discount during the summer. Ricardo, however, felt little anxiety, since, as he wrote to Mill, he always safeguarded himself when handling
Sources: Grellier’s Terms of All the Loans, 1812, and the newspapers of the day; also, ‘Loans Contracted on Account of Great Britain, in each year since 1793; &c.’ in Parliamentary Papers, 1822, vol. xx, N. 145.
Although all British Loans contracted for by competitive bidding are included, this table is not a complete record of funding operations during the period. In particular Loans for the funding of Exchequer Bills and other conversion operations are omitted. Most of the Loans listed are partly on account of Great Britain and partly on account of Ireland: certain small separate Loans for Ireland, however, are not included.
The unsuccessful bidders have been arranged, as far as possible, in the order of their bids (beginning with the second best bid).
The prices of Omnium given are market quotations and as such quite distinct from the calculated ‘bonus to the contractor’ described on p. 76–7.
Date of Contract | Sum Raised | Contractors | Unsuccessful Bidders | Prices of Omnium on opening day | Notes | |
1805 Feb. 18 | £22,500,000 | A. & B. Goldsmid; Robarts and Thellusson; Sir F. Baring & Co. | the parties coalesced and made the same bid | none | 4 to 5¼ premium | |
1806 March 28 | £20,000,000 | Goldsmid; Robarts; Baring | Barnes, Steers & Ricardo | 3 to 4½ premium | ||
1807 March 3 | £14,200,000 | Barnes, Steers & Ricardo | Goldsmid; Baring; Robarts. | 2 to ¾ premium | On 21 March Barnes, Steers & Ricardo took also the Irish Loan of £1,500,000 which soon went to 4 premium | |
1808 May 31 | £10,500,000 | Sir F. Baring | Goldsmid; Robarts; Walsh & Nesbitt; Barnes, Steers & Ricardo | 1½ to 2¼ premium | ||
1809 May 12 | £14,600,000 | A. Goldsmid | Robarts; Barnes, Steers & Ricardo; Sir F. Baring | 2 to 1¼ premium | 3 premium on 12 Jan. 1810 | |
1810 May 16 | £12,000,000 | Baring, Battye & Co.; Goldsmid & Co. | Barnes, Steers & Ricardo; Robarts, Curtis & Co. | 2 to 1¼ premium | Went to 10 discount on 28 Sept. (the day of Abraham Goldsmid’s suicide) | |
1811 May 20 | £12,000,000 | Barnes, Steers & Ricardo; Robarts, Curtis & Co. | Baring, Battye, etc.; Reid, Irving & Co. | 2 to 1¼ premium | 2¼ discount on 12 July | |
1812 June 16 | £22,500,000 | Barnes, Steers & Ricardo; Battye & Co.; Robarts & Co. | all lists coalesced and made the same bid | none | 3 to ½ premium | |
1813 June 9 | £27,000,000 | Barnes, Steers & Ricardo; Baring, Angerstein, Trower, Battye, etc. | the two lists coalesced and made the same bid | none | 2 to 3½ premium | |
1813 Nov. 15 | £22,000,000 | The contractors of the previous Loan, viz. Barnes, Steers & Ricardo; Baring, etc. | none | 3½ premium | Went to 10 premium on 24 Nov.; and 30 premium in Feb. 1814, in the closing stage of the war | |
1814 June 13 | £24,000,000 | Barnes, Steers & Ricardo; Baring, Angerstein, Ellis, Trower, Battye, etc. | the two lists coalesced and made the same bid | none | 5½ to 7 premium | Gradually fell and went to 6 discount in September |
1815 June 14 | £36,000,000 | Steers & Ricardo; Baring and Angerstein; Ellis and Tucker; Trower and Battye | all made the same bid | none | 2½ to 3¼ premium | Rose sharply after the news of Waterloo reaching 13 premium on 27 June |
1819 June 9 | £12,000,000 | N. M. Rothschild | David Ricardo, Brothers & Co.; Reid, Irving & Co. | 1¾ premium to 2 discount | ||
1820 June 9 | £5,000,000 | Reid, Irving & Co. | N. M. Rothschild; Haldimand; F. & R. Ricardo; Baily | par | ||
‘so ungovernable a commodity’ as Omnium: ‘I play for small stakes, and therefore if I’m a loser I have little to regret.’1
In 1812 for the Loan of £22,500,000, which was bid for on 16 June, the three lists (Barnes, Steers and Ricardo; Battye; Robarts) coalesced and made a uniform bid. For the Loan of £27 millions negotiated on 9 June 1813 there were only two lists, that of Barnes, Steers and Ricardo and that of Baring and others. Since their offers were similar, the Loan was divided between them. An unusual feature was that a second Loan was raised later in the same year (on 15 November); this Loan being for £22 millions. In view of the fact that the instalments of the first Loan had not yet been completed, the Chancellor of the Exchequer announced that preference would be given to the contractors of the previous Loan. The offer was accepted on the terms proposed by the Government, and the contractors arranged for the new Loan to be ‘divided amongst the subscribers to the last in the exact proportion of their former subscriptions.’2 This Loan was issued at a time when the Funds were at a very low level; and soon, with the hopes of an early termination of the war, the Omnium went to a considerable premium, which in the ensuing months exceeded 20 per cent.
In the consultations which preceded the Loan of 1814 the Chancellor of the Exchequer asked the contractors for their opinion on the question of reducing the sum to be borrowed by the Government from £24 millions to £12 millions by using the Sinking Fund—a method which had been advocated in Parliament by Pascoe Grenfell.3 All the contractors advised against reducing the Loan in this way, with the exception of Ricardo, who, ‘greatly to his credit’, according to Grenfell, recommended the application of the Sinking Fund and a loan of £12 millions only, as being more advantageous to the country.1 Evidently the Chancellor disregarded his advice; for on 13 June 1814 a loan of £24 millions was negotiated, and was taken by the same two lists as in the previous year, which made identical bids.
