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SWR in the 19th century
Old 02-02-2008, 09:32 AM   #1
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SWR in the 19th century

I just finished Samuel Butler's The Way of All Flesh; a semi-autobiography completed in 1885.

In the book, he often refers to a certain class of people as being in receipt of a "living", which means they don't actually work, but live off their investments. He gives many examples of net worths and livings; for instance a sum of 80,000 pounds was expected to provide a living of 3500 pounds annually. Just a tad over 4%.

He also expounds on his investing philosophy:

...kept henceforward as nearly in the middle of the middle rut as I could...No amount of trouble would have been likely to have increased my estate one half so much as it had increased without my taking any trouble at all.

Some thing just don't change.
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Old 02-02-2008, 09:41 AM   #2
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...kept henceforward as nearly in the middle of the middle rut as I could...No amount of trouble would have been likely to have increased my estate one half so much as it had increased without my taking any trouble at all.

Some thing just don't change.
I guess our manner of speech changes. I'm guessing the entire book written in that style -- did that make it harder to read? I like it, but had to read it a few times to understand it.

Guess he's saying he prefers index funds over an aggressive program of individual stock trading.
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Old 02-02-2008, 09:46 AM   #3
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Guess he's saying he prefers index funds over an aggressive program of individual stock trading.
:confused: I didn't get that at all. He said no annuities and go with Vanguard rather than Fidelity.
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Old 02-02-2008, 09:50 AM   #4
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You just have to read Jane Austen (very early 1800s) to encounter how people talked about "incomes" back then. As Mrs. Bennett excitedly exclaimed "Mr. Darcy has 10,000 pounds a year!". That indicated that Mr. Darcy had sufficient capital invested to generate that annual income.

I actually think a "living" meant that you did have a career. I think that referred more to a gentry position such as that of a clergyman where the position came with a home and annual stipend.

It was considered extremely gauche to be "in trade" (i.e. operate any kind of business) and no one in the upper classes would admit to such a thing. To be a true "gentleman" one must live off of investments and enjoy a life of leisure. Normally these investments were in some kind of "funds" yielding some fixed percent. 3 to 5% was common, from what I've read. But investments in shipping and other endeavors were common although much more speculative. Someone owning an estate (real property) could expect income from the rents and agricultural production, providing the estate was well managed (a steward's job).

Of course, it was perfectly acceptable for a gentleman to earn extra pocket money through gambling.

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Old 02-02-2008, 02:04 PM   #5
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You're right about the "living", Audrey. That is what young Pontifex would receive when gained his curacy, or rectorship, or whatever.

I'm growing a little accustomed to the period, having read the Bronte sisters recently.

I think that Butler was saying he's a Couch Potato investor.
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Old 02-02-2008, 02:49 PM   #6
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In the 18th and 19th century, the British government issued Consols, which were perpetual bonds having coupon rates of 3.5% and later 3%. I would expect many of the gentry of the era held these bonds.
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Old 02-02-2008, 03:23 PM   #7
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I have a $500.00 bond dated March 1,1863 issued by the Confederate States of America. It pays 8% per annum paid semi-annually on the surrender of the annexed coupons of $20.00. Four of the coupons are missing and of the remaining eight the date of the next to be redeemed was July 1, 1865. It would have matured July 1, 1868.
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Old 02-02-2008, 03:30 PM   #8
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A gentleman certainly does not w*rk, but spends his days at his club, dining or reading the Times or whatever.

At least, thats what I do!!
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Old 02-02-2008, 04:25 PM   #9
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In the 18th and 19th century, the British government issued Consols, which were perpetual bonds having coupon rates of 3.5% and later 3%. I would expect many of the gentry of the era held these bonds.
I have read the phrase "having money in the 3 percents" so that's likely what they were referring to.

Audrey
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Old 02-02-2008, 04:50 PM   #10
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Audrey,

If you are a fan of Jane Austen, and you would like to read more
about the economy of Regency England have a look at "Jane Austen's
Economics" at http://tinyurl.com/2tvjuk. Its was written a a few
years ago, but the Austen-fest on PBS has renewed interest in
this topic in other newsgroups.

Zorba
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Old 02-02-2008, 05:15 PM   #11
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This thread started out in the 19th century,but then switched to the 18th. One thing to remember about the 19th century in England is that once the Napoleonic Wars were over, there was very little in the way of sustained inflation such as we have today.

