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[-THE GREAT METROPOLIS, VOLUME 2-]
[-83-] CHAPTER II
THE ROYAL EXCHANGE.
Historical sketch and description of—Number of
persons who visit it in a day—Business done in it— Supposed wealth of
persons attending it—The late Mr. Rothschild—General
observations—Negotiation of bills of exchange—The subject of exchanges
THE Royal Exchange is a phrase with which everybody is familiar. It is one which is hardly ever out of the mouths of some of the city merchants. By many in the country it is confounded with the Stock Exchange. It will be afterwards seen that the two are wholly distinct from each other. The Royal Exchange is close to the Bank of England, and also to the Stock Ex-[-84-]change. You have only to walk a few yards in going from either of the three places to the other. It may be worth mentioning for the information of those unacquainted with the localities of the metropolis, that the Mansion House is also in the immediate neighbourhood. These four places are so near each other, that one might visit all of them in less than two minutes.
I shall afterwards have occasion to speak to of the present Royal Exchange, viewed merely as an architectural edifice. The first Royal Exchange, or Burse, as it was then called, owed its origin to the munificence of Sir Thomas Gresham. The idea, however, was not his own; it was suggested to him, if our antiquarians may be credited, by Richard Clough, who had been Sir Thomas's leading clerk, and who was eventually knighted and made his representative at Antwerp,—the latter city being then the great commercial emporium of Europe. Sir Thomas first gave public intimation of his intention to build the "Burse" in 1564. He laid the foundation-stone on the 11th of June, 1566, [-85-] and the building was finished in 1577. In three years afterwards, it was visited in state by Queen Elizabeth, who caused the "Burse" to be proclaimed by herald and trumpet, "The Royal Exchange." The edifice was erected at the sole expense of Sir Thomas, but the city of London purchased and presented him with the ground, and cleared away the buildings which stood on it, at an expense of 4,000l. The object which the founder of the institution proposed to himself, was to have an Exchange, with large and covered walks, wherein the merchants and traders of the city of London might daily assemble and transact business, in all seasons, without interruption from the weather, or impediments of any kind. Previous to the erection of the Royal Exchange the merchants were in the habit of meeting in the open air in Lombard Street, where they suffered many inconveniences, not only from the variableness of the weather, but from the intrusion of pedestrians along the thoroughfares, and of vehicles of every kind. Sir Thomas Gresham died in 1579, leaving the [-86-] building, with the shops, cellars, vaults, &c., belonging to it, to the corporation of London and the company of mercers, but providing that four professors, of divinity, astronomy, music, and geometry, should be appointed, at a yearly salary of 100l. each, to deliver gratuitous lectures in one of the rooms of the place. These professorships were kept up till 1830, when they were transferred to the London Institution, no one scarcely ever attending the lectures. It is said that the largest audience which ever honoured either of the professors with their presence during the delivery of their lectures, for many years previous to the time they were given up, consisted of three individuals.
What the peculiar style of architecture, or the extent of the first building may have been, I have not been able to learn. It was destroyed by the great fire in 1666. That the edifice must have been handsome, maybe inferred from a casual remark made by the Rev. Thomas Vincent, a well-known evangelical divine of that period, in a work which he published imme-[-87-]diately after that destructive conflagration. "No stately building," says Mr. Vincent, "was so great as to resist the fury of the flames. The Royal Exchange itself, the glory of merchants, is now invaded with much violence. When the fire was entered, how quickly did it run round the galleries, filling them with flames; then descending the stairs, compasseth the walks, giving forth flaming vollies, and filling the courts with sheets of fire. By and by the kings fell all down upon their faces*, (* By this is evidently nieant, the statues of the Kings of England, which ornamented the building.) and, the greatest part of the building after them (the founder's statue only remaining) with such a noise as was dreadful and astonishing."
Mr. Bayley, in his "Reminiscences of London," gives another very interesting quotation from "Meditations on the Burning of London," by the Rev. Samuel Rolle, also a clergyman of that period,—which clearly shows that the Royal Exchange must have been an edifice [-88-] of great magnificence, as well as a place of great resort. "What a princely foundation," says he, "was the Royal Exchange! and of how great use! Was not that the centre in which those lines met, which were drawn from all parts of Europe? Rich merchants, I mean, and other eminent tradesmen and great dealers, not only English, but Spanish, French, Dutch, Portuguese, Danes, and Swedes. Was not the place a little epitome, or rather representative, of all Europe (if not of the greatest part of the trading world) renewed every day, at such a time, and for so many hours? As London was the glory of England, so was the Royal Exchange one of the greatest glories and ornaments of London. There were the statues of the Kings and Queens of England set up in the most conspicuous and honourable places, as well receiving lustre from the place where they stood, as giving lustre to it."
