a market-town of Cheshire, situated thirty-four miles north-east of Chester.
STOKTON, a port-town of Durham, situated near the mouth of the river Tees, sixteen miles south of Durham.
STOCKZOW, a town of Bohemia, in the duchy of Silesia, situated on the river Vistula, thirty-seven miles south-east of Troppau.
STOCKS or PUBLIC FUNDS in England. As there are few subjects of conversation more general than the value of stocks, and hardly anything so little understood, we shall here give account of them in as clear and concise a manner as possible; presenting our readers with the rationale of the stocks, and a short history of the several companies*, describing the nature of their separate funds, the rules to which they are applied, and the various purposes they answer, both with respect to the government, the companies themselves, and the community in general.
In order to have a clear idea of the money-transactions of the several companies, it is necessary to know something of money in general, and the difference between that and the current specie. See the article MONEY.
Money is the standard of the value of all the necessaries and accommodations of life; and paper money is the representative of that standard to such a degree, as to supply its place, and to answer all the purposes of gold and silver coin. Nothing is necessary to make this representative of money supply the place of specie, but the credit of that office or company who delivers it: which credit consists in its always being ready to turn it into specie whenever required. This is exactly the case of the bank of England: the notes of this company are of the same value as the current coin, as they may be turned into it whenever the possessor pleases. From hence, as notes are a kind of money, the counterfeiting them is punished with death as well as coining.
The method of depositing money in the bank, and exchanging it for notes (though they bear no interest) is attended with many conveniences; as they are not only safer than money in the hands of the owner himself, but as the notes are more portable and capable of a much more easy conveyance; since a bank note for a very large sum may be sent by the post, and, to prevent the designs of robbers, may, without damage, be cut in two, and sent at two several times. Or bills, called bank post-bills, may be had by application at the bank, which are particularly calculated to prevent losses by robberies, they being made payable to the order of the person who takes them out at a certain number of days after sight; which gives an opportunity to stop bills at the bank if they should be lost, and prevents their being so easily negotiated by strangers as common bank notes are: and whoever considers the hazard, the expense and trouble there would be in sending large sums of gold and silver to and from distant places, must also consider this as a very singular advantage. Beside which, another benefit attends them; for if they are destroyed by fire, or other accidents, the bank will, on oath being made of such accident, and security being given, pay the money to the person who was in possession of them.
Bank notes differ from all kinds of stock in these three particulars. 1. They are always of the same value. 2. They are paid off without being transferred; and, 3. They bear no interest: while stocks are a share in a company's funds, bought without any condition of having the principal returned. India bonds indeed (by some persons, tho' erroneously, denominated stock) are to be excepted; they being made payable at six months notice, either on the side of the company or of the possessor.
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.
* Of these a general account only was given under the words COMPANY, and BANK, as it would be necessary to resume them in connection with the present article, the better to illustrate it. ployed. But this term has been extended farther, though improperly, to signify any sum of money which has been lent to the 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 or 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 anything that will really, or only in imagination, affect the credit of a 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 ann. 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 stocks of the East India, the bank, and South Sea companies, are distinguished by different denominations, and are of a very different nature, we shall give a short history of each of them, together with an account of the different stocks each is possessed of; beginning with the East India company, as the first established.
Of the East India Company.
There is no trading company in Europe, the Dutch East India company excepted, which can be put in competition with this. It was first established in the latter end of the reign of queen Elizabeth; and its privileges have been enlarged, or confirmed, by almost every monarch since. Its shares, or subscriptions, were originally only 50l. sterling; and its capital only 269,891l. 5s. but the directors having a considerable dividend to make in 1676, it was agreed to join the profits to the capital, by which the shares were doubled, and consequently each became of 100l. value, and the capital 739,782l. 10s.; to which capital, if 663,639l. the profits of the company to the year 1685, be added, the whole stock will be found to be 1,703,402l.
However, this company having sustained several losses by the Dutch, and the subjects of the great Mogul, was in a declining way at the Revolution, when the war with France reduced it so low, that it appearing scarcely possible to be supported, a new one was erected. The merchants forming the new East India company received their charter in 1698, having, in consideration of the grant thereof, lent the government two millions at 8 per cent. per annuum; and pushing their trade with vigour, they soon carried on twice the business that was ever done by the old company. But after the two companies had subsisted a few years in a separate state, means were contrived to unite them; which was effected in 1702, when a new charter was granted them under the title of the United Company of Merchants trading to the East Indies.