The last and biggest Loan of the war (for £36 millions) was that raised on 14 June 1815, four days before the Battle of Waterloo. The Funds which had been depressed because of the uncertainty of the war situation fell still further when the size of the Loan was announced on 10 June.2 On this occasion there were four lists: Steers and Ricardo;3 Baring and Angerstein; Ellis and Tucker; Trower and Battye.4 Once again all the bids were identical; as the Chancellor of the Exchequer, Vansittart, told the House, they were also, ‘singularly enough...exactly the minimum of what the Treasury had resolved to accept.’ And unlike other occasions, when uniform bidding was taken as a sign of collusion, the Chancellor found further ground for satisfaction in the fact that ‘four different calculations had been made by four different persons, and all had concurred in naming...the bidding.’5 The terms were very favourable to the lenders, the bonus to the contractors as calculated by the Chancellor being as much as £4. 8. 10¼;1 besides, this was based on an extremely low market price of stocks (Consols standing at 54). On the day of the contract the Omnium was quoted at 2½ to 3¼ per cent premium and remained above 3 on the following day. The first news of the victory at Waterloo was brought to London on the 20th by a Mr Sutton of Colchester, owner of the Ostend packet, who being at Ostend when the news reached there ordered one of his vessels to sea without waiting for passengers.2 It was published in a special edition of the Morning Post late on the 20th.3 In the course of the 21st the Omnium rose to 6 per cent premium. The Times of the following day quoted Stock Exchange opinion as holding ‘that the news of the day before would be followed up by something still more brilliant and decisive’.4 On the 23rd Omnium rose above 9 per cent premium, and on the 27th and 28th it touched 13 per cent, which was the peak at this period. During the rest of the summer it fluctuated between 5½ and 8½, and in the autumn it rose again to over 13 (on 21 November even reaching 16½), at which level it remained until the Loan was fully paid up.
This Loan brought to Ricardo the largest single profit he ever made. In writing to Malthus on 27 June, when the Omnium was quoted at 11½ to 13 per cent premium, he says:5 ‘I have all my money invested in Stock,6 and this is as great an advantage as ever I expect or wish to make by a rise’. He had also made a ‘moderate gain’ on the portion of the Loan which he had ‘ventured to take over and above’ his capital. This he had sold quickly (possibly even before the first instalment was due on 17 June) at a premium of 3 to 5 per cent. He closes his account to Malthus by saying: ‘Perhaps no loan was ever more generally profitable to the Stock Exchange’. Mill on his part concluded that Ricardo must be now ‘Bless us all! no body can tell how rich!’ To which Ricardo replied that, ‘though sufficiently rich to satisfy all my desires, and the reasonable desires of all those about me’, he was not quite so rich as Mill seemed to think.1
Malthus, at whose request Ricardo had reserved a share of £5000 in the Loan, became apprehensive as to the result of the military campaign and asked him to take an early opportunity of selling at a small profit provided this was not ‘either wrong, or inconvenient to you’. Accordingly, Ricardo sold Malthus’s share on the opening day, when the premium was about 3 per cent.2
This was the last Loan contracted for by Ricardo, who was now in process of retiring from business. In the years 1816 to 1818 there were no Government Loans. A new Loan was negotiated in the summer of 1819, when Ricardo was a Member of Parliament and during the passage through both Houses of Peel’s Bill for the resumption of cash payments; and it is surprising to find Ricardo reappearing once more in the role of a competitor for the Loan. There was an unusually long interval between the first rumours of an impending Loan, which we first find mentioned in the newspapers at the end of April, and the bargain for the Loan on 9 June. This delay was due to uncertainty on the Government’s part as to whether, in view of the impending passage of Peel’s Cash Payments Bill, the Bank would extend the usual facilities to the subscribers, and consequently as to the size of the Loan which it would be practicable to issue. Meanwhile Grenfell and Ricardo in Parliament were pressing for the adoption of their suggestion to apply the Sinking Fund in diminution of the Loan.1 In the end the Bank refused under any conditions to accommodate the subscribers, and the Ministers were driven to adopt the Grenfell-Ricardo scheme. Accordingly they decided that of the £24 millions required, £12 millions should be taken from the Sinking Fund and only £12 millions raised from the market. The Funds, which had been falling steadily in the expectation of a big Loan, recovered sharply (Consols rising from 66 to 70) when on 4 June the unexpectedly small size of the Loan was announced. As a result, the contract was concluded five days later on unusually favourable terms for the Government.
According to The Times of 30 April three distinct parties were already preparing lists of subscribers with a view to contracting for the Loan. These were as follows:
‘1. Mr. Rothschild—This gentleman’s list is said to be very extensive: it was completely filled before any intimation of a loan had been publicly received from the Treasury; and the sums written for, constitute, as is reported, an aggregate of more than 40,000,000 l.
‘2. Messrs. Ricardo, Brothers, and Co—This is the Stock-exchange list, and nothing has yet been done towards arranging it: the circular letters of this party will not be sent, it is asserted, until the Chancellor of the Exchequer comes forward with the Budget.2
‘3. Messrs. Reid, Irving & Co.; Sir T. Jackson and Co.; in conjunction with Mr. George Ward, Messrs. Ellis, Tucker and Barnett, and Trower and Battye.—These houses are receiving letters from their several friends, and are forming, in fact, distinct lists; but an union of interests and a coalition of the whole into one list is considered extremely probable.’
It was in fact these three groups which on 9 June made bids for the Loan. The best bid was that of Rothschild, and the contract went to him. Ricardo was the runner-up and Reid, Irving & Co. came last.
There had been a preliminary meeting at Downing Street on 4 June at which the Prime Minister and the Chancellor of the Exchequer had informed the intending contractors of the details of the Loan. This was reported as follows in The Times of Monday, 7 June 1819:
‘When they went up on Friday to Downing-street, Lord Liverpool stated to the parties, that he had sent to the Bank a paper, proposing three plans, to ascertain if the Bank would take in the Omnium, and advance the instalments in the usual manner, provided any one of them was adopted. The plans were, to raise a loan of
1st July, 1820. | |
24 Ditto, | 1st April. |
12 Ditto, | 17th March. |
‘But the Bank had that morning refused to take in the Omnium under any of these plans. He therefore now proposed a loan for only 12,000,000 l.; and in the event of the offer being accepted, he reserved to the Chancellor of the Exchequer and himself the power of submitting to Parliament a proposal for applying to the service of the year such part of the Sinking Fund as they might deem necessary. The amount of Sinking Fund so to be applied is understood to be 12,000,000 l., which, Lord Liverpool trusted, would not be inconvenient...
‘Mr. Rothschild begged to know whether Exchequer-bills would remain at their present rate of interest, or whether the rate would be increased? The Earl of Liverpool said, they must reserve to themselves the discretion of varying the interest as circumstances may require.
Ricardo’s circular to the subscribers on his list for the Loan of 1819 (reduced from the original in the possession of Sir John Murray)
‘Mr. Ricardo desired to know, as the loan was to be so small, whether it was intended that the corporate companies should have portions of it assigned to them as heretofore?
‘Our readers are probably aware, that on the loans contracted by the Government, a certain proportion has been uniformly reserved for the advantage of the Bank of England and other corporate bodies.1
‘A desire is said to have been expressed that the custom shall cease, and accordingly it was determined that no sum shall be reserved for the Bank or other public companies.’
