A Conspiracy of Paper

TEN

THE SUN WENT DOWN, and the Sabbath was over. After dinner I retired with my uncle to his study, where we finally came to the business of discussing my father’s finances at the time of his death. Like my uncle’s private closet in his warehouse, this room was lined with ledgers and maps, but here he also kept histories, travel books, and even some memoirs—all, I suspected, important to an understanding of the places with which he traded. The walls of the room not covered with bookshelves were a distracting clutter of maps and prints he had taken from broadsheets or pulled out of inexpensive pamphlets. Almost all available wall space was covered; parts of prints and woodcuts overlapped one another. Some were pictures of important men, such as the King, or of scenes of domestic life or of trade or of a ship upon the ocean. It was a dizzying array, but Uncle Miguel took pleasure from the endless variety of images.

He sat behind a desk, and I pulled a chair up close that I might hang upon his words. I suppose because contacting my uncle had been such a difficult matter for me, and because he had delayed this meeting for a full twenty-four hours, I believed that he would have things to say that would prove tremendously illuminating.

“The problem is not that your father kept inadequate records,” my uncle began. “He kept copious records. He simply organized his information inadequately. He knew where everything was, but no one else did. It would be a project of months, maybe years, to organize his papers and then cross-examine everything against the issues in his possession at the time of his death.”

“So there is no way of learning whether or not his holdings were disordered, as Balfour claims his father’s were.”

“I fear not. At least not directly. But he was involved in something curious shortly before his death, and it is for this reason that I first became suspicious about this accident. Your father had a true gift for the funds, you know—almost a prescient ability to predict their rise and fall. He liked to discuss the funds with me—about how much this one or that was worth on the current market. I think perhaps I was the only man he could talk to and not fear I would act prematurely on his advice, and thus cause an unpredicted flux in the market. Then, shortly before he died he grew quiet and changed the subject when I asked him what he worked upon. I know that he met several times with Mr. Balfour, but Samuel never told me of their business. That the two of them should die only a day apart—I think you can see why I am suspicious.”

“If I am to make any progress in this inquiry, I must have a better sense of these issues in which he involved himself. I must confess that my father never told me much about his business, and I never cared to learn much of the doings of Exchange Alley in general. What are these funds you speak of? How do they work?”

My uncle settled into his chair, and smiled like a pedant. “The process is quite simple. If you were to find yourself in need of more ready money than you had in your possession, there would be several options open to you, such as borrowing money of a goldsmith or a scrivener. Governments, particularly when they fight wars, often find themselves short of the money they require to pay their troops, manufacture their weaponry, and so forth. In the past in this country, and even today in nations oppressed by absolute monarchs, a king could demand that his wealthy nobles ‘lend’ him money. If the king never paid the money back, there was not much these nobles could do. And once the monarch died, heirs would usually refuse to honor any predecessor’s debts.”

“So this money was not lent but extorted.”

“Precisely. And when the powerful landowners are oppressed by their monarch, it is ever a dangerous circumstance. When King William took the throne away from the villainous Papist, James II, thirty years ago, he immediately made war against the French in order to prevent that nation from gaining mastery of Europe. To pay for these wars, he used the Dutch method of raising revenues. Instead of demanding that men pay the Crown cash, he offered the opportunity to turn cash into investment. When the Kingdom wishes to pay for a war, money can be acquired by selling issues—promises to pay back a certain amount with a particular interest. If you invest one thousand pounds into an issue that promises to pay 10 percent interest, you receive one hundred pounds per year. After ten years, the government has repaid your loan, but you continue to receive an income. Now, this might be a bad investment for someone who has only a thousand pounds in the world, but if a man can spare the money, then the funds provide a regular and dependable source of revenue. More dependable than land, for a landowner’s rents may fluctuate depending upon the economy of the countryside and the bounty of the harvest. Investments in the funds are guaranteed.”

“But for how long?” I inquired. “For how long does the state continue to pay out that hundred pounds a year?”

My uncle shrugged. “It depends on the issue, of course. Some are for sixteen years, some a little more, some a little less. Some issues are life annuities, so as long as the holder is alive, the interest arrives yearly.”

“But if the annuitant dies before the loan has been paid back . . .” I began.

“Then it is a good deal for the Treasury, yes.”

“Is it possible that my father was killed in order to prevent some sort of loan repayment?” I asked, though I considered such a thing unlikely. It was a poor government that murdered its lenders.

My uncle laughed softly. “It is true that King Edward the First expelled the Jews from this island because he did not wish to repay his loans, but I think that things have changed somewhat in the past five hundred years. I think it unlikely that the Treasury or its agents would be so violent in its efforts to reduce the national debt.”