The rev. author proceeds in a quaint but forcible manner, to indulge in reflections on the subject :—" How full of riches was that Royal Exchange! Rich men in the midst of it, rich [-89-] goods above and beneath! There were men walked upon the top of a wealthy mine; considering what eastern treasures, costly spices, and such things were laid up in the bowels (I mean the cellars) of that place. As for the upper part, was it not the great storehouse whence the nobility and gentry of England were furnished with most of those costly things wherewith they did adorn themselves? Here, if anywhere, might a man have seen the glory of the world in a moment. What artificial thing could entertain the senses and fantasies of men that was not there to be had? Such was the delight that many gallants took in the magazine of all curious varieties, that they could almost have dwelt there; going from shop to shop, like bees from flower to flower,—if they had had but a fountain of money - that could not have been drawn dry! I doubt not but a Mahometan, who never expects more than sensual delights, would gladly have accepted of that place and the treasures of it, for his heaven, and have thought there were none like it. The sins of the lower part, where [-90-] merchants met to discourse their affairs, we may suspect to have been craft and covetousness, over-reaching and going beyond one another. And were there not other kinds of sins which did abound in the upper region of that Exchange, which like so many comets or blazing stars did portend or threaten the destruction of it? Oh the pride and prodigality that were there to be seen! How few could be charitable that were so expensive as many were in that place! And how much of that that was there expended, might well have been put to charitable uses! How likely was it that they should be humble who were so curious and phantastical as the things that were bought showed them to be! They that worked for that place had need of as good a phantasie for metamorphosis in habits as Ovid had in other things, that they might please customers so unsatiable after novelties.
"Though there was in that place an insurance office, which undertook for those ships and goods that were hazarded at sea, either by boisterous winds or dangerous enemies, yet it could not [-91-] secure itself, when sin, like Sampson, took hold of the pillars of it, and went about to melt it down. What quick work can sin and fire make! How that strong building vanished of a sudden, as if had been but an apparition! How quickly was it taken down, as if it had been but a slight tent, the cords whereof are presently loosened, and the stakes soon removed! So fell that noble structure, undermined by craft and covetousness, and overladen with pride and prodigality; and great was the fall thereof."
It will at once be seen, amid the quaint expressions and moral reflections with which this extract abounds, what a magnificent superstructure the first Royal Exchange must have been, and what an important place it must have been in the estimation of the inhabitants of London. It would appear that the large apartments above must have been something like our modern bazaars, though containing a far more valuable assortment of articles. It will afterwards be seen that there is nothing of this kind connected with the present Royal Exchange.
[-92-] I have not been able to ascertain what were the expenses which Sir Thomas Gresham incurred in building the original Royal Exchange. The style and dimensions of the place show that the expenses must have been enormous. Sir Thomas was, perhaps, one of the very few citizens of London at that period whose fortune could justify such an undertaking. His father was called, from his great wealth, and the extent of his commercial transactions, the King's Merchant.
The Royal Exchange was rebuilt without loss of time. On the 23rd of October, Charles the Second laid the base of the column on the west side, as you enter from Threadneedle Street. In eight days afterwards, the foundation stone of the column on the east side of the same entrance was laid by the Duke of York, afterwards James the Second; and on the 19th of the following month, the first stone of the eastern column of the entrance from the south was laid by Prince Rupert. The new building was finished in rather less than two years; and was [-93-] opened on the 28th September 1696. The entire expenses of the edifice amounted to 58,962l., which would be equal to 200,000l. of our present money. The expenses were defrayed by the city and mercer's company conjointly, each paying one half. Considerable alterations and repairs were made in 1767, towards the expenses of which parliament contributed 10,000l. Additional alterations and repairs were made between 1820 and 1826, at an expense of upwards of 30,000l.
The Royal Exchange is chiefly built of stone. The form of the building is quadrangular. On either side in the interior is a commodious piazza; and in the central parts of the south and north sides is a piazza on the outside. The whole edifice unites the quality of stability with an excellent architectural taste. The interior is ornamented with statues of many of the sovereigns of England, independently of various other emblematical designs. The principal front of the building measures two hundred and sixteen feet, and the area within, exclusive of [-94-] the space occupied by the piazzas, is one hundred and forty-four feet from east to west, by one hundred and seventeen from north to south. This area is open above. It is paved with Turkey stones of a small size, which are said to have been the gift of a merchant who traded to that country. In the centre is a statue of Sir John Bernard, who was for many years the representative in parliament of the city of London. The walls of the piazzas are covered all over, chiefly with written placards advertising the sales of ships, goods, &c. the sailing of vessels, and containing announcements of every other kind connected with commercial and mercantile matters. I do not know the precise charge made for permission to post up these advertisements, but it is very trifling. Some merchants and others purchase the right for the whole year round, and no sooner take one down than they put another up. The shops outside the Exchange are very small in size, and are chiefly occupied by booksellers, stationers, and newsvenders. There are cellars underneath which are let out [-95-] for warehouses. On the upper floor, on the north side of the building, is Lloyd's coffeehouse, so well known to all connected with the shipping business. This place consists of two lofty rooms, of considerable length, where all business is transacted between brokers and underwriters relative to the insurance of ships at sea. By an arrangement of the society who conduct this establishment, agents are established in all the leading sea-ports throughout the kingdom; and they make a point of furnishing the earliest possible information at headquarters relative to the arrival and sailing of vessels, and to their condition and equipment. Hence it is that Lloyd's is so celebrated for having the first intelligence in the metropolis respecting shipwrecks and other disasters by sea. On the same floor as Lloyd's there are several other rooms for other purposes, but it is unnecessary to advert to them in other than general terms.