‘The Loan.—Yesterday morning at 10 o’clock pursuant to appointment, the contractors for the loan waited on the Chancellor of the Exchequer, and the First Lord of the Treasury, to deliver their proposals. The lists, which were three, were respectively headed by Mr. Rothschild; Messrs. Ricardo (brothers) and Co; and Messrs Reid, Irving and Co. The negotiation only lasted a few minutes. Previously to its commencement, Mr. Ricardo suggested to the Chancellor of the Exchequer the propriety of changing the day fixed on for the second payment, viz. the 17th July, as, that being the settling day for the account in Consols, much inconvenience would be caused by double arrangements of so much magnitude taking place in the same day. The Right Hon. Gentleman readily assented to the alteration, and the second payment now stands postponed to the 23rd of July.... The sealed proposals of each contractor were thenopened. It will be recollected, that for every 100 l. subscribed in money, 80 l. were to be given in Consols, and that the biddings were to take place in Reduced, the party willing to accept of the smallest sum in that stock, of course obtaining the contract. The following are the sums named by each contractor:
£62 | 18 | 8 | |
Messrs. Ricardo (brothers) & Co | 65 | 2 | 6 |
Messrs. Reid and Irving | 65 | 10 | 0 |
‘The loan, therefore, is taken by Mr. Rothschild. Before the gentlemen quitted the room, Mr. Ricardo expressed a desire to learn from the Chancellor of the Exchequer the manner in which Exchequer-bills are to be received in payment of the instalments of the loan. The Chancellor replied, that the Exchequer-bill itself, with the premium of 20s., and the interest due upon it, would be taken as so much money; the balance of the instalment to be paid in notes.’
After calculating that the bonus to the contractor was £1. 3. 3 (while on Ricardo’s bid it would have been £2. 13. 9 and on Reid Irving’s £2. 19. 0), The Times reports the ‘scene of agitation’ which ensued when the particulars were known on the Stock Exchange: ‘The most rapid fluctuations immediately took place, and in the course of the day Omnium was done at all prices, from 1¾ premium to 2 discount. The market closed at 1½ discount’.
The terms were so exceptionally advantageous for the Government that the Chancellor of the Exchequer in his Budget speech later on the same day expressed the hope that they would not prove unfavourable to the ‘adventurous parties’ with whom it had been negotiated, although the terms were so low that ‘the bidding might not at first sight appear justifiable on the score of prudence.’1 The outcome cannot have been very profitable to the contractor; but for Rothschild who had been mainly concerned in the floating of foreign loans, success in his first bid for a British Government Loan may have been chiefly a matter of prestige. In October there was a fall in the Funds; and Rothschild, who already in his evidence before the Bank Committee had opposed the resumption of cash payments, set about pressing the Ministers for a postponement of that measure, although without success.1
If for Rothschild the Loan of 1819 was only a stage in the building of a financial empire, for Ricardo it was the closing incident of his business career. There could hardly have been two more contrasting types. It was in the making of money that Rothschild found the main enjoyment of life: not so much prizing the money for what it could buy, as ‘finding intense delight in the scrambling and fighting, the plotting and tricking, by means of which it was acquired.’2 A story is told that, when someone said to him: ‘I hope that your children are not too fond of money and business, to the exclusion of more important things. I am sure you would not wish that’, Rothschild replied: ‘I am sure I should wish that. I wish them to give mind, and soul, and heart, and body, and everything to business; that is the way to be happy.’3 Ricardo, however, brought up his sons to be country gentlemen, and as for himself had no craving for the bustle of the City and viewed financial success as a means of retirement into the country, to the quiet pursuit of his ‘favourite science’. When he first went to Gatcomb he wrote to Malthus: ‘I believe that in this sweet place I shall not sigh after the Stock Exchange and its enjoyments.’4
This was Ricardo’s last appearance in the Loan market; and at the end of the year he even ceased to be a member of the Stock Exchange.
A highly misleading picture of the market for British Government loans during the Napoleonic Wars has been given by Professor Norman J. Silberling in an article of 1924, which has been uncritically accepted ever since.1 The gist of his conception is this: ‘In Ricardo’s day the membership of the Stock Exchange comprised two main factions: the contractors to public loans, who naturally took the bull side of the market, and the professional broker-jobbers, who took the bear side in order to derive profits on “continuation”.’2 Having thus set the stage, Silberling enacts a drama in which the villains are the ‘bear-jobbers’ or ‘the inner clique of exchange professionals, of which Ricardo seems to have been an acknowledged leader’, and the heroes the financial house of Benjamin and Abraham Goldsmid, who ‘always stood ready, not only to loan upon the funds, but to purchase them, so that they formed an increasingly important support for the contractors’.3 In the course of his attempt to show that these two parties were the only sources from which advances on the Funds could be obtained, he commits himself to the untenable statement that the Bank of England ‘did no lending on stock collateral’;4 ample evidence against which is available and has been cited in the preceding section.5 Apart from the inherent improbability of either party being consistently a bull or consistently a bear through the vicissitudes of a period of years, there is the fact, of which Silberling was evidently ignorant, that Ricardo was himself a loan-contractor. There were actually more than two parties, and the rivalry between them was expressed as much in competition to secure the contract for the Loan in the first instance as in the conflict of interest between successful and unsuccessful bidders after the Loan had been issued.
Silberling goes on from this general argument to accuse Ricardo of having inserted his first article in the Morning Chronicle (written, he says, ‘in the manner of a fevered alarmist’)1 and then of having published his Bullion pamphlet in order to bring about a fall in the Funds.2 The Bullion Committee itself is alleged to have been a mere tool of the bear clique: ‘Ricardo was not content to let the matter rest with the publication of a pamphlet, and, working through his friend Francis Horner, who now sat in the House of Commons, he began at once to agitate his program in Parliament. Horner managed to have a Committee appointed to canvass the subject of the high price of specie, the state of the exchanges, and other alleged signs of impending ruin’. The manoeuvre, according to Silberling, was crowned with success: ‘The price of the funds, in fact, fell abruptly late in 1810; the Goldsmids were placed in a desperate predicament, and one of the partners committed suicide.’3
Ricardo may well have been a bear in the autumn of 1810 when the fall in the Funds occurred. But Silberling is completely silent about the period of time between Ricardo’s publications and their alleged effect. The article had appeared in August 1809, the pamphlet at the beginning of 1810 and the Bullion Committee was appointed in February, while the great price-fall did not occur until September. During this interval, in May 1810, a new Loan was negotiated which, as we have seen above (p. 80), Ricardo was nearly successful in obtaining; and had he obtained it, the delayed effect of the plan imputed to him would have been to accomplish his own ruin. If the charge were true, is it conceivable that Ricardo would have made a bid for the Loan at that time?
