The Economic Growth of London in the 17th Century

reasons for:

increased population

centre for professional services (lawyers, bankers, insurance)

geography (Thames overseas trade and imports)

Why did London grow as a financial centre in the 17th century?

  • English borrowers turned to London for loans - London's importance to trade, wealthy merchants with cash to deposit/lend

  • What made higher lending more possible = interest rates go down to 6% - possible because of increased liquidity (money can be exchanged easily), increased confidence

  • What limitations can you see with early bills of exchange = as supplier of goods was always taking a risk due to pay coming at a future specified date, they had interest added to the loan - this meant the supplier would receive more than the true value of the goods

Money scriveners:

  • Someone who lends money, or arranges the lending of money on behalf of others, usually to those wanting to raise money on guarantee or security. They may also invest money at interest for clients (middlemen who arranged the loans), charged commission - flourish in Civil War + interregnum (Royalists needed cash and could not access usual sources), Robert Clayton = £3000+ per year in interest alone 

Goldsmith Bankers:

  • traditionally, goldsmiths’ jobs were to forge items out of gold or silver for sale meaning they had private vaults for storage of precious metals

  • people used to store money in the Royal Mint but this was seized by Charles I in 1640 so he could fund the bishops war

  • goldsmith bankers lended and borrowed money

  • London had 32 goldsmith-bankers in 1670, rising to 44 in 1677

  • because goldsmiths were seen as trustworthy, they could borrow at 4-6% meaning they could offer short-term loans at a rate above 6%

  • Commonwealth attempted to regulate finance through the Hale Commission in 1652 which established reforms such as the establishment of a register of property transactions yet this wasn't necessarily acted upon

  • In early 1670's Charles II was indebted to group of Goldsmith bankers who borrowed at 6% and lends to the Crown at 10% - this lead to him reforming banking in 1672 meaning loans to Crown were levied from general public causing lower interest pay

  • This caused funds deposited in Goldsmiths by the Royal Treasury to be confiscated and not refunding causing confidence from public in the Crown to keep investments safe was therefore lost, causing a boom in private financers - such confidence was not restored until 1688 when William IIIB restored status of Goldsmiths by repaying original loans