The annuities , also called constitutions , Constitut or annuities with money , were developed in France in the xvii th and xviii th centuries to overcome the lack of bank credit system, the Catholic religion prohibited to earn interest. Until the end of the xviii th century, the vast majority of credit in France through this system.
The annuity is a credit:
- exchangeable, therefore not binding on the long-term creditor;
- guaranteed by real estate, thus reserved for the property owners;
- repayable in advance, thus prompting the borrower to quickly look for money if interest rates fall;
- subject to seizure at the first payment incident, thus prompting the borrower to take no risk in the short term.
This way of doing credit has concentrated real estate assets and prepared a large French market for bonds of all countries. It has also slowed down entrepreneurship, according to Colbert , who wants to force rentiers to invest in colonial manufactures and companies created in the 1660s . Historians have studied via redemption receipts from the second half of the xvii th century, “resulting from the reimbursement policy initiated by Colbert annuities, which gives rise to specific edicts for each program type 1 “.”There is no more useless to his subjects of the king nor who was more dependent on them than the rentes” , writes Colbert to Louis XIV 2 .
Only the borrower can decide on a refund
This type of loan imposes on the lender a loss of capital control: it can not demand repayment. This system allows rent to circumvent legislation that prohibits usury: the rent is called “perpetual”. At the same time, it is repayable at any time by the borrower, who is required to pay interest or arrears until such return of capital. This provision allows him to fix himself the duration of the loan. Flexibility that seek to avoid bank type creditors at the end of the xix th century , to ensure a flow of financial income of a certain duration.
The only way for the annuitant to recover the money he has lent is to transfer the ownership of the annuity to a third party, who repays the annuity to him and collects the interest to come (called “arrears” or “quarters”, paid by quarter). Annuities constituted a form of bond convertible into real estate.
Guarantees on buildings or land
The specific security of this form of loan was in general important because proceeding from the assignment on an immovable: land, houses, offices, but also on other rents, because a majority of customs give to these rents this fictitious legal status d buildings.
The annuity is a real estate right. As such, it strikes the land regardless of who owns or owns it. It therefore includes a resale right in favor of the annuitant: in the event of non-payment of the annuity, the annuitant may proceed by virtue of his real right to enforceable measures on the immovable property.
A solid legal framework
In 1665, the ecclesiastical conference in Paris studied the wear and concluded that it was not wear as long as the capital is alienated, the master debtor’s repayment and denier consistent with the judgment of the King 3 .
A first prescription, common to annuities and other annuities, is that receipts from three consecutive years of arrears constitute a presumption of payment for the preceding years, and consequently operate as a presumption or an order of inadmissibility against the claim that would make the creditor.
The law provided that “if the creditor leaves accumulate more than five years, it may require that the last five, and there is a prescription the debtor acquired the remainder 4 . ”
Land rents had been introduced by the quantity of the inheritances of low-money people, so that no people could be found who could pay cash, and that nevertheless it was necessary to sell what could not be occupied or asserted. Instead, annuities came from the abundance of money amid lack of heritages 5 .
A system favored by the tax authorities, in the Ancien Régime
An article by Jean Nagle on lods and sales in Paris, published in the Magazine of Modern and Contemporary History in 1977 revealed that for any sale of building, it was normal that the lord (there were more than 25 in Paris ) levies a fee of 8% of the sale, paid by the purchaser. But if the sale was settled by giving in return an annuity constituted, the 8% duty was not due, by virtue of the quality of “immovables” attributed to these “constituted annuities”. It was then a simple real estate exchange and the lods and sales , or right of 8% (the ancestor of the transfer duty ), was not exigible 6 .
In addition, the legal security of these investments was higher than that of government pensions, often reduced or poorly paid, which explained their relatively low interest rate for the time: generally from 5% to 6.33% 7 . To hide the credit character or interest rates that were prohibited by the Catholic Church, these annuities were expressed by the inverse of the interest rate, called denier . An annuity of 5% was thus a denier of 20 .
The lower interest rate annuities under Mazarin and Colbert under
In a region like Rouen, the denier 16 reigned from 1601 to 1634, the denier 18 from 1634 to 1665 and the denier 20 thereafter, the operations of repurchase constituted annuities launched by Colbert a few years after coming to power to bring down the borrowing rate and reduce the economic weight of rentiers, in order to promote economic development 8 . During the big speculative waves of the system of Law , the denier climbed to 50, an interest rate of only 2%. Threatening the prepayment creditor was a way for the borrower to negotiate for a higher denier and therefore a lower interest.
“Colbert hates the annuitant: economically he sees it as a parasitic idler whose capital is invested neither in industry nor in trade, and politically, he perceives it as a danger” 2 , writes the historian Michel Vergé. Franceschi .
“The excessive profits provided by the constitutions of rent that can serve as an opportunity for idleness and prevent our subjects from engaging in trade and manufacturing, agriculture, we have resolved to reduce the profit,” replies, as a good student, Louis XIV 2 .
The Royal Declaration of January 1665, which reduced by more than two-thirds (300 pounds per 1,000 pounds ) the amount of annual annuity interest on the eight million sizes, was intended to make the annuities less attractive, but also to give a security allowing creditors to “exit” the market without much damage, to invest elsewhere. By this reduction, Colbert has indeed set “a value certainly lowered, but assured, which offers a kind of reference price allowing the resumption of transactions otherwise than at a low price” according to Katia Béguin.
The main form of credit until the end of the xviii th century
The annuities, for religious reasons, dominate in number and volume of all other types of credit acts to the last third of the xviii th century in France , as shown by the work of the latest historians , and make up for the absence in France of bank-type financial institutions 1 .
Historians of finance have worked on the archives of notarial intermediation. In particular, they analyzed the series annuity redemption receipts constituted the second half of the xvii th century , resulting from annuities refund policy, initiated by the finance minister of Louis XIV , Colbert , via specific edicts for each type of annuity issue.
They also revealed the development of constituted rents in the second half of the xviii th century, a period that usually sees more credit acts emancipate more spheres of mutual acquaintance, relative or clientelism 1 .
In the old regime, the purchase, resale, conversion and use of rents, including real estate increases, have a fundamental place in French fortunes looking for security combined with good performance 9 . In some cases, the rent built up could be used for productive investments. The Dance merchant, died in 1661, has taken that form seven people to help build two linen laundries 10 . The system of constituted annuities was used as early as the Crusades.
Notes and references
- ↑ a , b and c Circulation of annuities in France in the xvii th century: an approach to economic uncertainty , Katia Beguin
- ↑ a , b and c Colbert, The Common Sense Policy , Michel Vergé-Franceschi, Small Library Payot (2003), page 357
- ↑ Jansénisme and lending at interest , for Taveneaux
- ↑ Works of R.-J. Pothier: containing the “Treaties of French Law”, volume 2
- ↑ Institution François law , Volume 1, by Gabriel Argou, Claude Fleury, Rudolph Dareste
- ↑ The Age of Louis XIV by Pierre Goubert, page 120
- ↑ The Age of Louis XIV by Pierre Goubert, page 121
- ↑ The Age of Louis XIV by Pierre Goubert, page 117
- ↑ The Age of Louis XIV by Pierre Goubert , page 122
- ↑ The Age of Louis XIV by Pierre Goubert , page 116