The Royal Exchange, as might be expected, is a great object of curiosity to strangers. Most [-96-] persons on a visit to the metropolis make a point of seeing it. It is well worth seeing.
Various conjectures have been made as to the number of persons who visit it in the course of a day. There can be nothing but guesses on the subject. It is impossible to say with confidence what the exact number is. Some of the conjectures which have been hazarded are amusing for their extravagance. In the new edition of the "Encyclopaedia Britannica," now publishing in parts, a writer estimates the number at 200,000. This is perfectly astounding. Even supposing all who pass the Royal Exchange every day were to go into it, the number would not be much more than the half of what has been just stated; for it has been ascertained, as I mentioned in the first series of this work, that the entire number of persons who cross London Bridge in a day is under 100,000, and I am sure that every one who knows the two places will concur with me when I say, that the number of persons who go along Cornhill, in other words pass the Royal Exchange, in the [-97-] course of a day, is not much greater, if indeed it he so great, than that which crosses London Bridge every day. I should, for my own part, certainly say, that the number of persons who daily visit the Royal Exchange is under 20,000. In the early part of the day the place is quite deserted: you see nothing but an idler here and there, or some stranger gratifying his curiosity by the inspection of a place of which he has heard so much. I have often seen it when there were not fifty individuals present, including the parties who usually hang about it. Formerly the practice was to do business at all hours of the day; but our merchants have for some years past acted on the aristocratic principle of lying in bed in the morning, and postponing the transaction of business till a late hour. It is hardly thought respectable to appear on ‘Change before four o'clock. Many of the city merchants would look on themselves as having committed a very serious offence against their commercial dignity, were they to be seen there before the hour I have named. The proper [-98-] time for beginning business, that is to say, in the estimation of the city aristocrats, is about four; and the time for finishing business is a little before five. The time allowed for the transaction of business is consequently very short. We hear much of the excellent business habits of Englishmen, and of the singular expedition with which they get through their transactions. Here is an instance of dispatch; the dispatch, however, is a matter of necessity, not choice. Those ‘who do not finish their business by five o'clock must leave it unfinished. They are not allowed to remain after that hour on ‘Change. The doors of the place are then shut; and if persons will not go out of their own accord, they will either be turned out or shut in. The officers of ‘Change are fully empowered, by one of the regulations, to eject, by the everlasting ringing of a bell in their ears, those who do not choose to go of their own accord at the proper time. At half-past four o'clock one of the officers of the place goes round with a hand-bell, which he peals in the ears of all [-99-] those whom he sees in earnest conversation together. This is intended as a broad hint that the time for clearing ‘Change is at hand, and that they had better have but few words together, and do as much business as possible in the limited time that remains for them. I need not say that it is no very pleasant thing for those who are engaged in earnest conversation on interesting topics ‘with one another, to have their voices drowned as well as their tympanums invaded, by the deafening noise caused by the bell. These are considerations, however, which never enter the bellman's mind. He has no squeamishness on the subject. He does, as he himself says, his duty, which is to he as prodigal of the peals of his bell as possible. I have sometimes, indeed, thought that the noisy fellow takes a sardonic delight in interrupting those who are most earnest in conversation together. At all events, he displays no ordinary sagacity in singling out their ears for the heartiest salutes which the "long tongue" of his noisy instrument can give. My only surprise is that [-100-] some city aristocrats do not, in a paroxysm of wrath, caused by his unceremonious interruptions, take his bell and smash it in pieces. To be sure they would repent it afterwards, and therefore it is better they should not do it. I may add, they would have no right to do such a thing; but when people act under the influence of a momentary excitement, they sometimes do what is wrong.
‘Change about half-past four o'clock is an interesting sight. There you behold merchants of every kind and from all parts of Europe and the civilised world. If you do not always see natives of every part of the world, you see the representatives of the first commercial houses in every civilised country under heaven. The place, which is large, is as full as it can hold. In one place you see three or four all earnestly talking together: in another you see only two; hut the conversation which is being carried on between those two may be of the most important kind. It may not only be about transactions of a very extensive nature; but it may be a con-[-101-]versation on the result of which the stability of some great commercial establishment hangs. You can see by the earnestness and seriousness of the parties' manner, that the matter of their conversation is of no ordinary importance. In other instances, you see twos and threes standing and conversing together in different places; but you can at once discern, from the levity of their manner, that their business, if indeed they be engaged in business matters at all, is of no very interesting kind. Most probably they are there only from curiosity, as a great many always are; for men accustomed to do business on ‘Change are drawn to it at the usual time from a sort of habit, even when they have nothing to do. It is worthy of observation, that during the business hour—for it cannot be called hours—of the Royal Exchange, you very seldom see persons standing by themselves. You almost invariably see every body engaged with some or other of the thousands present. The topics, though almost exclusively of a commercial nature, are of necessity extremely varied. There is not a [-102-] branch of commerce under heaven which has not its representative there; there is scarcely a commodity in the world which is not the daily topic of conversation on the Royal Exchange. It is reported of some wit—I forget his name— of Charles the Second's time, that he took notes of the common conversation of a company of philosophers, and that on looking them over when the party broke up, they appeared a strange jumble of nonsense. Conversation relating to commercial transactions of such great importance, and of such vast magnitude as those which take place on ‘Change, cannot with strict propriety be said to be nonsense, however much it might look like it; but were it possible to transfer to paper all the conversations which are being carried on at the same time during the busy moments there, they would certainly have the appearance of the most unintelligible jargon which ever escaped human lips. I have sometimes thought, that if a man could himself possess all the commercial information which is possessed by the persons on ‘Change [-103-] taken altogether, what a living encyclopaedia of commercial knowledge he would be.
It were a curious inquiry, were there anything like certain data on which to conduct it, to try to find out what might be the aggregate amount of wealth represented by the gentlemen on ‘Change between the hours of four and five o'clock. There is, however, no such data. That such amount of wealth must be enormously great, there can be no doubt. Let it only be recollected that, as before stated, there are individuals from the great majority of the leading commercial houses in London, as well as from abroad, and it will at once be seen that the amount of wealth represented on ‘Change must be astoundingly great. Rothschild alone, when alive, represented property to the extent of between 5,000,000l. and 6,000,000l. To be sure, there are few Rothschilds in the world; there are none in London; but there are, nevertheless, thousands in the city who are men of great opulence. To be worth 100,000l. or 200,000l. is no uncommon thing among metropolitan mer-[-104-]chants. Many can boast of possessing a quarter of a million, and a few even half a million and more. It is easy, then, to fancy what a vast aggregate of wealth there must be, in the supposed circumstances, represented by the individuals assembling in the Royal Exchange. Supposing the number of persons present at a given time were 5,000, and that on an average they were worth 20,000l. each—which surely, when it is recollected that Rothschild's successors stand there, is no extravagant supposition—that would give the aggregate amount of wealth at 100,000,000l.
I have referred to the late Nathan Rothschild being on ‘Change. There he stood, day after day, leaning against a pillar on the right hand, as you enter from Cornhill. He was a little monarch on ‘Change; and the pillar in question may be said to have been his throne,.—with this difference, that while other monarchs sit on their wooden thrones, he leaned against his throne of granite. To that particular spot he was so devotedly attached, that no consideration would induce him to do business anywhere else. Ar-[-105-]dent as was his love of money, and great as were the sacrifices he would have made to increase his more than princely fortune, I question much if the temptation of some thousand pounds would have induced him to quit his favourite pillar. From that pillar he never moved. There he stood, nearly as stationary as the pillar itself, with his back resting against it, as if he could not have supported himself without its aid. With his note-book in his hand, he was always to he seen during the usual hour of business, entering into transactions of great extent with the merchants and commercial men of all countries. Little would the stranger, who chanced to see the prince of capitalists standing on the spot I have mentioned, have fancied, from his personal appearance, what an important influence he exerted on the destinies not only of ‘Change, but of the country and Europe. Nothing could be more unprepossessing than his appearance. He was just such a man as the boys in the street would have thought a fine subject for "a lark,"—unless, indeed, they had [-106-] been deterred by the lowering expression or sullen aspect of his countenance. He always looked sulky. I question if he ever indulged in a smile. I am sure he never did on ‘Change. There his features were never, so far as I could learn, known to relax their rigidity. I have been informed that he did in private, among his more intimate friends and relations, occasionally make an effort to smile; but never with any marked success. His smiles at best could never be said to be more than a species of spoiled grin. His countenance wore a thoughtful aspect; but I never could see anything in it that indicated intelligence. He looked stupid or clownish like. He had a good deal of the appearance of a farmer of the humbler class. His features were massy. He had a flat face. I have scarcely ever seen a Jewish countenance which had less in it of the conformation so characteristic of the faces of that people, than Rothschild's. His features seemed to be huddled together. There was nothing like regularity in them. His face was full, and unusually round. His nose had a [-107-] good deal of the cock-up form. His mouth was rather large, and his lips thick and prominent. His forehead was of more than an average height, considering the altitude of his face. His hair had something of a darkish hue, and was generally short. His complexion was pale; except where it was slightly tinged with colour by the weather. He was short and thick. He was considerably under the general height, though it is possible his pot-belly and corpulent appearance generally, may have made him appear shorter than he really was. Any time I saw him, he always wore a great-coat of a dark brown colour. He paid but little attention to his personal decoration. His tailor had no very difficult customer to please. From his appearance I should have inferred, that if he could but have abundance of room in his clothes, he never troubled himself as to the way in which Snip executed his task. I have no notion, however, that either his tailor or any other of his tradesmen would get off as easily on the question of price, as they did as to the taste with which they [-108-] executed their tasks. At home he was, as might have been expected, still less particular about his personal appearance. I could relate some extraordinary anecdotes on this subject which have never before appeared in print, and most probably never will; but I have my reasons for passing them over in silence.
