Millionaire - Janet Gleeson [12]
William III was frantic for money to pursue his war in Europe, but the royal record for failing to repay loans made London’s goldsmiths and moneylenders reluctant to help. Memories lingered of Charles II’s unreliability. And there was such an acute lack of coins that money was hard to come by. The treasury had tried threats and bribes but could raise only a paltry £70,000 (US$112,000). It was not nearly enough to prop up the desperate king.
In 1694 Neale partly saved the day by instituting a government lottery that would provide a sixteen-year loan for the Crown. His scheme, something like today’s premium bonds, sold tickets for £10 (US$16) each, paid annual interest of 10 percent, and also entitled the holder to a chance of winning some of the £40,000 (US$64,000) annual prize money. The idea, borrowed from Venice, captured Londoners’ imaginations—there were much-publicized stories of big wins—but failed to reach its target of raising £1 million (US$1.6 million). The diarist John Evelyn’s coachman was one of the lucky ones: he won £40 (US$64).
Law, perhaps surprisingly, deplored the use of lotteries to raise money. A few years later, when Victor Amadeus of Savoy asked for his advice on the subject, Law’s disapproval was unmistakable: “Public lotteries are less bad than private ones, but they are injurious to a state. They do harm to the people, take the paltry sums they earn by their labour, make them dissatisfied with their lot, and give them a desire to grow rich by gambling and luck. Servants lacking money are tempted to steal from their masters to obtain means to play in the lottery.” What inspired such strongly voiced censure of “gambling and luck”? It could have been the humiliation of having to ask his mother to help him out with his gaming debts, or revulsion at recalling his seedy life as a London gamester.
Law’s fascination with money taught him other crucial lessons. The Crown’s checkered track record on repayment was only part of the reason William found it hard to raise money. Equally to blame was the fact that the coinage was in disarray. At the Tower of London, Neale, in his role as mint master, was supervising a massive upheaval. Minting had remained virtually unchanged since the Middle Ages, and much of the currency in circulation was over a century old. Coins varied hugely in weight and size because shavings of gold or silver had been pared from their middle or edges—a crime known as clipping—and used to make counterfeit coins or sold as bullion. All in all, by the late seventeenth century the diarist John Evelyn reckoned that England’s coins contained less than half the silver or gold of their face value. The penalty for counterfeiting or clipping was death, but many were desperate enough to try it.
The unreliable coinage created difficulties for everyone: Ward was typically enraged when his money dealer tried to pay him in debased coins that he thought only a rogue would dare offer and only a foolish man accept. At times the situation was so acute that traders returned to bartering or charging inflated prices to compensate for the dubious value of the money available, and civil unrest frequently erupted. One remedy was to introduce new coins with a metal content closer to their face value, and with clipperproof milled edges. At first the treasury circulated new coins without withdrawing the old ones and the situation grew even worse: money dealers rushed to melt down the old coins and smuggle the resulting bullion onto the European market, where it fetched a higher price than in England—which proved a theory put forward a century earlier by Gresham and immortalized as Gresham’s Law, that bad money drives out good. The financial pandemonium taught Law a valuable lesson: he began to see that for a country to prosper and maintain its political status quo, sound money was essential.
While the theoreticians and “projectors