To the two millions advanced by the new company, the united company in the 6th of queen Anne lent the government 1,200,000l. which made their whole loan amount to 3,200,000l. A further sum was also lent by the company in 1730, on a renewal of their charter, the interest of which is reduced to 3 per cent. and called the India 3 per cent. annuities.
As to India stock, it is of a quite different nature; for as that is not money put out to interest, but the trading stock stock of the company; and the proprietors of the shares, instead of receiving a regular annuity, have a dividend of the profits arising from the company's trade; which, as it is more valuable, these shares generally sell at a price much above the original value.
As to the management of this united company, all persons without exception, natives and foreigners, men and women, are admitted members of it, and 500 l. in the stock of the company gives the owner a vote in the general court, and 2000 l. qualifies him to be chosen a director. The directors are 24 in number, including the chairman, and deputy chairman, who may be re-elected for four years successively. The chairman has a salary of 200 l. a year, and each of the directors 150 l. The meetings or courts of directors are to be held at least once a week; but are commonly oftener, being summoned as occasion requires.
Out of the body of directors are chosen several committees, who have the peculiar inspection of certain branches of the company's business; as the committee of correspondence, a committee of buying, a committee of treasury, a house committee, a committee of warehouses, a committee of shipping, a committee of accounts, a committee of law-suits, and a committee to prevent the growth of private trade, &c., who have under them a secretary, cashier, clerks, warehouse-keepers, &c.
Other officers of the company are governors and factors abroad; some of whom have guards of soldiers, and live in all the state of sovereign princes.
Of the Bank of England:
The company of the bank was incorporated by parliament, in the 5th and 6th years of king William and queen Mary, by the name of the Governor and Company of the Bank of England, in consideration of the loan of 1,200,000 l. granted to the government, for which the subscribers received almost 8 per cent. By this charter, the company are not to borrow under their common seal, unless by act of parliament; they are not to trade, or suffer any person in trust for them to trade in any goods or merchandise; but they may deal in bills of exchange, in buying or selling bullion, and foreign gold and silver coin, &c.
By an act of parliament passed in the 8th and 9th year of king William III. they were impowered to enlarge their capital stock to 2,200,171 l. 10 s. It was then also enacted, that bank-stock should be a personal, and not a real estate; that no contract either in word or writing, for buying or selling bank-stock, should be good in law, unless registered in the books of the bank within seven days, and the stock transferred in 14 days; and that it should be felony, without benefit of clergy, to counterfeit the common seal of the bank, or any sealed bank-bill, or any bank-note, or to alter or erase such bills or notes.
By another act passed in the 7th of queen Anne, the company were impowered to augment their capital to 4,402,343 l. and they then advanced 400,000 l. more to the government, and in 1714 they advanced another loan of 1,500,000 l.
In the third year of the reign of king George I. the interest of their capital stock was reduced to 5 per cent., when the bank agreed to deliver up as many exchequer-bills as amounted to 2,000,000 l. and to accept an annuity of 200,000 l. and it was declared lawful for the bank to call from their members, in proportion to their interests in the capital stock, such sums of money as in a general court should be found necessary. If any member should neglect to pay his share of the moneys so called for, at the time appointed by notice in the London Gazette, and fixed upon the Royal Exchange, it should be lawful for the bank not only to stop the dividend of such member, and to apply it toward payment of the money in question; but also to stop the transfers of the share of such defaulter, and to charge him with an interest of 5 l. per cent. per annum for the money so omitted to be paid: and if the principal and interest should be three months unpaid, the bank should then have power to sell so much of the stock belonging to the defaulter as would satisfy the same.
After this the bank reduced the interest of the 2,000,000 l. lent to the government from 5 to 4 per cent. and purchased several other annuities, which were afterward redeemed by the government, and the national debt due to the bank reduced to 1,600,000 l. But in 1742, the company engaged to supply the government with 1,600,000 l. at 3 per cent. which is now called the 3 per cent. annuities, so that the government was now indebted to the company 3,200,000 l. the one half carrying 4, and the other 3 per cent.
In the year 1746, the company agreed that the sum of 986,800 l. due to them in the exchequer-bills unsatisfied, on the duties for licences to sell spirituous liquors by retail, should be cancelled, and in lieu thereof to accept of an annuity of 39,442 l. the interest of that sum at 4 per cent. The company also agreed to advance the further sum of 1,000,000 l. into the exchequer, upon the credit of the duties arising by the malt and land tax, at 4 per cent. for exchequer-bills to be issued for that purpose; in consideration of which, the company were enabled to augment their capital with 986,800 l. the interest of which, as well as that of the other annuities, was reduced to 3 l. 10 s. per cent. till the 25th of December 1757, and from that time to carry only 3 per cent.