It was one feature in Rothschild's conduct when on ‘Change, which I have never seen noticed, that he never, except when engaged in business, entered into conversation with any of the thousands in the same place. There he stood, in the midst of the bustle on ‘Change, apparently as deeply lost in thought, and with as melancholy a countenance, as if he had been alone in the vast wilderness of shade referred to by Cowper, or been the "Last Man" described by Campbell. I never knew a more striking illustration than he presented, of the possibility of one being in the depths of solitude while in the midst of the busiest and most bustling scenes which this busy and bustling metropolis presents. Whether his reserve was constitu-[-109-]tional, or whether it arose from the pride of purse, or whether from the magnitude of the matters which must have been ever occupying his mind, or whether from the conjoint operation of the three causes, I cannot positively say; but the fact of his reserve was as I have stated.
No man accustomed to reflection could see Rothschild on ‘Change without feeling a train of interesting thoughts awakened in his bosom. A crowd of ideas always forced themselves on my mind whenever I saw him standing at his favourite pillar. I thought of the immense power which a being who had little personally or intellectually to recommend him had, not only in his adopted country, but throughout the civilised world. The public in general had no conception of the greatness of that power. Were the secrets of the last twenty years, as these relate to the different courts of Europe, and to the various aspects which matters both here and on the continent assumed during that period, revealed, it would he seen that he was a prime mover in many of the great scenes which [-110-] have passed before us, though an actor who always remained behind the scenes. He had in many cases the power of causing or preventing war, according as he felt disposed or not to loosen his purse-strings and to supply princes with the means of war. The peace of Europe thus often depended entirely on him. And how affecting the thought, that in deciding how he should act, whether he should or should not make the required advances to the crowned heads of Europe, he was not influenced by any considerations hearing on the great question of humanity, but merely by calculations as to the prudence of the thing, viewed simply as a matter of pounds, shillings, and pence! The vast amount of happiness or of misery dependent on the course he should adopt, never, it is fair to presume, entered for one moment into his thoughts, or influenced his decisions in any degree. It was his, I repeat, to let loose or restrain the demon of war with all its devastations and horrors, just as he thought fit to unloose or keep shut the strings of his ample purse: it [-111-] was in his power to subject the world itself to the ravages of war, or to avert the frightful calamity. The destinies of millions of our fellow-creatures were in his hands. How soon could he have made myriads of wives widows, and children fatherless! How many mothers could he have, in the space of a few years, bereft of their sons ! And what multitudes of sisters could he have deprived of their brothers in the same short space! For how many hundreds of thousands of men, in the prime of life, could he have prepared a premature grave! To have looked on one whose personal appearance had less than that of most of his fellow-beings to recommend him, and to think that he possessed so vast a power over the fortunes of Europe, was one of the most melancholy reflections which could obtrude itself on the human mind. It is painful to think that mere wealth, without regard to the moral qualities of the possessor, should exercise so mighty an influence over the destinies not only of one country but of mankind. There must be something radically defective in the [-112-] condition of society, when mere wealth can enter so largely into the elements of human happiness or human misery. It is to be feared it will continue to be so until the dominion of wealth shall be overthrown, and for ever trampled under foot by the antagonist principle of knowledge,—not merely a scientific or philosophic knowledge,— but a knowledge based on the great truths of the Christian religion.
Rothschild, however, notwithstanding his vast and unparalleled opulence, has ceased to exist. Whatever influence it had on the monarchs of Europe, there was one monarch on whom it had none whatever. That monarch is Death. He asserts his dominion as unceremoniously and peremptorily over the most opulent and most distinguished, as over the poorest and most obscure. He is no respecter of persons. It is to be hoped that no human being, now that Rothschild is no more, will ever possess the same power, arising from the same causes, over the destinies of mankind, as he did.
But these are reflections I must not pursue [-113-] further. Since the death of Rothschild it were difficult to say what individual or what house, if any, has taken the lead on ‘Change. It is doubtful, indeed, whether we shall ever see any one occupying his place there. To say nothing of him in his capacity of a loan-contractor, his transactions were often of a most extensive kind. It would be a most interesting piece of information, were it possible to obtain it, to know what may have been the amount of his transactions on ‘Change from the day he first entered it till that on which he left it for ever. This, however, is information which will never be obtained. His own most intimate friends cannot have any idea of what the extent of his transactions on ‘Change were from first to last.
