In reading Pepys’ discussions of money, credit, “notes”, debts, wealth, etc., it is clear that the financial system under which he lives is drasticallly different from what we have now.
The important thing to remember is that financial transactions were not institutionalized: “Banks” were not large, impersonal institutions — they were individuals who made their living handling money for others.
Because there was no paper money, the only currency was metal coinage. This was highly inconvenient for transactions of any size, so a person purchasing something for, say, 20 l. would give a promissory note. The note could say “I will pay you this whenever you ask” — a demand note. The maker of the note was, at least theoretically, obliged to pay over in cash whenever the payee showed up at his home or place of business (they were quite often the same, particularly in the case of tradesmen). Or it could say “I will pay you this in 30 days” or 60 or six months or whatever.
The person to whom the note was offered as payment had to make the same sorts of judgments creditors make today: How confident am I that I can collect this debt? They didn’t have credit reports in those days, so the basis for the decision would include the reputation of the payor (if he was known), the appearance of the payor (that is one reason why clothing was viewed as so important), the address for payment (both as evidence of substance and to evaluate how far you’d have to go — how much trouble it would be to collect it), etc.
Having the paper, what was the creditor to do with it? He could retain it and try to collect it when it came due. But (a) collection was likely outside his “core competency”, as they say in business today, and (b) his capital was tied up until he could collect it. So the practice arose of “discounting” — essentially, selling the note to a third party for something less than face value. That passed the risk of non-collectability as well as the time delay on to the third party — the greater the perceived risk, the greater the discount from the face value. Offering cash for notes was one of the earliest functions of bankers, and you can still see its remnants: Your checks don’t say “Pay to Smith”, they say “Pay to the Order of Smith” — that is, Mr. Banker, please give the cash to whoever buys this note from Smith. And the indorsement on the back of the check is the way Jones shows the bank (and ultimately the court) that he did in fact buy the note from Smith.
Sorry to go on and on, but I hope this provides some clarification on these murky financial doings.
P.S. — A while back, people were asking about Pepys’ possible misuse of government funds. My impression is that, in those days, one of the perks of public office was that you had the use of funds from the time they were given to you until they had to be paid out. You were responsible for being sure they were there when they were needed, but in the meantime you could lend them out and earn some interest. That is, after all, what banks do even today.
A source of gold prior to the inter regnum was Spain and Barbery coast [ a suprise] long session in of Commons on how money makes the world flow or as said once " Nervi belli pecunia" or Pecunia non olet. "...they had their Bullion from the Refiner. - That he imported, out of Barbary and Spayne, 5,000l. in Bullion, of Gold and Silver. That they buy by the Troy Weight, and sell by the Venice Weight; wherein a third Part Difference. -..."
From: British History Online Source: House of Commons Journal Volume 1: 06 March 1621. House of Commons Journal Volume 1, (1802). URL: http://www.british-history.ac.uk/… Date: 16/06/2004
"Nervi belli pecunia” or Pecunia non olet." sources: Endless money forms the sinews of war. [Lat., Nervi belli pecunia infinita.] - Cicero (Marcus Tullius Cicero), Philippics (V, 2, 5) http://www.cultureandfamily.org/a… “Pecunia non olet” (“Money does not smell”) http://www.britannica.com/eb/arti…
Cost of running a ship; The Lamport: 3 rate, 210 men and 50 guns was owed 8,854l. 1s. 9d on may 1st 1660 money owed for 40 ships and 3,695 men cost wages l.129,981 14s. 0d.
A List of such of his Majesty's Ships of the Navy Royal, now in Pay, not of the Summer's Guard, with an Account of the Wages due to them to the First of May 1660, and the Charge they are at, was read; and is as followeth: Viz.
From: British History Online Source: House of Commons Journal Volume 8: 16 May 1660. Journal of the House of Commons: volume 8, (1802). URL: http://www.british-history.ac.uk/… Date: 05/03/2005
interest rates to be set at 10 percent: 10 per Cent Interest. A Bill for such Persons as shall supply his Majesty with Money for his present Occasions, to take Interest at Ten Pounds per Centum, was this Day read the Second time. Resolved, That the said Bill be committed to the Committee of the whole House, that is appointed for the King's Revenue: And that the House will resolve into a Committee To-morrow Morning, to take this Bill in the first Place, and afterwards the King's Revenue, into Consideration: And they are to limit a Time in the Bill, for the taking up and retaining Money at Interest, by his Majesty, at the Rate of Ten Pounds per Centum.
From: British History Online Source: House of Commons Journal Volume 8: 14 February 1662. Journal of the House of Commons: volume 8, (1802). URL: http://www.british-history.ac.uk/… Date: 07/03/2005
"Goldsmith-Banking: Mutual Acceptance and Interbanker. Clearing in Restoration London". Stephen Quinn. Department of Economics, Texas Christian University. http://www.econ.tcu.edu/quinn/fin…
Transactions by Pepys with leading goldsmith-bankers that illustrate what the Quinn paper JWB posted a link to argues:
Thursday 1 February 1665/66: "I to Alderman Backewell’s to set all my reckonings straight there, which I did, and took up all my notes. So evened to this day, and thence to Sir Robert Viner’s, where I did the like, leaving clear in his hands just 2000l. of my owne money, to be called for when I pleased." http://www.pepysdiary.com/diary/1…
GRAFT: a Pepys historian posted this today: I edited 1/3 to fit this format:
"Samuel Pepys Posted by J D Davies
It is a truth universally acknowledged that those who get outraged by things on Twitter are in need of a life.
Occasionally one sees something on Twitter which is so crass any pretense at possessing a life must be laid aside. So it was with the normally uncontentious Twitter feed of the National Maritime Museum, referring to Samuel Pepys. I quote: ‘How did a a tailor’s son turn a corrupt & inefficient Navy into a powerful fighting force?‘
The person who runs the NMM Twitter feed quotes from the museum’s website, linked to the current exhibition on Pepys and his times, reviewed generally positively in this blog. I’m not shooting the messenger. But whoever came up with the original message needs to go to the exhibition shop and look at the book called Pepys’s Navy: Ships, Men and Warfare 1649-89. It contains the author's 30 years of research, and the writings of others who independently came to the same conclusion, that ‘He didn’t, and it wasn’t corrupt and inefficient to begin with’.
It would take too long to prove those points here. I’ve written books to prove it (a paperback edition of Pepys’s Navy will be out this summer) and am working on a third, Kings of the Sea: Charles II, James II and the Navy, due out from Seaforth Publishing in 2017, which will produce more evidence. Besides, criticizing Samuel Pepys is like shooting Bambi’s mother: people brought up on Sir Arthur Bryant, or the various books and websites that essentially maintain the same tired line, can't be converted by one blog post or three books, and umpteen articles, but one has to try…
My point is: The idea Pepys ‘saved the navy’ is based on books published between 40 and 120 years ago, drawing on a narrow range of sources, shaped by schools of historical interpretation long fallen by the wayside.
To describe Pepys' navy as ‘corrupt and inefficient’ is wrong, an attempting to measure an earlier age by modern standards. These days I argue organisations, media outlets, etc., with wide reach – like the BBC, newspapers, national museums, and schools – have a responsibility to present historical stories that either reflect the best possible consensus of modern scholarship, or, at least, don’t recycle dated and discredited myths and theories. Wikipedia has a policy of not allowing articles to be based on original, primary research – and one can see why failsafes must be in place to prevent abuse, the alternative, and the current policy, as Wikipedia makes clear, is articles can only refer to published works, the implication being even if they are known to be wrong, and to other unimpeachably reliable sources such as ‘mainstream newspapers’.
That’s right, ‘mainstream newspapers’. Like the Daily Mail and The Sun.
Sorry, my shirt seems to be starting to stretch a bit…"
The English private banking industry owes its start in part to Charles I who, in 1642, decided to steal the deposits left in the Tower for safe-keeping by London merchants.
I found a story of how banking emerged in Nottingham to give us an idea of how this change occurred over time. Pepys Diary is written in the middle of the change, and (at least at the beginning of the Diary) and he hasn't yet found an alternative to his cellar:
In 1658 Thomas Smith (1631-1699) purchased for £210 a house and shop at the east end of South Parade on the corner of Peck Lane, Nottingham. Here he started a mercer business (meaning he was a dealer in any kind of goods or wares), and through industry and fair dealing secured the confidence of his customers.