And in order to enable them to circulate the said exchequer bills, they established what is now called bank circulation: the nature of which not being well understood, we shall take the liberty to be a little more particular in its explanation than we have been with regard to the other stocks.
The company of the bank are obliged to keep cash sufficient to answer not only the common, but also any extraordinary demand that may be made upon them; and whatever money they have by them, over and above the sum supposed necessary for these purposes, they employ in what may be called the trade of the company; that is to say, in discounting bills of exchange, in buying of gold and silver, and in government securities, &c. But when the bank entered into the above mentioned contract, as they did not keep unemployed a larger sum of money than what they deemed necessary to answer their ordinary and extraordinary demands, they could not conveniently take out of their current cash so large a sum as a million, with which they were obliged to furnish the government, without either lessening that sum they employed in discounting, buying gold and silver, &c. (which would have been very disadvantageous to them,) or inventing some method that should answer all the purposes of keeping the million in cash. The method which they chose, and which fully answers their end, was as follows.
They opened a subscription, which they renew annually, for a million of money; wherein the subscribers advance 10 per cent. and enter into a contract to pay the remainder, or any part thereof, whenever the bank shall call upon them, under the penalty of forfeiting the 10 per cent. so advanced; in consideration of which, the bank pays the subscribers 4 per cent. interest for the money paid in, and 3 per cent. for the whole sum they agree to furnish; and in case a call should be made upon them for the whole, or any part thereof, the bank farther agrees to pay them at the rate of 5 per cent. per annum for such sum till they repay it, which they are under an obligation to do at the end of the year. By this means the bank obtains all the purposes of keeping a million of money by them; and though the subscribers, if no call is made upon them (which is in general the case,) receive 6½ per cent. for the money they advance, yet the company gains the sum of £23,500 per annum by the contract; as will appear by the following account.
The bank receives from the government for the advance of a million £30,000
The bank pays to the subscribers who advance 100,000 l. and engage to pay (when called for) 900,000 l. more — 6,500.
The clear gain to the bank therefore is £23,500.
This is the state of the case, provided the company should make no call on the subscribers; which they will be very unwilling to do, because it would not only lessen their profit, but affect the public credit in general.
Bank-stock may not improperly be called a trading stock, since with this they deal very largely in foreign gold and silver, in discounting bills of exchange, &c. Besides which, they are allowed by the government very considerable sums annually for the management of the annuities paid at their office. All which advantages render a share in their stock very valuable, though it is not equal in value to the East India stock. The company make dividends of the profits half-yearly, of which notice is publicly given; when those who have occasion for their money may readily receive it; but private persons, if they judge convenient, are permitted to continue their funds, and to have their interest added to the principal.
This company is under the direction of a governor, deputy-governor, and 24 directors, who are annually elected by the general court, in the same manner as in the East India company. Thirteen, or more, compose a court of directors for managing the affairs of the company.
The officers of this company are very numerous.
Of the South-Sea Company.
During the long war with France in the reign of queen Anne, the payment of the sailors of the royal navy being neglected, and they receiving tickets instead of money, were frequently obliged by their necessities to sell these tickets to avaricious men at a discount of 40 l. and sometimes 50 l. per cent. By this and other means the debts of the nation unprovided for by parliament, and which amounted to £9,471,321 l. fell into the hands of these usurers. On which, Mr Harley, at that time chancellor of the exchequer, and afterward earl of Oxford, proposed a scheme to allow the proprietors of these debts and deficiencies 6 l. per cent. per annum, and to incorporate them in order to their carrying on a trade to the South Sea; and they were accordingly incorporated under the title of the Governor and Company of Merchants of Great Britain trading to the South Seas and other parts of America, and for encouraging the Fishery, &c.
Though this company seemed formed for the sake of commerce, it is certain the ministry never thought seriously, during the course of the war, about making any settlements on the coast of South America, which was what flattered the expectations of the people; nor was it indeed ever carried into execution, or any trade ever undertaken by this company, except the Affiento, in pursuance of the treaty of Utrecht, for furnishing the Spaniards with negroes, of which this company was deprived by the late convention between the courts of Great Britain and Spain, soon after the treaty of Aix la Chapelle in 1748.