Many persons suppose that a great deal of business, in the shape of buying and selling goods, is transacted on ‘Change. This is a mistake. Some such transactions do take place; but they are neither so numerous nor important as one unacquainted with ‘Change would be apt to imagine. The object of meeting there is not [-114-] so much with the view of making purchases, as in talking over all matters connected with commerce, making preliminary arrangements for entering into large speculations, and regulating the prices and the course of business. The bargains that are made are chiefly effected through the medium of merchant-brokers, who, as in the case of the brokers on the Stock Exchange, have an allowance of one-eighth, or half-a-crown per cent. on the amount of business done. If, for example, a merchant wishes to purchase a certain quantity of coffee, say twenty tons, he employs his broker to effect the sale, either stating the highest price he will give, or telling the broker to make the most favourable terms he can. The broker in such a case applies to the party on ‘Change with whom he thinks he can most easily and satisfactorily do the business, telling him he wants a certain quantity of the article, and the price he is authorised to give, if peremptorily limited as to terms. The seller closes or not, according to circumstances, with the offer made.
[-115-] One leading object of the Royal Exchange is to afford facilities for paying and receiving monies on mercantile transactions with foreign houses. Bills are drawn on or made payable to foreign houses for goods sent or received by London merchants. These bills are brought to ‘Change, and through the intervention of the brokers, as in the case already supposed, are negotiated there. Some of the larger houses who have foreign connexions are always ready to receive these bills, asking no more than a trifling profit on the transaction. The terms are always regulated by the state of the exchanges, in relation to England, at the place at which the bills are drawn or made payable. I have heard that formerly houses were always ready to negotiate such bills on such terms as would afford them only half-a-crown or one-eighth per cent. on each 1001. for their trouble. Now, however, the thing is not done for such fractional profits, though the profits are still small.
The prices at which bills of exchange are [-116-] bought or sold do not vary, on undoubted bills, to any material extent on ‘Change. A few of the leading brokers, after having ascertained the comparative demand and supply, fix the price among themselves, which price is strictly adhered to in all the more important transactions of the day. In cases, however, where a doubt exists as to the credit of the parties whose names are on bills, the prices do vary to a considerable extent, according to the strength or slightness of the doubt entertained. The bills which are bought and sold on the Royal Exchange are not always bona fide bills of exchange. It is understood, that of late years a great many fictitious bills purporting in some instances to be drawn on persons who never existed, and in others ‘with real names with the permission of the parties, have been brought into the market merely as a matter of speculation. As, however, in all such cases the party purchasing takes care to see that the names of responsible persons are adhibited to the bills, if not as drawers or accepters, as indorsers, the [-117-] transaction, in so far as regards its practical results, is not attended with loss or injury to any one.
There are only two days in the week on which business of this kind is transacted. These are Tuesday and Friday. I have endeavoured to find something like probable data—as absolutely certain data were out of the question— by ‘which to calculate the amount of money which may change hands on one of these days; but I find the thing is not to be had. A gentleman who has been many years on ‘Change estimates the average amount, at the briskest season of the year, at from 150,000l. to 200,000l. On those occasions in which a foreign loan has been contracted, there is of course a very great increase in this description of business. It was supposed by those most conversant with such matters, that when the Messrs. Barings some years since contracted a loan of 6,000,000l. with France, the amount of money which changed hands on one of the days when the purchasers of scrip were paying their money, must have been at least 500,000l.
[-118-] The affairs of the Royal Exchange are managed by the Gresham Committee. it is a common proverb in Scotland, that new lairds have new laws. An amusing illustration of this proverb was afforded nearly twenty years since, soon after the appointment, as a member of this committee, of an alderman celebrated for his partiality to turtle soup. Desirous of marking the commencement of his official career as a member of the committee in question, by something new, he succeeded in prevailing on the members to agree to an alteration in the hour of shutting up the place. No sooner had this determination been come to by the committee, than the aldermanic gentleman summoned the officers of the place into his presence. Obedient to his high behests they forthwith presented themselves. Putting his hands into his waistcoat pockets, and strutting through the committee-room with an air of infinite self-importance, he informed the officers of the resolution to which the committee had come. "And now," he added, pulling himself up and [-119-] speaking in a tone which was authoritative in the highest degree, "and now take care, on pain of losing your situations, that the place be cleared and the doors shut every night by live o'clock. No excuse admitted, remember; and no favour shown to any party, be that party who be may." The servants of the place bowed in the best way they could, and promised the most perfect obedience to the alderman's orders. The doors not having been before shut until six o'clock, it was with difficulty the poor fellows, notwithstanding the most exemplary use of handbells, and all the other exertions they could make, could effect even a partial clearance at five. A considerable number refused to stir a foot. What could the poor men do! The stern looks of the alderman, the night before, still haunted their minds, and his haughty tones were still ringing in their ears, notwithstanding all the noise they caused by their own bells. They, therefore, closed the doors on the refractory gentlemen who remained in the place. [-129-]After having confined them there about three hours, they, acting on the authority of some of the other members of the committee, opened one of the doors. Fancy their amazement and horror, when the first person among the prisoners that presented himself was the worthy alderman himself! He vowed vengeance in the shape of the immediate dismissal of the officers of the place, but one of the committee-men who was present when he gave such peremptory orders to shut the doors at five and to show no favour to any man, having interposed and reminded his aldermanic highness that they were only, as obedient servants, carrying his positive instructions into effect, he was obliged to let the matter pass over. Law-makers, says the old adage, should not be law-breakers. The alderman gave practical proof that he ever afterwards remembered this adage. He was most exemplary in setting an example of obedience to his own legislation; for no one ever again saw him on ‘Change after a quarter to five.