He found he needed more capital to expand, and as his customers had nowhere they could deposit money, they began to bring him their spare money for safe keeping. He gave them promissory notes and allowed them interest, and then either loaned out his customers' money, or gave them credit. Financial matters grew, and rents and taxes were collected. Over time he found he needed to make better provision for taking care of money and securities.
Before 1642 the merchants in London had been in the habit of depositing their bullion and cash in the Tower for convenience and security, under the guardianship of the Crown; but King Charles, in order to pay his debts, seized their property to the amount of £30,000. This caused great consternation, and the merchants decided in future to keep their capital under their own control.
Mr. Easton in the "History of a Banking House," p. 57, says this is precisely what Thomas Smith did in Nottingham. He lived on the premises, and underneath the shop was a basement kitchen. Beneath this he made three cellars in the sandstone rock, approached by a trap-door and ladder, and another set of cellars below them approached by steps. The basement wall shows there was once access to the basement of the adjoining house, as the increased business over time meant additional room had to be provided. Then the two kinds of business — the mercery and the banking -- had to be divided, and other premises were secured ...
King Henry I produced sticks of polished wood, with notches cut along one edge to signify the denominations. The stick was then split full length so each piece still had a record of the notches.
The King kept one half for proof against counterfeiting, and then spent the other half into the market place where it would continue to circulate as money.
Because only Tally Sticks were accepted by Henry I for payment of taxes, there was a built-in demand for them, which gave people confidence to accept these as money.
Henry I could have used anything, so long as the people agreed it had value, and his willingness to accept these sticks as legal tender made it easy for the people to agree. Money is only as valuable as people’s faith in it, and without that faith even today's money is just paper.
The tally stick system worked really well for 726 years. It was the most successful form of currency in recent history and the British Empire was built under the Tally Stick system, so how is it that most of us are not aware of its existence?
Perhaps the fact that in 1694 the Bank of England at its formation attacked the Tally Stick System gives us a clue as to why most of us have never heard of them. They realized it was money outside the power of the money changers (the very thing King Henry had intended).
The Italians taught the British accounting (which is why we have an L to denote the pound; it came to us from the sign for the Lira).
Benedetto Cotrugli's 1458 treatise "Della mercatura e del mercante perfetto" contains the earliest-known description of a double-entry bookkeeping system, but his manuscript was not published until 1573.
Luca Pacioli, a Franciscan friar and collaborator of Leonardo da Vinci, codified the system in his mathematics textbook "Summa de arithmetica, geometria, proportioni et proportionalità" published in Venice in 1494. Pacioli is often called the "father of accounting" because he was the first to publish a detailed description of the double-entry system, thus enabling others to study and use it.
Johan de Witt was a financial wizard and wrote treatise on things like mathematical curves and annuities with Descartes.
In the latter part of the 17th century "writing schools" opened in England which also taught bookkeeping, so the merchant class could get educated workers.
I bet they taught bookkeeping at the Merchant Taylors school. Maybe the grammar schools who were turning out gentlemen Latin scholars for Oxford and Cambridge did not -- but Warren and Cocke knew a debit from a credit. (You don't get to build those big country houses based on confusion.)
Kevin Sheerstone on 10 Feb 2004 explained 'a bill of imprest signed':
"In accounting an imprest account is one set up in anticipation of charges that are bound to be incurred, but which cannot be identified in advance with any speficity. 'Petty Cash' is a good example - when the balance gets a bit low for comfort it is replenished to an appropriate level by means of an imprest.
"In this context it probably means money advanced to Sam for expenses in connection with his official duties; he will presumably account for it later."
For a picture of a Pepys' era Bill of Exchange -- with his signature on it! -- and information about how they are used, see https://www.pepysdiary.com/indept…
14 Annotations
First Reading
Phil • Link
The comment is by Nix, copied from the 29 Jan 1659/60 entry: http://www.pepysdiary.com/diary/1… ]
Some observations on money and credit:
In reading Pepys’ discussions of money, credit, “notes”, debts, wealth, etc., it is clear that the financial system under which he lives is drasticallly different from what we have now.
The important thing to remember is that financial transactions were not institutionalized: “Banks” were not large, impersonal institutions — they were individuals who made their living handling money for others.
