London was the premier financial center in the world in the 19th and early 20th century. This status seemed lost for sure when New York and Tokyo gained share at different points of the 20th century. Indeed, forty or fifty years ago, the prospect of London regaining its past preeminence seemed a remote possibility, if…
Before the advent of the first specialized trading cities like Bruges, Antwerp, and Amsterdam, trade in Europe relied on a system of fairs that followed the same circuit each year. In the Middle Ages, these fairs brought together merchants from much of Europe. Conducting trade over such long distances at larger scale increased the demands…
The need for insurance becomes most apparent after a major disaster, so disasters tend to be nurturing of innovation in insurance. London’s Great Fire of 1666 was one such disaster. Not only did the destruction require the rebuilding of much of the city, it also prompted the development and proliferation of fire insurance, hitherto little…
It is easy to think of economic and financial crises that have had stunning political consequences. Sometimes this goes so far as to turn normally arcane fiscal and monetary questions into objects of fierce public debate. The reverse can also happen. Political events can and have changed the context of economic and financial decision-making with…
Trade is capital intensive, even more so when transit times are slower or the distances vaster. Products sitting in warehouses, ships, and ports are deadweight, tying up capital until they are finally sold and used. Merchant banks, as their name implies, serve merchants and for centuries that meant devising a solution to the financial problems…
Any influx of new money, if poorly managed, can prove as ruinous as it seemed alluring. Misdirected riches can be frittered away and, by enabling years or decades of dissipation, growing indebtedness, or both, can leave its former holders in far worse position than where they began. Spain was able to capture large amounts of…
The economic disorders that succeeded the First World War, a failed restoration of the gold standard, a stock market bubble, the Great Crash of 1929, the Great Depression, and the Second World War all occurred in the span of twenty-five years. The Bank of England was led by one man for almost the entirety of…
Life insurance contracts, life annuities, and an array of transactions relating to estates and inheritances are contingent on lifespan. It would make sense that some method of valuing these life-contingent transactions would have been formulated long ago, even in the absence of good demographic data. As it happens, life annuities were common in ancient Rome…
Credit is important for nearly all businesses. Even for companies without a need to finance large projects, like small businesses in capital-light sectors like retail, capital is still tied up in inventories and receivables. Banks can be one source of credit but banks are often disinterested in serving small businesses, as was the case in…
In 1660, the English parliament invited the exiled royal family to return. Charles II was allowed to rule, ending over a decade of republican administration that began with Parliament’s victory in the English Civil War. The restored king Charles II was, like Charles I, strapped for cash. Temporary relief would periodically come from the considerable…
Almost everywhere in Europe, the 19th century saw a decline in the power of the aristocracy. Political change was partly the cause, whether implemented by vote or revolution. However, economic changes underway decreased the relative importance of agricultural wealth. Not only were greater fortunes being made in commerce and new industries but maintaining an extravagant…
In 1666, a fire burned down much of London, leaving tens of thousands homeless and destroying numerous public buildings. The property lost was worth millions of pounds. So, rebuilding was more than a feat in engineering. A financial challenge also needed to be overcome. In the end, the rebuilding of London after the Great Fire…
