Before capital markets were sufficiently developed to raise large amounts of money but after the point in which even the largest enterprises, governments included, could be funded by a single family, other institutions acted as financial intermediaries. Banks and insurance companies were such intermediaries but before they achieved large size there were institutions such as…
State borrowing allows governments to pursue undertakings they would otherwise find impossible. Whether for large infrastructure projects or social reforms, public borrowing can create greater prosperity or expensive mistakes. When the latter are the result and the borrowing was done domestically, the public is hurt doubly, both as borrower and as investor. In the case…
In the history of finance, many diverse objects have become the center of speculative attention, even perishable items. Agricultural commodities have caused investment crazes that boom and bust as dramatically as any. These are not always the major ‘cash crops’ that are obviously commercially important. Included are even novel crops or livestock that, at least…
During the Financial Revolution that got underway in the 1690s, England and Scotland were linked by an integrated financial and mercantile community and a free flow of ideas. This helps explain how it was that the Bank of England and the Bank of Scotland could be formed almost simultaneously. Also, Scots in London, including one…
The invention of coins brought about a commercial revolution as a new market economy began to develop in the midst of more primitive means of distributing production across consumers. However, money also had negative side effects. It provided a new way of storing wealth that served no productive end in itself; unlike an estate, a…
Inflation can destroy the value of long term fixed-rate bonds, especially when that inflation is volatile or rising. If inflation gets out of control, it can become difficult to find willing lenders in a currency people have little faith in. For much of the mid-20th century, France was plagued by inflation that was high by…
A 1920s bubble where prices rise quickly, encouraging hordes of new speculators into the market, overwhelms the only prudential safeguard available at this time, good sense. When the bust comes, the speculators left with devalued assets are ruined and even take down banks along with them. This could describe the nationwide stock market boom and…
In the 17th and 18th centuries, Europe instituted mercantilist economic policies designed to promote the accumulation of money by running trade surpluses with other countries. Since several European states pursued this policy, they couldn’t all run trade surpluses with each other, so it tended to be with their colonies that European countries sought to accumulate…
Starting at the end of the 17th century, there was a wave of financial innovation in England. It isn’t often discussed what happened farther north, in Scotland. Scotland too saw a financial revolution, though it was hampered by the relatively small size of Scotland and some crises along the way. Some of these affected England…
In the early days of government borrowing, public borrowing went hand-in-hand with estates and inheritances. Bonds and annuities, both means by which states in early modern Europe borrowed, were also convenient ways of transferring wealth to widows and heirs. Perhaps nowhere was this association clearer than in London, especially in the 17th century. The City…
In the 1970s, many countries were hobbled by the energy crises of 1973-74 and 1979. Of course, some made out very well. Oil producing countries spurred along by ‘resource nationalism’, particularly those that did not themselves slash production to keep prices elevated, saw an oil windfall transform their economies. However, oil is a volatile basis…
In 1850, Japan was an economy intentionally closed off from foreign trade. Even Japanese merchants and bankers were not well regarded in the country, let along foreign ones. By 1900, Japan had come a long way industrially and financially, possessing a developed banking system and large industrial firms. Shibusawa Eiichi was responsible for much of…