“Adelman spoke to me the other night of reducing the national debt,” I noted, not intending to speak aloud.

“It is a concern upon many men’s lips.”

“Yes, but I grow curious when it is upon the lips of a man who wishes to silence me. Your friend Mr. Adelman requested that I discontinue my inquiry, and that makes me wonder what he has to hide.”

My uncle hardly appeared to hear me. “Adelman is a complex creature. I do not think murder is among his practices, however. He can get what he wants otherwise.”

“And how shall he get Miriam, Uncle?”

He smiled impishly—the kind of smile that made me sad to have been away from him so long. “By her consent, I should suspect, Benjamin, which does not appear to be forthcoming. No, Adelman has reasons of his own, I’m sure, to ask you not to look into these matters, and I’m certain they relate to his fear that the businessmen of the coffeehouses might panic if they should hear disagreeable rumors. You see, Adelman holds an unusual place in the South Sea Company. He is not one of its directors, at least not officially, but he has secretly invested in the Company, on the order of tens of thousands of pounds—perhaps even more.”

“I still do not understand why my inquiry should concern him.”

“I have left much out, I see. The state does not itself broker these loans. Rather it has been the responsibility of the Bank of England to collect the money and manage the disbursal of interest. In exchange it receives certain monetary considerations from the Treasury as well as the possession of large sums of money, which, if only temporarily, may be put to use by the Bank. Now the South Sea Company has been trying to take some of this business away from the Bank.”

“So, the Company and the Bank are both competing for the same trade—that of brokering government loans?”

“Correct,” my uncle said. “And as I told you, when King William’s wars were fought against the French, a great deal of money had to be raised, and raised quickly, and the government offered very attractive loans, such as those that I mentioned—yielding 10 percent for life. Now there is a great agitation in Parliament, which sees the debt of our fathers as the inheritance of our children. So the South Sea Company has proposed a reduction in the national debt by setting up stock conversions. One such conversion, though a very small one, took place earlier this year. Holders of government issues were offered the opportunity to exchange their annuities for South Sea stock. The Treasury gives the Company money for the stock, which eliminates a long-term debt.”

“This South Sea Company must be very profitable if men would exchange something guaranteed to earn a high interest.”

“Oddly, it is not profitable in the least. Its success is something of a fable of the new finance.” He leaned forward and glanced at me, pleased, as always, to play the role of instructor. “Like the other trading companies, the South Sea Company was formed to hold exclusive trading rights to a particular region—in this case, the seas off of South America. Unfortunately, interference from Spain has left these rights void of much value. The Company attempted to make a profit a few years ago in the unpleasant trade of Africans for labor in South America, but from what I have heard, their inexperience in these matters made the business both unprofitable and even more cruel for the cargo than is usual.”

“If it does not trade, then what does it do?”

“It has been making itself into a bank to rival the Bank of England—that is to say, attempting to participate in the funding of the national debt. And the Company has been growing in power. The stock has done very well of late, and yielded far more than these 10 percent annuities, and so it seems like a good exchange. But there are many who do not believe the conversions are sound, for in order for the stock to be profitable, the Company must make money and pay the stockholders dividends. If the company fails to be profitable, then the stock is worth nothing, and men who held government issues—real wealth—suddenly discover that they own nothing. It would be as though you woke up to discover your land had turned to air.”

“That is why Adelman wishes to scare me off this inquiry? Because of a stock conversion?”

“I expect that Mr. Adelman fears your inquiry will cause a public outcry of murder and intrigue within the funds.”

“You disagree?” I asked.

“Mr. Adelman has long been a friend of this family, but that does not mean that his interests and mine must always be the same. He wishes the South Sea Company to do well. My motive is justice. If these interests cannot co-exist, I am unwilling to step aside.”

“I admire your spirit, Uncle,” I said, for I saw a fierce determination in his face that earnestly made me wish to serve him.

“As I admire yours, Benjamin. Were Aaron alive, I know he would not hesitate to take upon himself this inquiry. Now you must stand in his shoes.”

I could but nod. I believed that if Aaron were alive, he should wedge himself in the wardrobe rather than step onto the streets in search of a murderer, but if my uncle wished to remember his son as a valiant man, I would not take that image from him.

