What my credit can do in (medieval) Venice

Mueller, Reinhold C. (1987) I banchi locali a Venezia nel Tardo Medioevo. Studi Storici, 28/1: 145-55.

There is a lot to be admired in Austrian economists, their resilience, their attachment to simple elegant ideas and their sound understanding of the long-term factors that give the economy its cyclical nature. But one must admit that their Ludite-like hatred for finance is to the very least puzzling. They claim to trust nothing but gold and they would like to see the activity of banks restricted to little more than a locker service. Their trust in free market and in the adaptive nature of human ingenuity ends at the door of their local branch of HSBC.

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).

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.

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.

More on Lehman Brothers (1850-2008)

Before arcane CDOs imploded...

The Wall Street Journal presents a neat infographic on the new jobs of Lehman’s executives after its bankruptcy in September 2009.

Found via Chart Porn.

Velde F. (2009) Eighteenth-century France’s one-man-bubble

Velde, François R. (2009) “Was John Law’s System a bubble? The Mississipi Bubble revisited” in The Origin and Development of Financial Markets and Institutions. From the Seventeenth Century to the Present, eds. Jeremy Atack and Larry Neal, Cambridge: Cambridge University Press, 99-120.

A slightly different version of this paper is available online.

The shares of the Compagnie des Indes created by John Law to manage the colonization of Louisiana, public finances and monopolies went from 250 Livres in July 1718 when the initial offering closed to just under 10,000 L days before Christmas 1719 and finally to 50 L in March 1721 (p.108). Can this jump followed by an even more impressive collapse in under 3 years be described as a bubble? (p.109)

Quinn S. and Roberds W. (2006) When financial innovation’s good for the economy

Quinn, Stephen and Willam Roberds (2006) “An Economic Explanation of the Early Bank of Amsterdam, Debasement, Bills of Exchange and the Emergence of the First Central Bank”, Federal Bank of Atlanta. Working Papers Series, 13: 50p.*

This paper is available online.

Introduction

The United Provinces suffered from what Adam Smith termed the “small state” problem: it was awash in foreign coin and had little control over their quality, thus suffered from their constant debasement (p.1). Debtors always have an incentive to pay their due with debased coins. But this practice is only viable if the seigniorage he pays to the mint is lower than the amount of silver he saves in the operation. De facto, there is collusion between the mint and the debtor against the creditor (p.4).

Interest rates in premodern Amsterdam

Ok it has nothing to do with the theme of the week (the Glorious Revolution), but I’m sure you hadn’t remarked there was a theme of the week anyhow.

So here is a very compeling story that explains better than anything else the process of financial revolution; here is a table showing the interest rates in 16th and 17th century for private loans used by small and medium businessmen:

Source: Dehing, Pit and Marjolein ‘T hart (1997) “Linking the fortunes: currency and banking, 1550-1800” in Marjolein ‘T Hart, Joost Jonker and Jan Luiten van Zanden, eds., A financial history of the Netherlands, Cambridge: Cambridge University Press, p.44-45.

Quinn S. (2001) Public debt to private finance: “Drop dead”

Quinn, Stephen (2001) “The Glorious Revolution’s Effect on English Private Finance: A Microhistory 1680-1705”, The Journal of Economic History, 61/3: 593-615.

Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).

Introduction

According to North and Weingast’s famous thesis, the investiture of William III of England in 1688, the “Glorious Revolution”, triggered a quick modernization of the British financial system – prompting in turn a fall of the interest rates. But the arrival of the new king also led the realm into a new war against France which lasted nine years and increased public debt from £1 million to £19 million (⅓ of the national income; p.593).

On The Economist view of what the crisis means for economics

The meltdown of modern economic theory.

The Economist has published on its last edition three articles on the impact of the crisis on economics as a science. The first article is a general view on the matter, the second has to do with macroeconomic debates and the third on the state of financial economics.

I think that readers will find it interesting to read the reflection of The Economist’s writers on this issue. How is it that economics got into this impasse?

Here are some excerpts that I found interesting in each of the articles.

Web shopping: On “Taking Stock”

Marketplace is an American Public Media production that caught my attention some months ago, due to the quality of the contents.

Now, courtesy of Felix Salmon, I found out that Marketplace has a special series, Taking Stock, where economists give their point of view on the current economic situation.

Temin P. and Voth H.-J. (2008) A case for deregulation… in 18th-century Britain

Temin, Peter and Voth, Hans-Joachim (2008) “Private borrowing during the financial revolution: Hoare’s Bank and its customers, 1702-24”, Economic History Review, 61/3, 541-564.

Introduction

The Financial Revolution is said to have allowed the British government to borrow widely and cheaply. Famously, North and Weingast added that it also had a profound and beneficial effect on private businesses (p.541). To assess the latter claim, the authors use data collected from the archives of a small London goldsmith bank, Hoare’s (p.542). It is likely that their sample is fairly representative since there were only a dozen such establishments around 1700s. The key event of the period is the lowering of the legal maximum interest rate from 6 to 5% in 1714 by the heavily indebted British government at the end of the War of Spanish Succession (p.543).