Murphy A. (2009) The smartest boys in the alley, early derivatives on the London stock market

Murphy, Anne L. (2009) Trading options before Black-Scholes: a study of the market in late seventeenth-century London. Economic History Review, 62/1: 8-30.

The ledger of the financial broker Charles Blunt contains the details of some 1,500 transactions realized between 1692 and 1695, about a third of which regard the then novel trade in equity options (p.9). The technique had arisen in the 1620s in the commodity market and was proving very useful in the decade following the Glorious Revolution, when some 100 joint-stock companies were floated in London  (p.10). During the boom of the early 1690s, it is likely that “several thousand derivatives were transacted each year”.

Seurot F. (2002) Something rotten in the state of medieval banking

Seurot, François (2002) “Les crises bancaires en Italie au Moyen Age: un essai d’applicationn de la théorie de Minsky-Kindleberberger”, paper presented at the XIX Journée d’économie monétaire et bancaire, 21p.

This paper is available online (pdf).

Following a long tradition, Minsky and Kindleberger [1996] have based their analysis of financial crises in the early modern and modern periods on their vision of credit as intrinsically unstable and thus naturally prone to crashes. Their model is based on five steps:

1. An exogenous shock modifies the incentive system the economy is based upon.
2. These new incentive channel credit toward a given sector and produces a localized economic boom.
3. Euphoria leads to the overestimation of the ROI and to overtrading.
4. Fundamentals are reconsidered and credit dries up.
5. Torschlusspanik, or bank rush (p.1).

A’Hearn B. (2005) The not-so-mighty finance

A’Hearn, Brian (2005) Finance-led divergence in the regions of Italy. Financial History Review, 12/1: 7-41.

After the unification, the Italian South did not catch up with the North, on the contrary they engaged on a divergent path as the per capita income gap increased from 15-25% to 55% in the first 50 years (p.7). This continuing disparity may be explained by the sore state of the southern banks which could have been unable to support and finance local development (finance-led growth argument; p.9). However, initial evidence seems not to support this hypothesis, as the share of the Mezzogiorno in the banking activity of the country was in line with the relative economic weight of the region (p.10).

Bochove C. van (2008) Outsourcing financial modernisation

Bochove, Christiaan van (2008) “Integration of Denmark-Norway in the Dutch capital market”, chapter 4 in The Economic Consequences of the Dutch. Economic integration around the North Sea, 1500-1800, Amsterdam: Aksant, 90-125.

The early modern markets for goods and labour were highly integrated. As the country’s Golden Age came to an end, by 1700, Dutch capital was increasingly finding investment opportunities abroad, chiefly in Great Britain but also in the Danish Kingdom (p.90). It had not always been the case. For instance around 1600, trade with Norway was conducted with cash rather than bills of exchange, a sure sign of poor integration. The concentration of trade in the hands of a local business elite (rather than scattered between small producers) made this modernization possible. By the mid century Norwegian merchants started drawing credit from Amsterdam (p.93).

Murphy A. (2006) The Financial Revolution: a supply-side story (for real)

Murphy, Anne L. (2006) “Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt”, History, 91/302, 200-17.

The sums involved in the so-called English Financial Revolution following the arrival on the throne of William III were altogether not that important: £6.9m from 1688 to 1702 while the government budget over the period reached £72m. However, “the impact of those novel methods of fund-raising was considerable”. In particular because small wealth-owners represented a large share of these early investors (p.201). Samuel Jeake, a merchant from Rye (East Sussex) was one of those small investors. He recorded his thought and his transactions in a diary and a few letters (p.202).

Fontaine L. (2008) When relief is worth more than a treasure

Fontaine, Laurence (2008) “Entre banque et assistance: la création des monts-de-piété”, chapter 6 in L’Economie morale. Pauvreté, crédit et confiance dans l’Europe préindustrielle. Paris : Gallimard, p.164-189.