Because there was no paper money, the only currency was metal coinage. This was highly inconvenient for transactions of any size, so a person purchasing something for, say, 20 l. would give a promissory note. The note could say “I will pay you this whenever you ask” — a demand note. The maker of the note was, at least theoretically, obliged to pay over in cash whenever the payee showed up at his home or place of business (they were quite often the same, particularly in the case of tradesmen). Or it could say “I will pay you this in 30 days” or 60 or six months or whatever.
The person to whom the note was offered as payment had to make the same sorts of judgments creditors make today: How confident am I that I can collect this debt? They didn’t have credit reports in those days, so the basis for the decision would include the reputation of the payor (if he was known), the appearance of the payor (that is one reason why clothing was viewed as so important), the address for payment (both as evidence of substance and to evaluate how far you’d have to go — how much trouble it would be to collect it), etc.
Having the paper, what was the creditor to do with it? He could retain it and try to collect it when it came due. But (a) collection was likely outside his “core competency”, as they say in business today, and (b) his capital was tied up until he could collect it. So the practice arose of “discounting” — essentially, selling the note to a third party for something less than face value. That passed the risk of non-collectability as well as the time delay on to the third party — the greater the perceived risk, the greater the discount from the face value. Offering cash for notes was one of the earliest functions of bankers, and you can still see its remnants: Your checks don’t say “Pay to Smith”, they say “Pay to the Order of Smith” — that is, Mr. Banker, please give the cash to whoever buys this note from Smith. And the indorsement on the back of the check is the way Jones shows the bank (and ultimately the court) that he did in fact buy the note from Smith.
Sorry to go on and on, but I hope this provides some clarification on these murky financial doings.
P.S. — A while back, people were asking about Pepys’ possible misuse of government funds. My impression is that, in those days, one of the perks of public office was that you had the use of funds from the time they were given to you until they had to be paid out. You were responsible for being sure they were there when they were needed, but in the meantime you could lend them out and earn some interest. That is, after all, what banks do even today.
vicente • Link
A source of gold prior to the inter regnum was Spain and Barbery coast [ a suprise] long session in of Commons on how money makes the world flow or
as said once " Nervi belli pecunia" or Pecunia non olet.
"...they had their Bullion from the Refiner. -
That he imported, out of Barbary and Spayne, 5,000l. in Bullion, of Gold and Silver. That they buy by the Troy Weight, and sell by the Venice Weight; wherein a third Part Difference. -..."
From: British History Online
Source: House of Commons Journal Volume 1: 06 March 1621. House of Commons Journal Volume 1, (1802).
URL: http://www.british-history.ac.uk/…
Date: 16/06/2004
vicente • Link
"Nervi belli pecunia” or Pecunia non olet." sources: Endless money forms the sinews of war.
[Lat., Nervi belli pecunia infinita.]
- Cicero (Marcus Tullius Cicero), Philippics (V, 2, 5)
http://www.cultureandfamily.org/a…
“Pecunia non olet” (“Money does not smell”)
http://www.britannica.com/eb/arti…
vicenzo • Link
Cost of running a ship; The Lamport: 3 rate, 210 men and 50 guns was owed 8,854l. 1s. 9d on may 1st 1660
money owed for 40 ships and 3,695 men cost wages l.129,981 14s. 0d.
A List of such of his Majesty's Ships of the Navy Royal, now in Pay, not of the Summer's Guard, with an Account of the Wages due to them to the First of May 1660, and the Charge they are at, was read; and is as followeth: Viz.
From: British History Online
Source: House of Commons Journal Volume 8: 16 May 1660. Journal of the House of Commons: volume 8, (1802).
URL: http://www.british-history.ac.uk/…
Date: 05/03/2005
vicenzo • Link
interest rates to be set at 10 percent:
10 per Cent Interest.
A Bill for such Persons as shall supply his Majesty with Money for his present Occasions, to take Interest at Ten Pounds per Centum, was this Day read the Second time.
Resolved, That the said Bill be committed to the Committee of the whole House, that is appointed for the King's Revenue: And that the House will resolve into a Committee To-morrow Morning, to take this Bill in the first Place, and afterwards the King's Revenue, into Consideration: And they are to limit a Time in the Bill, for the taking up and retaining Money at Interest, by his Majesty, at the Rate of Ten Pounds per Centum.
