Skip to main content
SpringerLink
Log in

Diary of a Default

  • Chapter
  • First Online:
Book cover The Day the King Defaulted

  • 275 Accesses

Abstract

Describes the (day-by-day) events surrounding the Stop of the Exchequer, from April 1667, just prior to George Downing becoming secretary, to default itself in the year 1672 until the final resolution 34 years later. Presents a list of all the goldsmith-bankers who were creditors of the Crown and concludes with a careful analysis of the internal rate of return (IRR) from the collateralized treasury orders (CTOs) during the 1672–1706 period, when they were finally merged into the national debt.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 49.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    See Lowndes and Gill (1931).

  2. 2.

    And ten weeks after the infamous John Wilmot (Earl of Rochester) had eloped with Elizabeth Malet and got married at a chapel in Knightsbridge.

  3. 3.

    Another notable (but unrelated) event, which took place around the same time, was the attendance of the first woman, Margaret Cavendish—poet, writer, scientist and philosopher—at a meeting of the Royal Society (founded in 1662).

  4. 4.

    See Beresford (1925), p. 217.

  5. 5.

    In fact, you can read digitized versions of the minutes online at http://www.british-history.ac.uk. The full State Papers are available (by subscription) at http://gale.cengage.co.uk/state-papers-online-15091714.aspx and provide access to both the calendar and the manuscripts. Both locations are a virtual goldmine of information for English history buffs.

  6. 6.

    See Lee (1965), p. 130, for example.

  7. 7.

    Some early American history aficionados might recognize his name from Albermarle County in North Carolina, which is actually named after the Duke. He was one of the original eight Lords Proprietors of the Province of Carolina, which just goes to prove that he did have a diversified investment portfolio. See Isenberg (2016) for more on him, along with the philosopher John Locke, and their role in Colonial America. The county eventually dissolved and merged with others in the vicinity.

  8. 8.

    See Hutton (1989), p. 299, or Lee (1965), pp. 128–150, or Beresford (1925), Chap. 12, as well as the Calendar of Treasury Books (1668), for most of the references in this section.

  9. 9.

    See the comment by Pepys, who purchased a copy of Leviathan in September 1668 and comments about the increasing price of the book in the secondary market once the bishop’s ban restricted supply.

  10. 10.

    See Pepys (1997), p. 648.

  11. 11.

    My source for this claim is Grayling (2016).

  12. 12.

    The source for most of the material in this section comes from Hutton (1986). Some say that the English were forced to make a treaty with the French, before the Dutch beat them to it.

  13. 13.

    See Hutchsinson (2016) for a recent telling of the story.

  14. 14.

    Manuscript 29553, folio 358, and reproduced in Browning (1966). Note that the author of the letter, Langhorne, was apparently an important and well-known Catholic, which might have clouded (slightly) his recollection of the matter.

  15. 15.

    Dated January 6, 1672.

  16. 16.

    Page 93.

  17. 17.

    Published in Iddesleigh (1887), p. 252.

  18. 18.

    In fact, there is an argument to be made that the Day the King Defaulted was actually on December 18, 1671, although I will discuss the exact timing and calendar dates competing for anniversary mentions, later on.

  19. 19.

    See Haley (1968), p. 294.

  20. 20.

    Entry for March 12, 1672.

  21. 21.

    See Melton (1986), pp. 120–222, for more on this.

  22. 22.

    See, for example, the seminal article by Diamond and Dybvig (1983), in which they use a game theoretic model to describe the process of a “run on the bank” and the need for government-based deposit insurance to avoid banks runs.

  23. 23.

    See Shin (2009) for a detailed analysis of the Northern Rock bank run within the context of a Diamond and Dybvig (1983) framework. That article also discusses the rather peculiar fact that the queues to pull out money started only after the Bank of England announced (September 13, 2007) that it would provide emergency liquidity support to Northern Rock.

  24. 24.

    See the book The World’s First Stock Exchange, by Petram (2014). See also Goetzmann and Jorion (1999).

  25. 25.

    See Koudijs (2016). His study focuses on a period in the late eighteenth century, but the mail and post system was in place by the late 1660s. See also Koudijs (2015) for related work on insider trading during the same period.

  26. 26.

    Source: State Papers Domestic, Car. II, 302, No. 39.

  27. 27.

    See W. G. S. Dibden (1965) for more on this.

  28. 28.

    Thanks to Peter Koudijs at Stanford University for providing this information and related references.

  29. 29.

    Reported in the annals of Transactions of the Jewish Historical Society of England (1937), Vol. 3, pp. 94–107.

  30. 30.

    I would like to thank Rabbi Jeremy Milevsky, spiritual leader of the B’nei Torah congregation in Toronto, for bringing this technical permit to my attention.

  31. 31.

    The lineage for Lord Chancellor was Clarendon to Bridgeman to Shaftesbury.

  32. 32.

    Not to distract, but the Dutch were having convulsions of their own, and Prime Minister de Witt (together with his brother) was lynched by a mob, bringing an end to a distinguished career.

  33. 33.

    Shaftesbury’s attention was now focused on giving anti-Catholic speeches in parliament and he was no longer part of the in-crowd at court.

  34. 34.

    Danby arm-twisted the corporation of the City of London into lending money by threatening that otherwise he wouldn’t disband the Army (which the City loathed and feared).

  35. 35.

    See Turnor (1677).

  36. 36.

    The source for the material in this section about bankruptcy and debtors’ prison is primarily from Cohen (1982) and partially from Jones (1979).

  37. 37.

    This is as per Danby’s estimate reported in the CTB on February 8, 1677, and also reproduced by Horsefield (1982) in Table 1.

  38. 38.

    Page 338.

  39. 39.