“I think perhaps we should retrace our steps,” my uncle continued. “The magistrate who looked into your father’s death gave naught but a harsh reprimand to the coachman who ran down Samuel. I do not believe this driver, this Herbert Fenn”—and here my uncle paused to mutter a curse in Hebrew—“would have committed this act of his own accord. If this was murder, then the coachman was in someone’s employ. I shouldn’t think a man of your wile would have so much difficulty making this coachman say more than what is in his best interest.”

“Yes, I had thought of that,” I said, “and I aim to seek him out.”

My uncle offered me another smile, one not so sweet. “The conversation should not be too pleasant for him. You understand?”

“It may disincline him ever to speak again.”

He leaned back in his chair. “You’re a good man, Benjamin. You will find your way yet.”

“Let us suppose,” I continued, “that I get nowhere with this coachman. Can you think, Uncle, of any enemies my father might have had? Anyone who either stood to benefit by his death—or perhaps someone who bore a grudge sufficient to motivate revenge?”

My uncle smiled at my ignorance. “Benjamin, your father was a prominent stock-jobber. The entire nation hated him, and there are thousands who drank a bumper to his death.”

I shook my head. “I do not concern myself with matters of finance, but I fail to see why my father should be so despised.”

“For many Englishmen, these are very confusing times. Our family has been engaged in finance among the Dutch for a number of years now, but it is new to the English, and many see it as very dangerous, a replacement of the glory of the past with a new and honorless greed. Much of it is fantasy, naturally. It is always so when men remember the past and use it to condemn the present. But there are those who recall fondly a time when an English King was an English King, and he was chosen by God rather than by Parliament. Similarly,” he said, taking a guinea from his purse, “they remember when gold was gold. Its value was contingent on nothing, and all things had value that could be measured in precious metals. Gold and silver, if you will, were the stable center of value, around which all things orbited—much as the natural philosophers have described the workings of the sun and the planets for us.” He waved me over. “Now,” he said, “take a look at this.”

I walked to his desk and he showed me a banknote written for the value of one hundred and fifty pounds. It originated with the Bank of England and had been made out to someone I had no idea of, but this man had signed it over to another gentleman, who had signed it to a third, who had signed it to my uncle. “Which would you rather have?” he asked me. “That guinea or this note?”

“As the note is worth more than a hundred times the guinea,” I said, “I should rather the note, provided you sign it over to me.”

“Why should you require I sign it to you? If it is worth one hundred and fifty pounds, then that is its value. How can my signature vest it with value?”

“But it is not one hundred and fifty pounds in the way that this coin is one guinea. That note is merely the promise to pay one hundred and fifty pounds. It is nonnegotiable, and as it is signed to you, it is a promise to pay it to you. If you sign it to me, then the promise is to me. Unsigned, it should be difficult to get the promisers to agree to pay it.”

“There you have the problem,” my uncle said. “For money in England is being replaced with the promise of money. We in business have long valued banknotes and paper money, because they allow for large sums to be conveyed with ease and relative safety. They have allowed for the flourishing of international commerce we see today. Yet for many men, there is something most unsettling about the replacement of value with the promise of value.”

“I do not see why this causes unease. If I am the merchant and can buy what I will with this banknote, or if I can easily convert it to gold, where is the harm?”

“The harm,” my uncle said, “is in whom this system makes powerful. If value is no longer vested in gold, but in the promise of gold, then the men who make the promises hold ultimate power, no? If money and gold are one and the same, then gold defines value, but if money and paper are the same, then value is based upon nothing at all.”

“Yet if we value paper and it buys us what we need, it becomes as good as silver.”

“But can you not imagine, Benjamin, how these changes frighten men? They no longer know where value lies or how to conceive of their own worth when it changes from hour to hour. To hide your gold plate under your floorboards is lunacy in this age, for to let metal molder when it could be breeding more metal is to lose money. Yet to play the funds is to risk it as well, and many fortunes have been made and lost in speculating upon the funds. Speculation could not take place, you understand, without stock-jobbers such as your father was, but even those who have grown vastly rich upon the market turn and look at men like your father with hatred and disdain—for jobbers like Samuel have become emblems of these changes that make men so uneasy. Those who have lost money, you might imagine, hate jobbers even more. There is a sense, you see, that finance is but a game, the rules and the outcome of which have been preset by men operating in secret. These men profit from the fortunes and misfortunes of others—and they cannot lose because they themselves dictate the values of the market. That, at any rate, is what is believed.”

“Absurd,” I said. “How can those who buy and sell stocks dictate their values?”

“First you must understand that in order for stock-jobbers to make money, the prices of the funds must fluctuate. Otherwise there can be no buying and selling at a profit.”

“If the prices of government issues are fixed,” I inquired, “why do the prices fluctuate?”

