Friday 16 November 1660

Up early to my father’s, where by appointment Mr. Moore came to me, and he and I to the Temple, and thence to Westminster Hall to speak with Mr. Wm. Montagu about his looking upon the title of those lands which I do take as security for 3000l. of my Lord’s money.

That being done Mr. Moore and I parted, and in the Hall I met with Mr. Fontleroy (my old acquaintance, whom I had not seen a long time), and he and I to the Swan, and in discourse he seems to be wise and say little, though I know things are changed against his mind.

Thence home by water, where my father, Mr. Snow, and Mr. Moore did dine with me. After dinner Mr. Snow and I went up together to discourse about the putting out of 80l. to a man who lacks the money and would give me 15l. per annum for 8 years for it, which I did not think profit enough, and so he seemed to be disappointed by my refusal of it, but I would not now part with my money easily.

He seems to do it as a great favour to me to offer to come in upon a way of getting of money, which they call Bottomry, which I do not yet understand, but do believe there may be something in it of great profit.

After we were parted I went to the office, and there we sat all the afternoon, and at night we went to a barrel of oysters at Sir W. Batten’s, and so home, and I to the setting of my papers in order, which did keep me up late. So to bed.

10 Annotations

First Reading

vincent  •  Link

"..After dinner Mr. Snow and I went up together to discourse about the putting out of 80l. to a man who lacks the money and would give me 15l. per annum for 8 years for it, which I did not think profit enough...." A year ago He could not come up with 15L in excess let alone 80L.
From Plautus, Curculio, 380-381
Qui homo mature quaesivit pecuniam , nisi eam mature parsit, mature esurit.

Mary  •  Link

An interesting question of interest.

Sam may have second thoughts once he learns of the very real risks involved in bottomry; £80 put out at 18.75% p.a. may look a safer bet if it’s backed by enforceable legal agreement. Not as exciting, of course, but safer.

Andrew Hamilton  •  Link

A question of interest

It all depends on the terms of the loan, which aren't spelled out precisely enough for us to determine. For example, if Sam put out 80L and got back ONLY 8 years x 15L , or 120L, his interest income would average only 5.2 percent p.a. Bottomry (see Merchant of Venice) holds out the lure of making one's fortune in one venture -- or in that case, one's ruin.

David A. Smith  •  Link

"80l. to a man who ... would give me 15l. per annum for 8 years"
With all due respect both to Mary and Andrew, I believe neither has the yield right. I interpret the offer as £15 a year being both interest and principal (that is, a self-amortizing loan), in which case (drum roll of calculators, please) the yield is 10.00% if it is figured in annual payments, 10.85% if payments are made monthly.
As to whether that is a good yield on the money, see next post …

David A. Smith  •  Link

"Bottomry, which I do not yet understand"
In essence (click on the helpful footnote link), this is a limited partnership or syndicated share: a piece of the upside in exchange for the risk of capital downside. Syndicates, the first form of modern capitalist securitization, were invented in the mid-17th (mostly by the Dutch, IIRC), so what we are witnessing is not just the heady days Restoration profit-taking but the scienti-fication (my neologism) of commerce -- a breakthrough financial invention that made it possible to turn later technological oddities into wholesale industrial change. So here we have, in micrcosm, the fascinating linkages among liberation, commerce, greed, aspiration, technology, exploration, and license.

dirk  •  Link

A question on interest

Throughout the middle ages interests on loans were considered to be unacceptable, based on the official church interpretation of the scriptures (usury). This attitude changed in the 1500's - simply because the church had to adjust to the facts of (financial) life.

It would be interesting to know what the official/religious/practical position with respect to interest payments was in Sam's days. And in how far Britain's position on this point differed from the rest of Europe. Can anybody help me out here?

cumgranosalis  •  Link

Neither be a borrower or lender: usurary, going rate, 8% by law.
but when push comes to shuv, people do anything to stay afloat else it be one of the seven storage facilities for those that fail to pay up, others have habit of spending less than they have in hand so that they can take advantage of the free spenders.
Many Countries had to borrow in order to keep upright, as there be many that rob the ships of gold [see Penn and allies] and others needed cash to have a army to get more monies.

Second Reading

Chris Squire UK  •  Link

It is curious to read this entry and the comments on it in late 2013, after 5 years of ZIRP… Here’s what OED knows about ‘bottomry’, including SP from 1663:

‘bottomry, n. A species of contract of the nature of a mortgage, whereby the owner of a ship, or the master as his agent, borrows money to enable him to carry on or complete a voyage, and pledges the ship as security for repayment of the money. If the ship is lost, the lender loses his money; but if it arrives safe, he receives the principal together with the interest or premium stipulated, ‘however it may exceed the usual or legal rate of interest’ . .
1622 G. de Malynes Consuetudo 171 The name Bottommarie is derived by the Hollanders from the Keele or Bottome of a ship..The money so taken vp by the master of the ship, is commonly done vpon great necessitie..the vse payed for the same is verie great, at 30, 40, and 50 pro cent. without consideration of time.
1663 S. Pepys Diary 30 Nov. (1971) IV. 401 A Maister of a ship, who had borrowed twice his money upon Bottomaryne.
. . 1842 J. A. Park Law Marine Insur. II. xxii. 869 In this consists the difference between bottomry and respondentia, that the one is a loan upon the ship, the other upon the goods.
1848 J. Arnould Law Marine Insurance I. i. ix. 206 The lender on bottomry advances money to the borrower on condition, that if the ship perishes the borrower is to pay him nothing, [etc.].’

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