August 21, 2009
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) Read the rest of this entry »
April 28, 2009
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.
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). Read the rest of this entry »
April 13, 2009
Gelderblom, Oscar and Jonker, Joost (2004) “Completing a Financial Revolution: The Finance of the Dutch East India Trade and the Rise of the Amsterdam Capital Market, 1595-1612”, The Journal of Economic History, 64-3, 641-671.
One of the most commonly mentioned innovations of the British Financial Revolution, which occurred under the reign of William III, is the appearance of a secondary market for public and private securities. The earlier Dutch leg of the Financial Revolution, on the other hand, despite the availability of numerous public securities is usually assumed never to have evolve a meaningful secondary market (p.642). But the authors argue that the creation in 1602 of the Verenigde Oostindische Compagnie (the Dutch East India Company or VOC) led to the emergence of such a secondary market and that this market yield some of the advantage associated with the British innovations (p.643). Read the rest of this entry »