[-121-] The Royal Exchange is divided into a number of departments called walks. There is the Scotch walk, the French walk, the Dutch walk, the Italian walk, &c. &c. There is not, indeed, any country in the world of great commercial importance which has not its walk. The merchants and parties engaged in the business peculiar to the country thus singled out, are supposed to station themselves in their respective walks. This is done to a considerable extent, though you will by no means find that the different walks are adhered to with scrupulous closeness. By means, however, of these divisions of ‘Change, one party can, in the great majority of cases, find out another party with the greatest ease, even when the number of gentlemen present may be between 4,000 or 5,000. The following sketch of the way in which the space on ‘Change is divided among the leading commercial countries, ‘will give a better idea of it than it were possible to do by mere verbal description:- [-122-]
Were it a part of the plan of this work, which it is not, to embrace matters bearing directly upon the question of political economy, this would be the proper place to enter into the subject of the "exchanges" between this and other countries. But though not attempting to popularise a subject which, from its very nature must ever be to the majority of readers unintelligible, it may be right to refer for a moment to [-123-] some of the more obvious principles connected with it. Political economists, and those who have large transactions on the Royal Exchange, speak of two kinds of exchange. The one is the nominal, the other is the real exchange. What is meant by the nominal exchange, may be understood by putting a single hypothetical case. Suppose the currency of France were seven and a-half per cent. below the [-124-] Mint standard and purity, and the currency of England were on a par with the Mint standard and purity, then the nominal exchange as between France and England will be seven and a-half per cent. in favour of this country. But suppose, on the other hand, that the currency of this country were now, as it has been before, twelve per cent. depreciated below the Mint standard and purity, while in France the currency was only five per cent, degraded, then the nominal exchange, as between France and England, would be seven per cent, in favour of France, or against this country. The nominal exchange, therefore, is always regulated by the relative value of the currency of a country to the Mint standard and purity, compared With the relative value of the currency to the Mint standard and purity in any given country with regard to which the state of exchange is sought to be ascertained.
The real exchange, again, between any two countries, is always limited by the expense which would be incurred [-124-] in the transfer of bullion from one country to another. A merchant will prefer a bill of exchange for the purpose of remittance to another country, to the transmission of bullion, provided the premium charged on the bill do not exceed the cost of the transfer of the bullion; but if it should, then he will export the requisite amount of the precious metals to pay his debts to the foreign house with which he has transacted business. If, for example, a merchant in London owes 100l. to a house in Paris, and the-premium on a bill on Paris were twenty shillings, he will decline to purchase a bill if he can send over 100l. worth of bullion for ten shillings. But though the premium on bills can never exceed the amount of expense incurred in the transfer of bullion from one country to another, there may be a great variation in the amount of premium and in the expenses of the transmission of bullion. In the time of war, for example, or when commercial intercourse between two countries is restricted, the expenses of transmitting bullion from one to another are necessarily increased, owing to the unavoidable augmentation in the freight, insurance, &c. The premium on bills of exchange, therefore, always bearing as it does a certain relation to the expenses of transmitting bullion, fluctuates very considerably at different times.
The real exchange between any two countries is regulated in a considerable degree by the supply and demand for bills. Supposing, for the sake of illustration, that any two given countries had an equal supply of bullion, and that the currency of each was either at its Mint standard, or that it was equally depreciated below that standard in the case of both countries, then the exchange will be in favour of whichever country has the least debts due to the [-125-] other. If London owes Paris a greater amount of debt than Paris owes London, then there will of necessity be a greater demand for bills on Paris than there will be in Paris for bills on London. The premium will consequently be greater in London for bills on Paris, than it will be in Paris for bills on London. The exchanges will, in other words, be in favour of France and against Great Britain; and they will be so in the supposed case to an extent proportioned to the greatness of the demand for bills in London on Paris. If, on the other hand, the debts due by Paris to London be greater than those due by London to Paris, then the demand for bills in Paris on London will be in the same relative proportion, and the premium on such bills will be correspondingly greater in Paris for bills on London, than in London for bills on Paris.