How little Ricardo considered his own currency proposals as an instrument for depressing the Funds is shown by his undiminished advocacy of them at times when he obviously stood to gain from a rise. For instance, when in 1811 he had been successful in securing the contract for the Loan, and his friends were apprehensive about his holdings of Omnium,1 he was writing to Perceval and to Tierney urging the adoption of his plan ‘first, to arrest the progress of the depreciation of our currency, and secondly to restore it to its standard of value’.2
As for the Bullion Committee, this was so far from being a plot against the loan contractors that Sir Francis Baring, the head of the house of Baring, as a witness before the Committee was a principal supporter of their conclusions. Yet the Barings, along with Goldsmid, were contractors for the Loan of 1810.
In conclusion it may be noted that the chief authority on which Silberling relies is an anonymous pamphlet of 1821, which claims to be An Exposé of stockjobbing practices and which gives a lively if somewhat incoherent description of scenes on the Stock Exchange in Ricardo’s time.3 Although Ricardo is not mentioned directly, he is transparently referred to as ‘a bullion pamphleteer’ and as ‘Milord David the bear-general’;1 and the writer presents his own version of events in phrases such as the following: ‘With the creation of false alarms, attacks upon capitalists without, besides Goldschmidt, as Brickwood mentioned hereafter, ticket pocketing, &c. within the Stock Exchange; this bullion pamphlet had its effect, to depress the funds above 10 per cent.; to the destroying this contractor, distressing the capitalists, embarrassing the Minister, and enriching the, at length triumphant Stock Exchange bears, who, in their own words of exultation, had “got stocks at length to a fair jobbing price.”’2
The authorship of this pamphlet, which was evidently the work of a stockbroker, has been attributed to ‘J. Lancaster’.3 This can be no other than Joseph Lancaster who had been a member of the Stock Exchange from 1804 to 1810;4 in that year he defaulted, no doubt in consequence of the fall in the Funds of which his pamphlet so much complains, and he was accordingly excluded from membership by decision of the Committee of the Stock Exchange.5
When in 1814 Ricardo was intending to give up the Stock Exchange and become a country gentleman, he bought his first estates, and in 1816 and 1817 made further considerable investments in land. Writing in December 1817 to J. B. Say he describes how he had been gradually retiring from business and had ‘from time to time withdrawn’ his money from the Funds and ‘invested a large portion of it in landed property’.1 His selling out of the Funds had been speeded up by the great rise in their price in 1817; Consols which had been 62 in January had gradually risen to 83 in July, near which level they remained for the rest of the year. At such prices Ricardo considered the Funds ‘enormously high’ in view of the large budget deficit;2 and he told Mallet that ‘he did not conceive how any man who could get his 3½ per cent by land could leave his money in the funds’.3 Two years later, in 1819, he was writing to his own brother-in-law, J. H. Wilkinson, that he had ‘large sums’ to pay for land not yet conveyed to him, adding: ‘I have retained very little money at my disposal as I have invested almost all I have in land, in mortgages and in the foreign funds.’4
First as regards investment in land. Ricardo’s earliest purchase had been the Manor of Minchinhampton in Gloucestershire, which included a large estate of 5000 or 6000 acres and the residence of Gatcomb Park. This he acquired in July 1814 from Philip Sheppard, at a price of £60,000.1 The house had been built shortly after 1770 by Edward Sheppard whose ancestors had owned the Manor since 1651; but his only son Philip Sheppard was a spendthrift whose extravagant habits involved him in debt and finally compelled him to part with the estate.2
Towards the end of the same year 1814 Ricardo bought another property, the Manor of Dalchurst, otherwise Hadlow Place, with other estates near Tonbridge in Kent, from the assignees of George Children. There is no direct evidence of the price, but it was probably upwards of £25,000.3 The payment was not completed till April 1817.
From 1815 Ricardo employed Edward Wakefield to keep him informed of opportunities for investment and to advise him in his purchases of land, and later to supervise the management of his estates.4 Wakefield had considerable experience as a practical farmer and now acted professionally as adviser to landed proprietors.5 In the summer of 1816 he writes to Ricardo: ‘I feel pretty confident that the time has arrived when you may buy to advantage’.1 And a few weeks later: ‘bearing in mind your views of making a large investment in land—I have been looking at various properties on sale—some of which may perhaps be worth your purchasing’.2 Wakefield’s idea was that Ricardo’s landed investments should be made more methodically, with an aim which he describes as follows: ‘I think your great object should be purchasing in the neighbourhood of where you already possess property, or else a large Estate which lays compact.’3 Accordingly, he was critical of Ricardo’s earlier purchase of Dalchurst, of which in the same letter he writes: ‘The Estate which you have in Kent is a bad purchase and away from everything else and gives none of that consequence which would attach to it did it join other Estates.’
Having adopted Wakefield’s plan of ‘compactness’, and on his advice, Ricardo in 1816 bought two great estates in the neighbourhood of Ledbury, on the borders of the counties of Gloucester, Worcester and Hereford. The first of these consisted of the Manors of Bromesberrow and of Bury Court, purchased at a price of £50,000 from Joseph Pitt, Walter Honeywood Yate and others. It included Bromesberrow Place, a house in beautiful surroundings at the foot of the Malvern Hills, which in 1819 Ricardo gave as a residence to his eldest son Osman. The second was the adjoining Manor of Pauntley Court, together with the estates of Wood End, Gamage Hall and Everas, purchased at a price of £54,000 from John Stokes and others. With regard to this, Wakefield wrote: ‘It is as safe a purchase as can be made and will certainly yield you 4 pr. Cent.’1 The payment was spread over two years and was completed in September 1818.
Soon after this purchase, Wakefield was recommending another neighbouring estate, Berrow in Worcestershire: ‘the tythes may be purchased, and the Parish would then so nearly belong to you that a quantity of rich land might be inclosed at a trifling expence and attached to it.’2 In this case the negotiations were protracted, as several interests were involved. In July 1817 Wakefield writes: ‘Now that you have purchased Bromsbero—that property of Mr White called Berrow is important, it runs almost up to the very house.’3 The purchase was not concluded until 1819; the price being £17,500 for the estate and £2,850 for the timber. This estate was bought from Joseph and William White, who appear to have remained as tenants at an annual rent of £675. In the autumn of 1817 Wakefield brought to Ricardo’s notice the Manor of Brinsop, an estate of 800 acres belonging to Dansey Richard Dansey in Herefordshire ‘within a few miles of Bromesberrow’,4 with the fifteenth-century manor house of Brinsop Court, surrounded by a moat.5 The purchase was concluded in the summer of 1818 for £26,000.6 Meanwhile in October 1817 Ricardo had bought from John Garrett an unnamed estate in the parish of Minster in the Isle of Thanet at a price of about £35,000.7 There were also some smaller purchases—groups of cottages or single fields—to round off one or other of the estates.