My uncle smiled. “Because the price is fixed with money, and money is worth more at some times than at others. If there is a bad harvest and food is scarce, then one shilling buys less than if food is plentiful. Similarly, if there is war, and trade is inhibited, then many goods are scarce and more expensive, so money is worth less. The threat of war or famine, or the promise of bounty or peace, all affect the prices of the funds.”

I nodded, pleased with myself for understanding this concept.

“Now, let us say that I am a corrupt stock-jobber,” my uncle mused, delighted with this game, “and I have a government fund that I want to sell that is valued at one twenty-five—that is, 125 percent of its original value. Let us further say that there are rumors of a conflict between Prussia and France. The outcome of such a conflict will almost certainly affect prices here, for a victory on the part of Prussia defeats a mutual enemy, while a victory on the part of France strengthens our enemy and makes war more likely—and if there is war, then money buys less.”

“I understand,” I said.

“Our corrupt jobber believes that France will win and that the prices of government issues will fall, so he wishes to sell. What does he do? He plants false rumors that the Prussians cannot but win—that is, he convinces others of the opposite of what he believes to be true. He has writings to this effect appear in the newspapers. Suddenly ’Change Alley is full of bulls who wish to buy all they can. Our friend sells at one thirty-five, and when the Prussians actually lose the battle, the price of the issue drops, the jobber has sold at an unreasonable rate, those who purchased when the price was elevated now suffer a great loss.”

“Surely you do not suggest that men truly practice such schemes, or that my father did?”

“Bah.” He waved his hand. “Do jobbers manipulate rumors to alter stock prices in their favor? Some do and some don’t. If so, it is the province of well-placed men who have the ear of governments. Directors at the Bank of England and so forth. These men do have control over what is valuable and what is not, and that is indeed a great deal of power.”

“But did my father resort to such deceptions?” I asked pointedly.

He showed his palms to the ceiling. “I never meddled with his business. He managed his affairs as he thought best.”

I ignored the fact that my uncle had maneuvered out of answering a question. It was no matter; I knew the answer but too well—that is, I knew of at least one incident, from when I was a boy, when my father had cheated another man. When I had learned of that cheat, though I was but a child, I could not understand how he might have deceived other men—he had no ability to charm or cajole as my uncle did. Perhaps his bland impatience had been misunderstood as earnestness.

“Even if he did not engage in any manipulations,” I continued, “he would sell when he suspected prices would soon fall. Is that not deceitful?”

“He never knew that prices would fall, and assuredly he was wrong many times, though never so often as he was right. If I buy something of you, there is much uncertainty on my end, but one thing I may be sure of is that you are willing to part with what you sell. When your father sold he took a chance, much like the men to whom he sold.”

“Yet when he was right, and prices fell, men cried dishonesty.”

“Inevitably. It is the way of things when one loses, is it not?”

“Then,” I said with some agitation, “you think every man my father ever did business with should be suspected? That seems like a great number of men. Is there perhaps a record of some of the men with whom he dealt most recently?”

My uncle shook his head. “Not that I have been able to discover.”

“And can you think of no one in particular—a great enemy who might have delighted in the destruction of my father?”

My uncle shook his head vigorously, as though trying to dispel an unpleasant thought. “I cannot. As I say, your father was hated by many men, men who feared the new financial mechanisms. But a great enemy? I think not. It is Herbert Fenn, this coachman, who ran him down. That is where your inquiry must begin.” He slammed his fist into his palm.

Sensing that my uncle had no more to tell me, I rose and thanked him for his assistance. “I shall, naturally, keep you informed of my progress.”

“And I shall continue to look for anything that may be of use.”

My uncle and I shook hands warmly, perhaps a bit too warmly for my comfort, for he looked at me with something like paternal affection, and I could only choke back the urge to tell him that I was not his son, and his son was most certainly not to be found within me.

After a formal farewell to my aunt and to Miriam, I left the house and made my way to the High Street, where I procured a hackney to take me to my home.

I was pleased that I had acquired so much information, even if I was not sure how I would now proceed. One thing was certain, however. In the time since I had first spoken to Mr. Balfour, I had come around to his way of thinking. Perhaps it was the conversation I had had in Adelman’s coach, or perhaps it was my understanding of the depth of confusion produced by the financial markets that my father had understood so well. I could not say why precisely it had happened, but I realized that I now acted with the belief that my father’s death had been a murder.

There remained in my mind, however, one question that I could not set aside. It was on the matter of my father’s enemies. I could not understand why my uncle had lied to me so boldly.