In calculating the actual state of the exchanges as between any two countries, it will be necessary to ascertain both the real and nominal exchange. This is always done by our mer-[-127-]chants before fixing the amount of premium on bills drawn on foreign countries. If, to illustrate this part of the subject, the nominal exchange be five per cent. in favour of France, as against this country, and the real exchange be one per cent. in favour of France, then the actual state of the exchange will be six per cent in favour of France and against this country. But as it often happens that the nominal exchange is in favour of a particular country while the real exchange is against it, then the merchant must ascertain the difference between the nominal and real exchange, which will give him the exact state of the exchange, as between the two countries. For instance, suppose the nominal exchange be five per cent, in favour of Paris, while the real exchange is one per cent, against it and in favour of this country, then the actual condition of the exchange as between the two countries, will be four per cent, in favour of France. If, again, the nominal rate of exchange in France be two per cent. in favour of this country, while the real exchange in England is two per cent. [-128-] against France, then the exchange between the two countries will be at par, and vice versa. In the case formerly supposed of the supply of bullion being equal in any two given countries, and the currency of each being of the Mint standard and purity, then the exchange between those two countries will depend entirely on the state of the real exchange; in other words, on the comparative supply and demand for bills on the two countries.
It sometimes happens that the computed exchange between this and another country may be favourable to us, while the real exchange is against us, and vice versa. This occurs when there is a difference between the nominal exchange and the nominal prices of this country and any other given country, while the price of bullion is the same in both. Mr. Blake, as quoted by Mr. Maculloch, gives a supposed example with the view of illustrating this. He says—" Suppose the computed exchange between Hamburgh and London to be one per cent. against this country, and that this arises [-129-] from a real exchange which is favourable to the amount of four per cent., and a nominal exchange which is unfavourable to the extent of five per cent.; let the real price of bullion at Hamburgh and London be precisely the same, and consequently, the nominal prices different by the amount of the nominal exchange, or five per cent.; now, if the expenses of freight, insurance, &c., on the transit of bullion from Ham-burgh, are three per cent, it is evident that a profit would be derived from the import of that article, notwithstanding the computed exchange was one per cent, against us. In this case the merchant must give a premium of one per cent. for the foreign bill, to pay for the bullion. 100l. worth of bullion at Hamburgh would therefore cost him 101l., and the charges of importation would increase the sum to 104l. Upon the subsequent sale, then, for 105l. of depreciated currency in the home market, he would derive from the transaction a profit of 1/. This sum is precisely the difference between the real exchange and the expenses of transit, that part of the [-130-] computed exchange which depends on the nominal producing no effect; since whatever is lost by its unfavourable state, is counterbalanced by a corresponding inequality of nominal prices."
From the observations I have made, it will be seen how it happens that when the exchanges are against us, the gold flows out of this country; and how, on the other hand, when the exchanges are in our favour, there is an influx of gold to our ports from foreign countries.
In negotiating bills of exchange it often happens that the party in London who has a debt to pay some foreign house, does not discharge that debt by a direct remittance to the place where the debt is due. He must, before making the remittance, ascertain the state of exchanges not only between this country and that to which he means to make his remittance, but between the latter and other countries. Mr. Maculloch, in one of his articles, illustrates this point in a manner as clear as it is capable of being made to the ordinary reader. He says— "When a [-131-] merchant in London means to discharge a debt due by him in Paris, it is his business to ascertain, not only the direct state of exchange between London and Paris, and consequently the sum which he must pay in London for a bill on Paris equivalent to his debt, but also the state of exchange between London and Hamburgh, Hamburgh and Paris, &c.; for it frequently happens that it will be more advantageous for him to buy a bill on Hamburgh, Amsterdam, or Lisbon, and to direct his agent to invest the proceeds in a bill on Paris, rather than remit directly to the latter. This is termed the arbitration of exchange. Thus, for example, if the exchange between London and Amsterdam be 35s. Flemish per pound sterling, and between Paris and Amsterdam 1s. 6d. Flem. per franc, then, in order to ascertain whether a direct or indirect remittance to Paris would be most advantageous, we must calculate what would be the value of the franc in English money if the remittance were made through Holland; for if it be less than that resulting from the direct exchange, it [-132-] will obviously be the preferable mode of remitting.
This is determined by stating, as, 35s. Flemish (the Amsterdam currency in 1l. sterling) 1s. 6d : Flemish (the Amsterdam currency in a franc) : : 1l. 10d the proportional or arbitrated value of the franc. Hence, if the English money, or bill of exchange, to pay a debt on Paris, were remitted by Amsterdam, it would require l0d. to discharge a debt of a franc, or 1l. to discharge a debt of 24 francs; and, therefore, if the exchange between London and Paris were twenty-four, it would be indifferent to the English merchant whether he remitted directly to Paris, or indirectly via Amsterdam; but if the exchange between London and Paris were above twenty-four, then a direct remittance would be preferable; while, if, on the other hand, the direct exchange were less than twenty-four, the indirect remittance ought as plainly to be preferred." I have thus glanced at the subject of the exchanges, as it is so intimately connected with the Royal Exchange. It is one about which we see [-133-] something in every newspaper we take into our hands; it is one, moreover, of the greatest interest to all classes of the community; for from the state of exchanges as between this and other countries, we may, in most cases, infer our real condition as a commercial community.
[nb. grey numbers in brackets indicate page number, (ie. where new page begins), ed.]