These were Ricardo’s investments in landed property, amounting altogether to about £275,000, as they can be traced from the rather fragmentary correspondence and accounts of his land-agent and his solicitors. They agree well enough with the more reliable, if less detailed, statement of his estates that can be obtained from his will, some account of which is given below, p. 104–5.
Next to landed investments in importance came loans on mortgage. The largest of these was an advance of £165,000 which Ricardo made in 1819 to Francis Dukinfield Astley on the security of the Dukinfield and Newton estates near Manchester, partly coal-mining properties. Then there was the loan of £25,000 to Lord Portarlington on his estates in Ireland in connection with Ricardo’s seat in Parliament (as described above, V, xvii-xviii). Finally, in 1821 he lent £10,000 on mortgage to the Corporation of Waterford. This last loan was arranged by his friend Sir John Newport, Member of Parliament for that city.1
The third field of investment which Ricardo entered as part of the re-arrangement of his holdings was that of the French Funds. A somewhat fuller account of this item is possible since much of the correspondence received by Ricardo in connection with it has been preserved.2 In July 1817 while on a visit to Paris he established a connection with two banking houses there, Delessert & Co. and Ardoin & Co.,3 and through them at once invested £100,000 in French stock, dividing the business equally between them. Of this sum he placed three-quarters in the 5 per cent Rentes and a quarter in shares of the Bank of France. Of the latter he bought 450, all of them through Delessert & Co., one of whose partners, Benjamin Delessert, was a Director (régent) of the Bank of France and was in friendly relations with Ricardo, whom he entertained in Paris.1 These shares he appears to have retained till the end of his life.2 Of Rentes he bought in the course of July and August 1817 a total of 2,600,000 francs capital at an average price of 67; one-third of them through Delessert and two-thirds through Ardoin. In July of the following year when the Rentes had risen about 10 points, Ardoin wrote to Ricardo suggesting that this might be a good moment for him to sell at least a part of his holding.3 Within the first ten days of August 1818 on Ricardo’s instructions Ardoin sold out the whole of what they held on his behalf (1,831,000 frs.),4 at over 78. Meanwhile Delessert had written to Ricardo advising him that in their opinion the Rentes were likely to reach a price of 80 within the year.5 When Ricardo, following the successful sale of the Ardoin holding, wrote to Delessert at the beginning of September instructing them to sell out on his behalf, the order could no longer be executed, the price having then fallen below the limit (76½ ex dividend) which he had fixed.6 By November of the same year, as a result of the monetary stringency brought about by the discount policy of the Bank of France, the price had fallen again below 70, and at that level Ricardo bought back 2 million francs capital of Rentes.1 Curiously, although this represented the re-investment of the money obtained from the sale effected by Ardoin, only 1,400,000 frs. was bought through them and the remaining 600,000 frs. through Delessert.
He had now about 3 million frs. in Rentes,2 which he held through his Paris bankers until July 1821, the half-yearly dividends being remitted to him in sterling. At this time he transferred the handling of his Rentes to his brother Jacob Ricardo3 who with Samson, another brother, was engaged in extensive financial operations in Paris. Between July and November of that year, they sold on his behalf the stock at an average price of 87½. He shortly afterwards gave instructions to buy it back if it were to fall one or two points.4 The anticipated fall did take place; but at this stage a mishap occurred, in that Clavet Gaubey, the agent de change whom Ricardo’s brothers employed in this business, became a defaulter. The stock was still registered in Ricardo’s name, so that there was no anxiety on that account. But there was some doubt as to how much of the price-difference in the settlement could be recovered. Jacob Ricardo undertook, however, to bear himself any loss that might arise as a result of Ricardo’s having placed the stock at his disposal ‘when it was materially useful’ to him.5
There are hardly any letters preserved subsequent to this incident, so that we cannot follow in detail the later story of Ricardo’s dealings in French stock. However, in a letter of June 1822 to Miss Edgeworth, who had asked his advice on her French investments, he wrote that he had ‘no thought of parting’ with his holding of French stock, adding: ‘If it rose to 100—I might probably be tempted to bring the money to this country, and employ it in the purchase of land or on mortgage.’1 Writing to her again on returning from the Continent in December of the same year, after a period of great fluctuations in price ‘accordingly as the opinions in favour of peace or of war have prevailed’, he said that he had no intention of selling his holding at the present depressed price (88), but would be inclined to sell half of it if the price rose to 95. This he would do, firstly because he had bought it at a much lower price, and secondly because he thought the policy of the French Government might lead to internal disorder, if not to war. But he is confident that whatever happens ‘the funds will survive’.2 In 1823 France declared war on Spain and the price mentioned of 95 was not reached in the few months before Ricardo’s death. From a final letter we learn that, after selling a small part of his holding at 88¼ at the end of June 1823, he still retained some 2¾ million frs. of Rentes.3
We can now evaluate the relative importance of the main types of property in which Ricardo had invested: landed estates, £275,000; sums lent on mortgage, £200,000; French stocks, £140,000. This distribution, which remained virtually unaltered between 1819 and 1823, illustrates Ricardo’s statement in Parliament that ‘it would puzzle a good accountant to make out on which side his interest predominated’ with respect to currency policy.1
When we come to consider the total value of his estate, we have three main sources on which to draw. First, the figures for the various investments described above, which give a total of £615,000; some considerable items, however, are not included in this figure, such as bank deposit, the leasehold house in Brook Street, etc., the value of which is not known owing to the partial character of the documents which have survived. Secondly, the probate value of his estate at death, which was sworn as being under £500,000. Probate value at that time did not, however, include freehold real estate; besides, the figure of £500,000 was an upper limit, implying no more than that the estate was between four and five hundred thousand, since the same sum of £6000 was payable for probate duty on any estate within that range.2Thirdly, the estimate current at the time which is given by the Gentleman’s Magazine3 as £700,000.
On the basis of the probate valuation of the personal property, and the calculated cost of the real estate, Ricardo’s total estate must have been worth between £675,000 and £775,000—which agrees nearly enough with the Gentleman’s Magazine’s figure.4
Ricardo’s annual income from the investments of which we know, amounted to about £28,000. Of this, probably £10,000 was the normal revenue from the estates;1 over £10,000 the interest received on the mortgages,2 and rather less than £8000 the dividends on the French stock.