From: British History Online
Source: House of Commons Journal Volume 8: 14 February 1662. Journal of the House of Commons: volume 8, (1802).
URL: http://www.british-history.ac.uk/…
Date: 07/03/2005
dirk • Link
interest rates
"The rate of 6% was a standard one in England by the mid-17th century."
http://www.mhs.ox.ac.uk/staff/saj…
JWB • Link
"Goldsmith-Banking: Mutual Acceptance and Interbanker. Clearing in Restoration London". Stephen Quinn. Department of Economics, Texas Christian University.
http://www.econ.tcu.edu/quinn/fin…
Second Reading
Terry Foreman • Link
Transactions by Pepys with leading goldsmith-bankers that illustrate what the Quinn paper JWB posted a link to argues:
Thursday 1 February 1665/66: "I to Alderman Backewell’s to set all my reckonings straight there, which I did, and took up all my notes. So evened to this day, and thence to Sir Robert Viner’s, where I did the like, leaving clear in his hands just 2000l. of my owne money, to be called for when I pleased." http://www.pepysdiary.com/diary/1…
San Diego Sarah • Link
GRAFT: a Pepys historian posted this today: I edited 1/3 to fit this format:
"Samuel Pepys
Posted by J D Davies
It is a truth universally acknowledged that those who get outraged by things on Twitter are in need of a life.
Occasionally one sees something on Twitter which is so crass any pretense at possessing a life must be laid aside. So it was with the normally uncontentious Twitter feed of the National Maritime Museum, referring to Samuel Pepys. I quote: ‘How did a a tailor’s son turn a corrupt & inefficient Navy into a powerful fighting force?‘
The person who runs the NMM Twitter feed quotes from the museum’s website, linked to the current exhibition on Pepys and his times, reviewed generally positively in this blog. I’m not shooting the messenger. But whoever came up with the original message needs to go to the exhibition shop and look at the book called Pepys’s Navy: Ships, Men and Warfare 1649-89. It contains the author's 30 years of research, and the writings of others who independently came to the same conclusion, that ‘He didn’t, and it wasn’t corrupt and inefficient to begin with’.
It would take too long to prove those points here. I’ve written books to prove it (a paperback edition of Pepys’s Navy will be out this summer) and am working on a third, Kings of the Sea: Charles II, James II and the Navy, due out from Seaforth Publishing in 2017, which will produce more evidence. Besides, criticizing Samuel Pepys is like shooting Bambi’s mother: people brought up on Sir Arthur Bryant, or the various books and websites that essentially maintain the same tired line, can't be converted by one blog post or three books, and umpteen articles, but one has to try…
My point is: The idea Pepys ‘saved the navy’ is based on books published between 40 and 120 years ago, drawing on a narrow range of sources, shaped by schools of historical interpretation long fallen by the wayside.
To describe Pepys' navy as ‘corrupt and inefficient’ is wrong, an attempting to measure an earlier age by modern standards. These days I argue organisations, media outlets, etc., with wide reach – like the BBC, newspapers, national museums, and schools – have a responsibility to present historical stories that either reflect the best possible consensus of modern scholarship, or, at least, don’t recycle dated and discredited myths and theories. Wikipedia has a policy of not allowing articles to be based on original, primary research – and one can see why failsafes must be in place to prevent abuse, the alternative, and the current policy, as Wikipedia makes clear, is articles can only refer to published works, the implication being even if they are known to be wrong, and to other unimpeachably reliable sources such as ‘mainstream newspapers’.
That’s right, ‘mainstream newspapers’. Like the Daily Mail and The Sun.
Sorry, my shirt seems to be starting to stretch a bit…"
http://jddavies.com/2016/01/25/sa…...
San Diego Sarah • Link
The English private banking industry owes its start in part to Charles I who, in 1642, decided to steal the deposits left in the Tower for safe-keeping by London merchants.
I found a story of how banking emerged in Nottingham to give us an idea of how this change occurred over time. Pepys Diary is written in the middle of the change, and (at least at the beginning of the Diary) and he hasn't yet found an alternative to his cellar:
for more information, see: http://www.nottshistory.org.uk/mo…
In 1658 Thomas Smith (1631-1699) purchased for £210 a house and shop at the east end of South Parade on the corner of Peck Lane, Nottingham. Here he started a mercer business (meaning he was a dealer in any kind of goods or wares), and through industry and fair dealing secured the confidence of his customers.