"After the inflation during the Napoleonic Wars, and the subsequent deflation, the buying power of the fluctuated only a little during the nineteenth century. There was a little deflation in the second quarter, followed by some inflation in the third quarter, and some deflation during the fourth quarter of the century."

Inflation and Contemporary Equivalents to Victorian Money

This page also helps you to inflation-adjust those 19th century incomes to today's English pound.

Ha
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Old 02-02-2008, 05:23 PM   #12
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A gentleman certainly does not w*rk, but spends his days at his club, dining or reading the Times or whatever.

At least, thats what I do!!
About 40 years ago, in Canada, a voters list was literally nailed to the local utility poles before every election. It included name address and occupation. The old pharts retirees, well the male ones, were listed as 'gentleman' under occupation. The females weren't expected to have jobs.
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Old 02-02-2008, 06:35 PM   #13
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I have a $500.00 bond dated March 1,1863 issued by the Confederate States of America. It pays 8% per annum paid semi-annually on the surrender of the annexed coupons of $20.00. Four of the coupons are missing and of the remaining eight the date of the next to be redeemed was July 1, 1865. It would have matured July 1, 1868.
The "sub-prime" of its day
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Old 02-02-2008, 07:51 PM   #14
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"After the inflation during the Napoleonic Wars, and the subsequent deflation, the buying power of the fluctuated only a little during the nineteenth century. There was a little deflation in the second quarter, followed by some inflation in the third quarter, and some deflation during the fourth quarter of the century."
How did we ever get to the point were 2 to 3% sustained inflation, year after year, is considered very low?
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Old 02-02-2008, 10:34 PM   #15
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The money supply must grow to meet economic growth.
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Old 02-02-2008, 10:57 PM   #16
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How did we ever get to the point were 2 to 3% sustained inflation, year after year, is considered very low?
My theory is that during the first half of the 19th century and in earlier centuries, economic growth was very sluggish. Money was very concentrated in the hands of just a few, there was no large scale consumerism. The industrial revolution in the second part of the 19th century changed all that. It created a large middle class which now had more money to spend and it created demand and economic growth as never seen before.

By the way I love the 19th century and I always loved the idea of the "gentleman" living off his rents and this was probably what inspired me to seek early retirement in the first place.
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Old 02-02-2008, 11:23 PM   #17
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The money supply must grow to meet economic growth.
If the money supply expanded to meet economic growth we would have no inflation.

Everywhere there is fiat currency there has been inflation. Why? Because the money supply is easy to expand, production is harder to expand.

Ha
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Old 02-03-2008, 08:47 AM   #18
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Per Wikipedia:

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In classical political economy, inflation meant increasing the money supply, while deflation meant decreasing it (see Monetary inflation).[citation needed] Economists from some schools of economic thought (including some Austrian economists) still retain this usage. In contemporary economic terminology, these would usually be referred to as expansionary and contractionary monetary policies.
Anyway, a growth in the money supply (i.e. inflation) of 2-3% per year would somewhat match GDP growth.

Never said that's what actually happens...
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Old 02-03-2008, 11:29 AM   #19
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By the way I love the 19th century and I always loved the idea of the "gentleman" living off his rents and this was probably what inspired me to seek early retirement in the first place.
Same here. 19th Century authors strongly influenced my desire for Financial Independence, as that was a highly desirable state in that period. For women (and plenty of men), it was more a case of an inheritance or dowry that provided income for them to live a gentry (i.e. non working) life.

No inheritance or allowance from a relative? - than you had better marry for money (men too), or god forbid, you would find yourself working which mean an instant and severe drop in social status.

One nice thing about 19th attitudes was that they respected "gentlemanly" (or lady) pursuits possible due to leisure time - interests in science and natural history, art, politics, charity, etc. It wasn't all socializing and family - although there was plenty of that. Although, you could also say that the lack of respect for honest work was a rather sick thing. The pendulum swings.....

Even though our culture neither celebrates FI nor respects non-recreational leisure pursuits (if a hobby is not making money it gets no respect), it is obviously much more possible to achieve FI than it was in the 19th century due to far more egalitarian property rights and far fewer constraints on social mobility for the individual.

Audrey
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Old 02-03-2008, 03:41 PM   #20
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If you were financially independent in the 19th century, it was not uncommon to have indigent relatives drop in for tea and then stay for several months or years. Another way to beat working!
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