After this, some other sums were lent to the government in the reign of queen Anne at 6 per cent. In the third of George I. the interest of the whole was reduced to 5 per cent. and they advanced two millions more to the government at the same interest. By the statute of the 6th of George I. it was declared that this company might redeem all or any of the redeemable national debts, in consideration of which, the company were empowered to augment their capital according to the sums they should discharge; and for enabling the company to raise such sums for purchasing annuities, exchanging for ready money new exchequer bills, carrying on their trade, &c. the company might, by such means as they should think proper, raise such sums of money as in a general court of the company should be judged necessary. The company were also empowered to raise money on contracts, bills, bonds, or obligations under their common seal, on the credit of their capital stock. But if the sub-governor, deputy-governor, or other members of the company, should purchase lands or revenues of the crown upon account of the corporation, or lend money by loan or anticipation on any branch of the revenue, other than such part only on which a credit of loan was granted by parliament, such sub-governor, or other member of the company, should forfeit treble the value of the money so lent.
The fatal South-Sea scheme, transacted in the year 1720, was executed upon the last mentioned statute. The company had at first set out with good success, and the value of their stock for the first five years had risen faster than that of any other company; and his Majesty, after purchasing 10,000 l. stock, had condescended to be their governor. Things were in this situation, when, taking advantage of the above statute, the South Sea bubble was projected. The pretended design of which was to raise a fund for carrying on a trade to the South Seas, and purchasing annuities, &c. paid to the other companies; and proposals were printed and distributed, shewing the advantages of the design, and inviting persons into it. The sum necessary for carrying it on, together with the profits that were to arise from it, were divided into a certain number of shares, or subscriptions, to be purchased by persons disposed to adventure therein. And the better to carry on the deception, the directors engaged to make very large dividends, and actually declared, that every 100 l. original stock would yield 50 l. per annum; which occasioned so great a rise of their stock, that a share of 100 l. was sold for upward of 1000 l. This was in the month of July; but before the end of September it fell to 150 l. by which multitudes were ruined, and such a scene of distress occasioned as is scarcely to be conceived. But the consequences of this infamous scheme are too well known. We shall pass over all the other transactions of this company in the reign of king George I., as not material to our present purpose.
By a statute of the 6th of his late Majesty, it was enacted, that from and after the 24th of June 1733, the capital stock of this company, which amounted to 14,651,103l. 8s. id. and the shares of the respective proprietors, should be divided into four equal parts; three-fourths of which should be converted into a joint stock, attended with annuities, at the rate of 4 per cent. until redemption by parliament, and should be called The new South Sea annuities; and the other fourth part should remain in the company as a trading capital stock, attended with the residue of the annuities or funds payable at the exchequer to the company for their whole capital, till redemption; and attended with the same sums allowed for charges of management, and with all effects, profits of trade, debts, privileges and advantages belonging to the South Sea company. That the accomptant of the company should twice every year, at Christmas and midsummer, or within one month after, state an account of the company's affairs, which should be laid before the next general court, in order to their declaring a dividend; and all dividends should be made out of the clear profits, and should not exceed what the company might reasonably divide without incurring any farther debt; provided that the company should not at any time divide more than 4 per cent. per annum, until their debts were discharged; and that the South Sea company, and their trading stock, should, exclusively from the new joint annuities, be liable to all the debts and incumbrances of the company; and that the company should cause to be kept within the city of London, an office and books, in which all transfers of the new annuities should be entered and signed by the party making such transfer, or his attorney; and the person to whom such transfer should be made, or his attorney, should underwrite his acceptance, and no other method of transferring the annuities should be good in law.
The annuities of this company, as well as the other, are now reduced to 3l. per cent.
This company is under the direction of a governor, sub-governor, deputy governor, and 21 directors; but no person is qualified to be governor, his Majesty excepted, unless such governor has, in his own name and right, 5000l. in the trading stock; the sub-governor is to have 4000l., the deputy 3000l., and a director 2000l. in the same stock. In every general court, every member having in his own name and right 500l. in trading stock, has one vote; if 2000l., two votes; if 3000l., three votes; and if 5000l., four votes.
The East India Company, the Bank of England, and the South Sea Company, are the only incorporated bodies to which the government is indebted, except the Million Bank, whose capital is only one million, constituted to purchase the reversion of the long exchequer-orders.
The interest of all the debts owing by the government is now reduced to 3 per cent. excepting only the annuities for the years 1750 and 1758, the life-annuities, and the exchequer-orders; but the South Sea company still continues to divide four per cent. on their present capital-stock, which they are enabled to do from the profits they make on the sums allowed to them for management of the annuities paid at their office, and from the interest of annuities which are not claimed by the proprietors.
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 134a 134½. South Sea ditto 97½, &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 £95½ or £85. 10s. while new South Sea annuities fetch only £84½, or £84 15s., though each of them produce the same annual sum of £3 per 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.