Ricardo’s will was made three years before his death; it is dated 4 April 1820, with codicils of 25 June 1821 and 11 July 1822. It is a long impersonal document, full of legal jargon and obviously drawn up by a solicitor.3
The main feature of the will is the discrimination that it makes between sons and daughters, the portion of a son being no less than eight times the value of that of a daughter. (In striking contrast with the equality of treatment of the children in Abraham Ricardo’s will.)4 After distributing the estate to his children and his wife and providing for poor relatives, the only latitude that he allowed himself was to make a uniform bequest of £100 each to his brothers and sisters and a few intimate friends.
To his eldest son, Osman, he left the Manors of Bromesberrow5 and Bury Court and the Whiteleaf Oak Estate,1 also the manor lands of Pauntley Court and the estates adjoining it. To his second son, David, he left Gatcomb Park and other properties in Minchinhampton and Avening, and also the Manor of Brinsop Court. And to his youngest son, Mortimer, he left the Manor of Dalchurst, near Tonbridge in Kent, an estate at Minster in the Isle of Thanet, and the estate of Berrow. To his three sons he also left the residuary personal estate, to be divided equally between them.
As regards his daughters he left £20,000 each to Birtha and Mary, who were unmarried, and £5000 each to Henrietta Clutterbuck and Priscilla Austin (each of these two having had £10,000 settled upon her at marriage and a further gift of £2,000).2 These bequests were increased by £5000 in the case of each daughter by a codicil of 11 July 1822 (the day before he sailed for his Continental tour). To his wife he left a life annuity of £4000 and in addition a bequest of £4000, a carriage-and-pair and the furniture and household effects at Upper Brook Street.
He also bequeathed a sum of £100 each to his brothers Moses, Jacob, Francis, Joseph, Ralph, Benjamin and Samson; to his sisters Hannah Samuda, Rebecca Keyser, Abigail Ricardo, Rachel Ricardo, Esther Wilkinson and Sarah Porter; to his brothers-in-law, David Samuda, Josiah Henry Wilkinson (and also to Sarah his wife), and George Richardson Porter; also to his friends George Basevi, James Mill and Thomas Robert Malthus.
A number of life annuities to poor relatives included: £200 to his brother Moses (in lieu of an allowance which he had hitherto made to him) and £100 to Moses’s wife Fanny if she survived him; £50 to Joseph Ricardo and £35 to Hannah Ricardo, two cousins living in Holland (in place of the allowances he had been making to them); £50 each to three of his aunts Delvalle, namely Esther Lindo, Leah Delvalle and Sarah Nunes; and £50 each to Joseph and Isaac Delvalle, his uncles.
He appointed as executors his wife, his son Osman and his brother Francis, leaving to the latter a further bequest of £200 as compensation for his trouble.1
[3 ]Altogether £11,493 of stock passed through his account from 29 Jan. to 15 Oct. 1793, his total sales balancing the purchases. No further transactions were recorded during the remainder of the year.
[2 ]See, for the year 1798, above, p. 55, n. i. See also Ricardo’s annual applications for membership of the Stock Exchange, which from 1811 give the bankers’ name; in that year he states, ‘I keep cash at Messrs Forster Lubbock & Co.’. This is repeated in subsequent years, the banking house from 1813 being described as ‘Sir John Lubbock & Co.’ (The MS applications are in the possession of the Stock Exchange.) The bank was in 1860 amalgamated with Robarts, Curtis and Co., to become Robarts, Lubbock & Co., and this in turn was absorbed by Coutts & Co. in 1914. In 1931 enquiries were made by the editor at the ‘Robarts, Lubbock & Co. Office’ of Messrs Coutts & Co. at 15 Lombard Street; but no records of the original Lubbock’s bank had been preserved.
[1 ]‘Minutes of the Committee of the Old Stock Exchange’. MS in the possession of the Stock Exchange.
[5 ]The Art of Stock Jobbing Explained, by A Practical Jobber, 7th ed., London, Clarke, n.d. [1819], p. 88.
[2 ]To fill this gap similar information for that period has been collected for another Stock and is given in a footnote to the Table.
[1 ]The totals have been obtained by roughly adding up, in round figures, his purchases of each year. The Stock Ledgers do not state these annual totals; nor do they give the balance as it stands after each transaction. They only show the total at the end of the page, when the balance is struck and carried over to another page.
[2 ]No Three per cent Consols were issued with the Loans of 1808 and 1809, and only small amounts with those of 1810 and 1811, which accounts for the falling off in the ‘Subscription’ column in those years. There were no Loans from 1816 to 1818.
[3 ]Not all unnecessary transfers could be avoided, however, since at that time there was no Stock Exchange Clearing. This was not instituted until the 1870’s. (See London Stock Exchange Commission, Minutes of Evidence, 1878, Q. 7591.)
[2 ]The wording above is quoted from J. Grant’s The Great Metropolis, London, 1837, Second Series, vol. ii, p. 81. Later writers have often repeated them in varying forms, e.g. C. Duguid, The Story of the Stock Exchange, London, 1901, p. 118. Grant also mentions a third rule, ‘Never refuse an option when you can get it’. This has not been taken up by later writers; it is obviously incomplete, and indeed does not make sense in the absence of any reference to the price of the option.
[1 ]The fullest source of information on the manner in which Loans were negotiated is the Report of the Evidence before the ‘Select Committee to Enquire into the Circumstances of the Negotiation of the late Loan’, 1796. (Journals of the House of Commons, vol. li, 1795–6, pp. 309–360. The Report was also published as a separate volume.) This loan for £18 millions had been given by Pitt without competition to Boyd, Benfield & Co., and the enquiry arose from the complaints of one of the parties excluded from bidding. See also the Section on ‘Manner of Transacting Loans’ in the Appendix to R. Hamilton’s Inquiry concerning...the National Debt, 3rd ed., Edinburgh, 1818, pp. 310–13, and J. J. Grellier’s The Terms of all the Loans, 3rd ed., ‘with an Appendix from the year 1805 to the present year, by R. W. Wade’, London, Richardson, 1812. (This edition is distinct from the ‘third edition’ which had been published in 1805.) The daily newspapers published paragraphs on the negotiations for the Loan and the final bidding; the fullness of these reports increased in later years and that of The Times for the Loan of 1819 is quoted from extensively below, pp. 85–9.
[2 ]An exception had been the ‘Loyalty Loan’ of £18 millions for 1797, which was issued to the public by direct subscription at a fixed price in December 1796. The list of Subscribers, which in this case was published, includes Abraham Ricardo for £3000 and David Ricardo for £1000. (In Parliamentary Papers, vol. 102 of the General Collection.)