He found he needed more capital to expand, and as his customers had nowhere they could deposit money, they began to bring him their spare money for safe keeping. He gave them promissory notes and allowed them interest, and then either loaned out his customers' money, or gave them credit. Financial matters grew, and rents and taxes were collected. Over time he found he needed to make better provision for taking care of money and securities.
Before 1642 the merchants in London had been in the habit of depositing their bullion and cash in the Tower for convenience and security, under the guardianship of the Crown; but King Charles, in order to pay his debts, seized their property to the amount of £30,000. This caused great consternation, and the merchants decided in future to keep their capital under their own control.
Mr. Easton in the "History of a Banking House," p. 57, says this is precisely what Thomas Smith did in Nottingham. He lived on the premises, and underneath the shop was a basement kitchen. Beneath this he made three cellars in the sandstone rock, approached by a trap-door and ladder, and another set of cellars below them approached by steps. The basement wall shows there was once access to the basement of the adjoining house, as the increased business over time meant additional room had to be provided. Then the two kinds of business — the mercery and the banking -- had to be divided, and other premises were secured ...
Banking was born.
San Diego Sarah • Link
info taken from: http://www.xat.org/xat/moneyhisto…
THE TALLY STICKS (1100 - 1854)
King Henry I produced sticks of polished wood, with notches cut along one edge to signify the denominations. The stick was then split full length so each piece still had a record of the notches.
The King kept one half for proof against counterfeiting, and then spent the other half into the market place where it would continue to circulate as money.
Because only Tally Sticks were accepted by Henry I for payment of taxes, there was a built-in demand for them, which gave people confidence to accept these as money.
Henry I could have used anything, so long as the people agreed it had value, and his willingness to accept these sticks as legal tender made it easy for the people to agree. Money is only as valuable as people’s faith in it, and without that faith even today's money is just paper.
The tally stick system worked really well for 726 years. It was the most successful form of currency in recent history and the British Empire was built under the Tally Stick system, so how is it that most of us are not aware of its existence?
Perhaps the fact that in 1694 the Bank of England at its formation attacked the Tally Stick System gives us a clue as to why most of us have never heard of them. They realized it was money outside the power of the money changers (the very thing King Henry had intended).
San Diego Sarah • Link
The Italians taught the British accounting (which is why we have an L to denote the pound; it came to us from the sign for the Lira).
Benedetto Cotrugli's 1458 treatise "Della mercatura e del mercante perfetto" contains the earliest-known description of a double-entry bookkeeping system, but his manuscript was not published until 1573.
Luca Pacioli, a Franciscan friar and collaborator of Leonardo da Vinci, codified the system in his mathematics textbook "Summa de arithmetica, geometria, proportioni et proportionalità" published in Venice in 1494. Pacioli is often called the "father of accounting" because he was the first to publish a detailed description of the double-entry system, thus enabling others to study and use it.
Johan de Witt was a financial wizard and wrote treatise on things like mathematical curves and annuities with Descartes.
In the latter part of the 17th century "writing schools" opened in England which also taught bookkeeping, so the merchant class could get educated workers.
I bet they taught bookkeeping at the Merchant Taylors school. Maybe the grammar schools who were turning out gentlemen Latin scholars for Oxford and Cambridge did not -- but Warren and Cocke knew a debit from a credit. (You don't get to build those big country houses based on confusion.)
Third Reading
San Diego Sarah • Link
Kevin Sheerstone on 10 Feb 2004 explained 'a bill of imprest signed':
"In accounting an imprest account is one set up in anticipation of charges that are bound to be incurred, but which cannot be identified in advance with any speficity. 'Petty Cash' is a good example - when the balance gets a bit low for comfort it is replenished to an appropriate level by means of an imprest.
"In this context it probably means money advanced to Sam for expenses in connection with his official duties; he will presumably account for it later."
This reminded him why he gave up accountancy.
San Diego Sarah • Link
For a picture of a Pepys' era Bill of Exchange -- with his signature on it! -- and information about how they are used, see https://www.pepysdiary.com/indept…