STOCKS, or PUBLIC FUNDS in England. By the word stock was originally meant, a particular sum of money contributed to the establishing a fund to enable a company to carry on a certain trade, by means of which the person became a partner in that trade, and received a share of the profit made thereby, in proportion to the money employed. But this term has been extended farther, though improperly, to signify any sum of money which has been lent to the govern-
government, on condition of receiving a certain interest till the money is repaid, and which makes a part of the national debt. As the security both of the government and of the public companies is esteemed preferable to that of any private person, as the stocks are negotiable and may be sold at any time, and as the interest is always punctually paid when due; so they are thereby enabled to borrow money on a lower interest than what could be obtained from lending it to private persons, where there must be always some danger of losing both principal and interest.
But as every capital stock or fund of a company is raised for a particular purpose, and limited by parliament to a certain sum, it necessarily follows, that when that fund is completed, no stock can be bought of the company; though shares already purchased may be transferred from one person to another. This being the case, there is frequently a great disproportion between the original value of the shares and what is given for them when transferred: for if there are more buyers than sellers, a person who is indifferent about selling will not part with his share without a considerable profit to himself; and, on the contrary, if many are disposed to sell, and few inclined to buy, the value of such shares will naturally fall, in proportion to the impatience of those who want to turn their stock into specie.
These observations may serve to give our readers some idea of the nature of that unjustifiable and dishonest practice called stock-jobbing, the mystery of which consists in nothing more than this. The persons concerned in that practice, who are denominated stock-jobbers, make contracts to buy and sell, at a certain distant time, a certain quantity of some particular stock: against which time they endeavour, according as their contract is, either to raise or lower such stock, by raising rumours and spreading fictitious stories, in order to induce people either to sell out in a hurry, and consequently cheap, if they are to deliver stock, or to become unwilling to sell, and consequently to make it dearer, if they are to receive stock.
The persons who make these contracts are not in general possessed of any real stock: and when the time comes that they are to receive or deliver the quantity they have contracted for, they only pay such a sum of money as makes the difference between the price the stock was at when they made the contract, and the price it happens to be at when the contract is fulfilled; and it is no uncommon thing for persons not worth 100l. to make contracts for the buying or selling 100,000l. stock. In the language of Exchange Alley, the buyer in this case is called the Bull, and the seller the Bear.
Besides these, there are another set of men, who, though of a higher rank, may properly enough come under the same denomination. These are your great monied men, who are dealers in stock, and contractors with the government whenever any new money is to be borrowed. These indeed are not fictitious, but real buyers and sellers of stock; but, by raising false hopes or creating groundless fears, by pretending to buy or sell large quantities of stock on a sudden, by using the fore-mentioned set of men as their instruments, and other like practices, are enabled to raise or lower the stocks one or two per cent. at pleasure.
However, the real value of one stock above another, on account of its being more profitable to the proprietors, or any thing that will really, or only in imagination, affect the credit of company, or endanger the government, by which that credit is secured, must naturally have a considerable effect on the stocks. Thus, with respect to the interest of the proprietors, a share in the stock of a trading company which produces 5l. or 6l. per cent. per annum must be more valuable than an annuity with government-security, that produces no more than 3l. or 4l. per cent. per annum; and consequently such stock must sell at a higher price than such an annuity. Though it must be observed, that a share in the stock of a trading-company producing 5l. or 6l. per cent. per annum, will not fetch so much money at market as a government annuity producing the same sum; because the security of the company is not reckoned equal to that of the government, and the continuance of their paying so much per annum is more precarious, as their dividend is, or ought to be, always in proportion to the profits of their trade.
As the prices of the different stocks are continually fluctuating above and below par; so, when a person who is not acquainted with transactions of that nature, reads in the papers the prices of stocks, where bank-stock is marked perhaps 127l. India ditto 134l. or 134½l. South-Sea ditto 97½l., &c. he is to understand that a 100l. of those respective stocks sell at such a time for those several sums.
In comparing the prices of the different stocks one with another, it must be remembered, that the interest due on them from the time of the last payment, is taken into the current price; and the seller never receives any separate consideration for it, except in the case of India bonds, where the interest due is calculated to the day of the sale, and paid by the purchaser over and above the premium agreed for. But as the interest on the different stocks is paid at different times, this, if not rightly understood, would lead a person, not well acquainted with them, into considerable mistakes in his computation of their value; some always having a quarter's interest due on them more than others, which makes an appearance of a considerable difference in the price, when in reality there is none at all. Thus, for instance, old South Sea annuities sell at present for 85½l. or 85l. 10s. while new South-Sea annuities fetch only 84½l. or 84l. 15s. though each of them produce the same annual sum of 1l. 3per cent. but the old annuities have a quarter's interest more due on them than the new annuities, which amounts to 15s. the exact difference. There is, however, one or two causes that will always make one species of annuities sell somewhat lower than another, though of the same real value; one of which is, the annuities making but a small capital, and there not being for that reason so many people at all times ready to buy into it as into others, where the quantity is larger; because it is apprehended, that whenever the government pays off the national debt, they will begin with that particular species of annuity the capital of which is the smallest.
A stock may likewise be affected by the court of chancery; for if that court should order the money, which is under their direction, to be laid out in any
particular stock, that stock, by having more purchasers, will be raised to a higher price than any other of the like value.
By what has been said, the reader will perceive how much the credit and interest of the nation depends on the support of the public funds. While the annuities and interest for money advanced is there regularly paid, and the principal insured by both prince and people (a security not to be had in other nations), foreigners will lend us their property, and all Europe be interested in our welfare; the paper of the companies will be converted into money and merchandise, and Great Britain can never want cash to carry her schemes into execution.
In other nations, credit is founded on the word of the prince, if a monarchy; or that of the people, if a republic: but here, it is established on the interests of both prince and people; which is the strongest security: for however lovely and engaging honesty may be in other respects, interest, in money-matters, will always obtain confidence; because many people pay great regard to their interest, who have but little veneration for virtue. See the article FUNDS.