The first Monti di Pietà (or mounts) were created in 15^th-century Italy by Recollet monks to shield the less-fortunate from the scourge of usury. It was not so much intended to pool the poor out of misery as to provide the struggling middle dwellers with a last safety net before falling into poverty (p.164). In the peninsula, the capital hoarded in the safes of the mounts was often diverted from its original aim to be loaned to the rich. It prevented the Italian mounts from becoming really successful. However their model spread over Europe.

Alonso García D. (2008) For the monarchy: entrepreneurs on call

Alonso García, David (2008) “Finances royales et monde financier dans la creation de la monarchie espagnole (xvie siècle)” in Les finances royales dans la monarchie espagnole (xvie-xixe siècles), ed Anne Dubet. Rennes: Presses Unioversitaires de Rennes, 175-186.

Early modern governments’ reliance on private finance has usually been interpreted as a sign of weakness. This is an anachronism; the use of private finance is the result of a strategy from the sovereigns (p.175). In Spain, the crown sees the involvement of the merchants in the tax-collection process as a way to enrich the kingdom (p.176).

McCant A. (1997) Moral capitalism: investments to feed orphans

McCants, Anne E.C. (1997) “The Rise and Decline of an Institutional Endowment, in Civic Charity in a Golden Age. Orphan Care in Early Modern Amsterdam, Urbana/Chicago: University of Illinois Press, 151-191.

Numerous elements point to the fact that Dutch charities were well-endowed in the early modern period (p.151). Nonetheless charities were expensive to run and part of the funds came from the beneficiaries themselves. For instance at the Amsterdam Municipal Orphanage, or Bugerweeshuis,

“the orphaned children of poor, but nonetheless, citizen, parents could not be denied entry on the basis of an inadequate inheritance to defray the cost of their support. But the orphaned children of prosperous citizens could also not expect to be cared for entirely at public expenses.”

Nonetheless the bulk of the institution’s resources came from its invested endowment (p.153).

Dagnino G. B. (1995) When being the first is not enough

Dagnino, Giovanni Battista (1995) “The Tavola di Palermo: The First Public Bank of Second European XVI century” in Proceedings of the Conference on Business History, October 24 and 25 1994, Rotterdam, eds Mila Davids, Ferry de Goey & Dirk de Witt, 91-111.

The evolution of Sicilian banks reflects the history of the island during the early modern period, in that they were “economically and financially backward” (p.91). The 16^th century in the Western Mediterranean was a time of Spanish Domination dominated by (1) money clipping, (2) high inflation, (3) commercial mismanagement, (4) Gresham Law episodes fuelled by unscrupulous financiers and (5) heavy and altogether negative government interventions (p.93).

Sessions of the Second Latin American Economic History Congress

Here is the list of preapproved sessions  of the Second Latin American Economic History Congress (CLADHE-II), to be held in Mexico City on February 3-5, 2010. To submit a paper to any of the sessions, you have to go here.

Gelderblom O. & Jonker J. (2008) What really brought interests down

Gelderblom, Oscar & Joost Jonker (2009) “The Conditional Miracle. Institutional change, fiscal policy, bond markets and interest rates in Holland 1514-1713”, Utrecht University Working Papers.

This paper is available online (pdf).

Traditional explanation of the low issuing rate on public debt in the Dutch Republic emphasize the dramatic fall that occurred around 1600, but fail to explain why this level kept on falling from 1640 to 1725, until it had reached 2.5% (p.2).

Stabel P. and Haemers J. (2006) Financial revolution: the supply side story (… almost)

Stabel, Peter and Jelle Haemers (2006) “From Bruges to Antwerp. International commercial firms and government’s credit in the late 15th and early 16th century”, in Banca, Crédito y Captial. La Monarquía Hispánica y los antiguos Países Bajos (1505-1700), eds. Carmen Sanz Ayán and Bernardo J. García García, Madrid: Fundación Carlos de Amberes, p.20-38.

Introduction

The Financial Revolution – i. e. the gradual increase of government spending made possible by an increasing reliance on loans obtained from the capital markets – has essentially been studied from the side of the public demand. The ability of the markets to match this demand being regarded almost as a given. Meanwhile the impact the governments’ enormous financial needs may have had on private finance have hardly been addressed (p.22).