[1 ]Thus in the Loan of £18 millions for 1796 (not to be confused with the Loyalty Loan mentioned in the previous footnote) the list prepared by the contractors included the following: Governor and Deputy Governor of the Bank, £100,000; Governor, Deputy Governor and Directors of the Bank, £400,000; Abraham Newland [Principal Cashier at the Bank], ‘for himself and Office’, £100,000; East India Company, £300,000; etc. The list, which is given in Appendix 2 to the Report of the Select Committee of 1796 (see above, p. 75, n. 1), is the only subscribers’ list in a loan issued to contractors which is extant for the period of Ricardo’s activity. No subscribers’ lists could be found for this period either at the Bank of England Record Office or in the Treasury papers at the Public Record Office.
[2 ]The dividends, however, were payable on the whole capital on the first normal dividend date of each stock after the Loan was contracted. (Hamilton, Inquiry, 1818, p. 311.)
[1 ]In 1796 a bonus of about 4 per cent was regarded as being fair to both the contractor and the public (see speech of William Smith, Chairman of the Select Committee on the Negotiation of the Late Loan, in the House of Commons, 22 Feb. 1796, Parliamentary History, XXXII, 769).
[2 ]‘Omnium is the whole subscription undivided; and is known in the Alley by the name of Omnium Gatherum, a cant phrase for, all together’ (Thomas Mortimer, Every Man his own Broker; or, A Guide to Exchange-Alley, 4th ed., London, 1761, p. 145–6).
[3 ]‘For the conveniency of sale, every subscriber for a considerable sum, has sundry receipts for different proportions of his whole sum, by which means he can the readier part with what he thinks proper’ (Thomas Mortimer, The Nefarious Practice of Stock-jobbing Unveiled, London, For the Widow of the Author, 1810, p. 50).
[1 ]See Ricardo’s Evidence on the Usury Laws, above, V, 341, Q. 23; on Ricardo’s sales before the Loan of 1815, above VI, 233. When the Loan of 1819 is impending, Trower writes to him: ‘I think you Gentlemen have pretty well, what is called prepared for the Loan this time, by the violent shake you have given the prices of the funds’ (above, VIII, 31; Ricardo, however, on this occasion, had not sold any stock against the Loan, because he thought the price already low, ib. 33).
[2 ]‘If he [the Loan-monger] can pay 2 or 3 instalments of his subscription, the Bank on the credit of these, advances the greater part of the remainder.’ (W. Morgan, A Comparative View of the Public Finances, 1801, p. 39.) ‘The Bank of England generally lends its aid in advancing some of the instalments.’ (Hamilton’s Inquiry, 1818, p. 311.) See also the references, in 1819, to the Bank ‘taking in the Omnium’, and advancing the instalments ‘in the usual manner’, by Lord Liverpool, below, p. 86 and by the Chancellor of the Exchequer, above, VIII, 134–5, note.
[2 ]Letter from Ricardo to John Robins, 12 Nov. 1813, quoted by Hollander from the MS in his own possession in David Ricardo, A Centenary Estimate, p. 39.
[1 ]This episode was recounted by Grenfell in a pamphlet of 1817 and again in a speech in the House on 13 May 1819 (see above V, 4–5 and n. 1).
[3 ]John Barnes, the other associate of Ricardo, had died a few months before; he, as the obituary says, had been ‘at the head of the list of Members of the Stock Exchange who have contracted with Government for the late Loans; and in this high trust received the cordial thanks of that body for his honourable conduct.’ (Gentleman’s Magazine, Feb. 1815, p. 185; cp. below, p. 125 ff.)
[4 ]All these persons had been associated with the Loans of the previous three years, but the last two lists had apparently been linked with the Barings’. The Trower listed was John, brother of Hutches Trower.
[6 ]Since only one instalment (10 per cent) of the Loan had as yet been paid, this could be taken to mean that Ricardo had kept so much of the Loan as to have the whole of his money absorbed by the first payment—in which case the current premium would have represented a more-than-doubling of his money in a fortnight; this however, may possibly be too sanguine an interpretation in view of his professed role (in 1811) of playing for small stakes.
[1 ]Above, VI, 251 and 262. There was a popular rumour at the time that ‘upon a single occasion, that of the battle of Waterloo’ Ricardo had ‘netted upwards of a million sterling.’ (Sunday Times, 14 Sept. 1823.)
[2 ]A facsimile of the printed circular which was eventually sent by Ricardo to the subscribers on his list will be found on p. 87 below.
[1 ]Hansard, XL, 1005. For Ricardo’s praise of the Chancellor for his good management ‘within the last two or three days’, see above, V, 21.
[1 ]See a letter written by the Prime Minister, Lord Liverpool, to the Chancellor of the Exchequer, N. Vansittart, from Walmer Castle on 31 Oct. 1819: ‘Nothing can be more foolish than Rothschild’s following you, and intending to follow me, into the country. If his proceeding is known it can of course only augment the general alarm, and increase all the evils he is desirous of preventing....The point, however, upon which I feel most anxiety is the idea suggested by Rothschild, of a continuance of the Bank restriction. I am satisfied that no measure could be more fatal, and that the very notion of its being a matter for consideration would do harm.’(C. D. Yonge, Life of Lord Liverpool, London, 1868, vol. ii, p. 416–17.) Cp. also above, VIII, 134–5.
[1 ]‘Ricardo and the Bullion Report’, being the second of two articles on ‘Financial and Monetary Policy of Great Britain during the Napoleonic Wars’, in Quarterly Journal of Economics, May 1924, vol. xxxviii, p. 397 ff.
[2 ]‘The publication of a tract emanating from an influential source and calling for drastic credit contraction operated undoubtedly in the direction of creating anxiety, perplexity, and embarrassment.’ (ib. p. 429.)
[3 ]The Bank—The Stock Exchange—The Bankers—The Bankers’ Clearing House—The Minister, and the Public.An Exposé, touching their various Mysteries, from the times of Boyd, the martyred Goldschmidt, &c. to those of Bowles, Aslett, Lord Peterborough, Cochrane, &c. Including Bulls, Bears, Time Bargains, Stock Exchange Telegraphs, Lotteries, Hoaxes, Bullion and Exchanges; Illustrated by Various Anecdotes, London, E. Wilson and J. Ridgway, 1821, pp. iv, 108. (Some copies have a different title-page, which omits the words before ‘An Exposé’ and has the imprint of J. J. Beresford, n.d. Both issues are in the Goldsmiths’ Library of the University of London.)
[3 ]It is thus ascribed in a MS note, apparently of the period, on the title-page of the copy in the Library of Edinburgh University; in this copy several of the persons referred to by nicknames in the text are identified by marginal notes in the same handwriting. (The copy in question is the source of the attribution in Halkett and Laing’s Dictionary of Anonymous and Pseudonimous Literature.)
[4 ]See MS ‘List of the Members of the Stock Exchange from...1802’, 1855. This Joseph Lancaster is not to be confused with the educationist of the same name.
[5 ]See MS Minutes of the Committee for General Purposes of the Stock Exchange, entries of 1 May and 12 June 1811, when Lancaster’s application for readmission, although supported by his creditors, was rejected on a vote. (It is significant that complaint against the ‘capricious and unjust’ treatment of defaulters by the Committee is a recurring theme of the pamphlet; see pp. 1, 8, 97.)
[1 ]Above, VII, 230. He gives these details to excuse himself from lending money to Say for a speculation in potato flour.
[3 ]J. L. Mallet’s Diary referring to his own visit to Gloucestershire in September 1817, quoted above, VII, 187 n.
[4 ]Letter of 2 July 1819, declining an application which Wilkinson had made at the request of a Mr Gordon (on this letter see below, p. 118).
[1 ]Half this sum, corresponding to the unsettled part of the estate, was to be paid in July 1814; the other half, being the purchase money of the settled part, to be retained by Ricardo till Philip Sheppard’s son, then 13, was 21, so as to make a title. (Letters to Ricardo from W. W. Salmon, 23 Feb. 1814 and 22 June 1816 and from Daniel Clutterbuck, 4 July 1814; MSS in R.P.)
[2 ]See A. T. Playne, A History of the Parishes of Minchinhampton and Avening, Gloucester, 1915, pp. 39–43 and 72.
[3 ]This is on the assumption that a Tonbridge tenant whose annual rent was £1050 farmed the whole estate. (The rent is mentioned in a letter from Wakefield, 17 July 1818; later it was reduced.)
[4 ]See, for a few biographical details on Wakefield, above VI, xxxviii. Ricardo seems to have paid him a commission of 1 per cent on the purchase-price of a new estate (from an Account dated 12 Nov. 1818, referring to the Berrow estate), and an annual payment which may be what Wakefield refers to when, in a letter of 20 May 1817, he asks for ‘the £300 on my own account which our mutual friend Mr Mill named to you’. (MSS in R.P.)
[5 ]In a printed Address to ‘Noblemen and Gentlemen interested in the value and management of Landed Property’ Wakefield offers his services to aid in the management of estates by looking over, and making written reports, ‘without interfering with the permanent steward’; also as auditor, superintendent, valuer, etc. (The Address is a leaflet of eight pages without title-page or date, printed by J. McCreery, London; paper water-marked 1813.)
[1 ]Letter of 25 June 1816. This and the other letters from Wakefield referred to below are unpublished. The MSS are in Ricardo’s Papers.
[5 ]See W. H. Cooke, Collections towards the History and Antiquities of the County of Hereford. In Continuation of Duncomb’s History, Hundred of Grimsworth, London, 1892, p. 35. The statement in this work, however, that Ricardo bought Brinsop in 1814 is shown to be inaccurate by Wakefield’s letters of 1817 in R.P.
[6 ]From a Statement of Account of Ricardo’s solicitors, Bleasdale, Lowless and Crosse, dated 7 April 1821, in R.P.
[7 ]Calculated from the ad valorem stamp duty on the purchase deed, £350 paid on 14 Oct. 1817. (Statement of account of Ricardo’s solicitors in R.P.)
[3 ]The latter firm from 1820 was changed to Ardoin, Hubbard & Co. With Delessert Ricardo had had previous relations: in 1802 they had held on his behalf 100,000 francs capital in the French Rentes. (Certificate dated 30 Messidor An 10 in R.P.)
[2 ]The shares were bought in 1817 at a price of 1350 francs, and in the summer of 1823 they were quoted at 1550 frs. Meanwhile in 1820 the Bank’s surplus had been distributed to the shareholders at the rate of 202 frs. per share.
[6 ]Letter from Delessert of 9 Sept. 1818, in reply to one from Ricardo of 3 September which is not extant.
[1 ]Letters from Ardoin of 31 Oct. and 5 Nov. 1818. From these letters it appears that Ricardo had fixed his buying limit at 72; but Ardoin, in view of the monetary crisis, had taken it upon themselves to delay carrying out his instructions in the expectation of being able to buy more advantageously for him.
[5 ]Letters from Samson Ricardo, 31 Dec. 1821 and 11 Jan. 1822, and from Jacob Ricardo, 10 Jan. 1822.
[1 ]Speech of 11 June 1823 in reply to Western’s insinuations, above, V, 317; he also repeated (what he had said in 1821, ib. 90) that he had no interest in British Government stocks. Cp. also the letter to Trower of 28 Dec. 1819, above, VIII, 147–8.
[4 ]Fanciful estimates were also in circulation, such as the figure given by J. B. Say of £1,600,000 (‘quarante millions de notre monnaie’) in ‘Notice sur Ricardo’, Mélanges, p. 86 and Œuvres diverses, p. 406.
[1 ]On the assumption that the estates had been bought at 25 or 26 years’ purchase which is the basis usually mentioned in Wakefield’s letters; but in the years of distress rent reductions had to be agreed to, and there were in any case considerable arrears. The rents of the estates under Wakefield’s supervision amounted to £6040 per year (as shown by an Audit sheet at 4 June 1821); this, however, did not include timber, etc., nor the estates at Minchinhampton and Minster.
[3 ]The will is in fact witnessed by Thomas Crosse the solicitor and by his clerks, as is also the first codicil. The second codicil, however, of 11 July 1822, is witnessed by Wm. Pike, ‘Butler to Mr Ricardo’, and by John Drysdale, ‘Footman to Mr. Ricardo’.
[4 ]Cp. the remarks on the practice of equal division of property among children prevailing in bourgeois families, above, II, 386.
[5 ]Since there was the possibility of the title to this property being contested, the will directed that £50,000 should be set aside to indemnify Osman against any loss therefrom.
[1 ]This estate was probably part of the purchase of Bromesberrow and Bury Court, since the will describes it as lately owned by W. H. Yate, who was one of the vendors of those properties.
[2 ]The other daughter, Fanny Austin, received both in the will and in the marriage settlement the same treatment as her married sisters, but did not receive the gift of £2000 (on the reason for this see below, p. 163). She died, however, in 1820, before Ricardo.
[1 ]For help with legal points in connection with the will the editor has to thank Mr S. F. C. Milsom of Trinity College, Cambridge.