    Horsefield (1982) on p. 523 claims that Chandaman’s figures were missing £43,000 in interest payments, which is why I’ll conduct a “sensitivity analysis” around these numbers.

  40. 40.

    Horsefield (1982) claims that Chandaman’s (1975) figures on p. 338 are missing some £43,000 in interest that was actually paid to the bankers prior to 1688. If we add it (evenly) to the cash flows in Table 6.2, the internal rate of return increases to 19 basis points, or 0.19%.

References

  • Beresford, J. (1925). The Godfather of Downing Street. Boston: Houghton Mifflin.

    Google Scholar 

  • Browning, A. (1966). Settlement of the Banker’s Debt Created by the Stop of the Exchequer. English Historical Documents, Volume VI c. 1660–1714. Routledge.

    Google Scholar 

  • Carruthers, B. G. (1996). City of Capital: Politics and Markets in the English Financial Revolution. Princeton: Princeton University Press.

    Google Scholar 

  • Chandaman, C. (1975). The English Public Revenue 1660–1688. Oxford: Clarendon Press.

    Google Scholar 

  • Cohen, J. (1982). The History of Imprisonment for Debt and Its Relation to the Development of Discharge in Bankruptcy. Journal of Legal History, 3, 153–171.

    Article  Google Scholar 

  • Coleman, D. C. (1963). Sir John Banks Baronet and Businessman: A Study of Business, Politics and Society in Later Stuart England. Oxford: Clarendon Press.

    Google Scholar 

  • Diamond, D. W., & Dybvig, P. H. (1983). Bank Runs, Deposit Insurance and Liquidity. Journal of Political Economy, 91(3), 401–419.

    Article  Google Scholar 

  • Dibden, W. G. S. (1965). Four Hundred Years of Anglo Dutch Mail. The Hague: Postal Historical Society.

    Google Scholar 

  • Goetzmann, W. N., & Jorion, P. (1999). Re-Emerging Markets. Journal of Financial and Quantitative Analysis, 34(1), 1–31.

    Google Scholar 

  • Grayling, A. C. (2016). The Age of Genius: The Seventeenth Century and the Birth of the Modern Mind. London: Bloomsbury.

    Google Scholar 

  • Haley, K. (1968). The First Earl of Shaftsebury. Oxford: Clarendon Press.

    Google Scholar 

  • Horsefield, J. K. (1982). The Stop of the Exchequer Revisited. The Economic History Review, 35(4), 511–528.

    Article  Google Scholar 

  • Hutchsinson, R. (2016). The Audacious Crimes of Colonel Blood: The Spy Who Stole the Crown Jewels and Became the King’s Secret Agent. London: Weidenfeld and Nicolson.

    Google Scholar 

  • Hutton, R. (1986). The Making of the Secret Treaty of Dover. The Historical Journal, 29(2), 297–318.

    Google Scholar 

  • Hutton, R. (1989). Charles the Second: King of England, Scotland and Ireland. Oxford: Clarendon Press.

    Book  Google Scholar 

  • Iddesleigh, S. H. (1887). The Closing of the Exchequer by Charles II in 1672. Lectures and Essays of the Earl of Northcote, 244–285.

    Google Scholar 

  • Isenberg, N. (2016). White Trash: The 400-Year Untold History of Class in America. New York: Viking: Penguin Random House.

    Google Scholar 

  • Jones, W. J. (1979). The Foundations of English Bankruptcy: Statutes and Commissions in the Early Modern Period. Transactions of the American Philosophical Society, 69(3), 1–63.

    Article  Google Scholar 

  • Koudijs, P. (2015). Those Who Know Most: Insider Trading in 18th Century Amsterdam. Journal of Political Economy, 123(6), 1356–1409.

    Article  Google Scholar 

  • Koudijs, P. (2016). The Boats that Did Not Sail: Asset Price Volatility in a Natural Experiment. The Journal of Finance, 71(3), 1185–1126.

    Article  Google Scholar 

  • Lee, M. (1965). The CABAL. Urbana: University of Illinois Press.

    Google Scholar 

  • Lowndes, W., & Gill, M. D. (1931). The Treasury: 1660–1714. The English Historical Review, 46(184), 600–622.

    Google Scholar 

  • Melton, F. T. (1986). Sir Robert Clayton and the Origins of English Deposit Banking 1658–1685. Cambridge University Press.

    Google Scholar 

  • Nichols, G. O. (1971). English Government Borrowing: 1660–1688. Journal of British Studies, 10(2), 83–104.

    Article  Google Scholar 

  • Pepys, S. (1997). The Concise Pepys. (T. Griffith, Ed.) Hertfordshire: Wordsworth Classics of World Literature.

    Google Scholar 

  • Petram, L. (2014). The World’s First Stock Exchange. New York: Columbia University Press.

    Book  Google Scholar 

  • Roseveare, H. (1991). The Financial Revolution 1660–1760. London and New York: Longman.

    Google Scholar 

  • Shin, H. S. (2009). Reflections on Northern Rock: The Bank Run that Heralded the Global Financial Crisis. Journal of Economic Perspectives, 23(1), 101–119.

    Article  Google Scholar 

  • Turnor, T. (1677). The Joyful News of the Opening of the Exchequer to the Goldsmiths of Lombard Street and Their Creditors. London, England: Grays Inn Gate.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Schulich School of Business, York University, Toronto, Ontario, Canada

    Moshe Arye Milevsky

Authors
  1. Moshe Arye Milevsky
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Moshe Arye Milevsky .

Rights and permissions

Reprints and permissions

Copyright information

© 2017 The Author(s)

About this chapter

Cite this chapter

Milevsky, M.A. (2017). Diary of a Default. In: The Day the King Defaulted. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-59987-8_6

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-59987-8_6

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-59986-1

  • Online ISBN: 978-3-319-59987-8

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation