The Ascent of Money_ A Financial History Part 11

69 Rafael Di Tella, Sebastian Galiani and Ernesto Schargrodsky, 'The Formation of Beliefs: Evidence from the Allocation of Land t.i.tles to Squatters', Rafael Di Tella, Sebastian Galiani and Ernesto Schargrodsky, 'The Formation of Beliefs: Evidence from the Allocation of Land t.i.tles to Squatters', Quarterly Journal of Economics Quarterly Journal of Economics, 122, 1 (February 2007), pp. 209-41.

70 'The Mystery of Capital Deepens', 'The Mystery of Capital Deepens', The Economist The Economist, 26 August 2006.

71 See John Gravois, 'The De Soto Delusion', See John Gravois, 'The De Soto Delusion', Slate Slate, 29 January 2005: http://state.msn.com/id/2112792/.

72 The entire profit is transferred to a Rehabilitation Fund created to cope with emergency situations, in return for an exemption from corporate income tax. The entire profit is transferred to a Rehabilitation Fund created to cope with emergency situations, in return for an exemption from corporate income tax.

73 Connie Black, 'Millions for Millions', Connie Black, 'Millions for Millions', New Yorker New Yorker, 30 October 2006, pp. 62-73.

74 Shiller, 'Recent Trends in House Prices'. Shiller, 'Recent Trends in House Prices'.

75 Edward L. Glaeser and Joseph Gyourko, 'Housing Dynamics', NBER Working Paper 12787 (revised version, 31 March 2007). Edward L. Glaeser and Joseph Gyourko, 'Housing Dynamics', NBER Working Paper 12787 (revised version, 31 March 2007).

76 Robert J. Shiller, Robert J. Shiller, The New Financial Order: Risk in the 21st Century The New Financial Order: Risk in the 21st Century (Princeton, 2003). (Princeton, 2003).

6. From Empire to Chimerica 1 Dominic Wilson and Roopa Purushothaman, 'Dreaming with the BRICs: The Path to 2050', Dominic Wilson and Roopa Purushothaman, 'Dreaming with the BRICs: The Path to 2050', Goldman Sachs Global Economics Paper Goldman Sachs Global Economics Paper, 99 (1 October 2003). See also Jim O'Neill, 'Building Better Global Economic BRICs', Goldman Sachs Global Economics Paper, Goldman Sachs Global Economics Paper, 66 (30 November 2001); Jim O'Neill, Dominic Wilson, Roopa Purushothaman and Anna Stupnytska, 'How Solid are the BRICs?', 66 (30 November 2001); Jim O'Neill, Dominic Wilson, Roopa Purushothaman and Anna Stupnytska, 'How Solid are the BRICs?', Goldman Sachs Global Economics Paper Goldman Sachs Global Economics Paper, 134 (1 December 2005).

2 Dominic Wilson and Anna Stupnytska, 'The N-11: More than an Acronym', Dominic Wilson and Anna Stupnytska, 'The N-11: More than an Acronym', Goldman Sachs Global Economics Paper, Goldman Sachs Global Economics Paper, 153 (28 March 2007). 153 (28 March 2007).

3 Goldman Sachs Global Economics Group, Goldman Sachs Global Economics Group, BRICs and Beyond BRICs and Beyond (London, 2007), esp. pp. 45-72, 103-8. (London, 2007), esp. pp. 45-72, 103-8.

4 The argument is made in Kenneth Pomeranz, The argument is made in Kenneth Pomeranz, The Great Divergence: China, Europe and the Making of the Modern World Economy The Great Divergence: China, Europe and the Making of the Modern World Economy (Princeton / Oxford, 2000). For a more sceptical view of China's position in 1700, see (Princeton / Oxford, 2000). For a more sceptical view of China's position in 1700, see inter alia inter alia Angus Maddison, Angus Maddison, The World Economy: A Millennial Perspective The World Economy: A Millennial Perspective (Paris, 2001). (Paris, 2001).

5 Calculated from the estimates for per capita gross domestic product in Maddison, Calculated from the estimates for per capita gross domestic product in Maddison, World Economy, World Economy, table B-21. table B-21.

6 Pomeranz, Pomeranz, Great Divergence Great Divergence.

7 Among the most important recent works on the subject are Eric Jones, Among the most important recent works on the subject are Eric Jones, The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia (Cambridge, 1981); David S. Landes, (Cambridge, 1981); David S. Landes, The Wealth and Poverty of Nations: Why Some are So Rich and Some So Poor The Wealth and Poverty of Nations: Why Some are So Rich and Some So Poor (New York, 1998); Joel Mokyr, (New York, 1998); Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge Economy The Gifts of Athena: Historical Origins of the Knowledge Economy (Princeton, 2002); Gregory Clark, (Princeton, 2002); Gregory Clark, A Farewell to Alms: A Brief Economic History of the World A Farewell to Alms: A Brief Economic History of the World (Princeton, 2007). (Princeton, 2007).

8 William N. Goetzmann, 'Fibonacci and the Financial Revolution', NBER Working Paper 10352 (March 2004). William N. Goetzmann, 'Fibonacci and the Financial Revolution', NBER Working Paper 10352 (March 2004).

9 William N. Goetzmann, Andrey D. Ukhov and Ning Zhu, 'China and the World Financial Markets, 1870-1930: Modern Lessons from Historical Globalization', William N. Goetzmann, Andrey D. Ukhov and Ning Zhu, 'China and the World Financial Markets, 1870-1930: Modern Lessons from Historical Globalization', Economic History Review Economic History Review (forthcoming). (forthcoming).

10 Nicholas Crafts, 'Globalisation and Growth in the Twentieth Century', International Monetary Fund Working Paper, 00/44 (March 2000). See also Richard E. Baldwin and Philippe Martin, 'Two Waves of Globalization: Superficial Similarities, Fundamental Differences', NBER Working Paper 6904 (January 1999). Nicholas Crafts, 'Globalisation and Growth in the Twentieth Century', International Monetary Fund Working Paper, 00/44 (March 2000). See also Richard E. Baldwin and Philippe Martin, 'Two Waves of Globalization: Superficial Similarities, Fundamental Differences', NBER Working Paper 6904 (January 1999).

11 Barry R. Chiswick and Timothy J. Hatton, 'International Migration and the Integration of Labor Markets', in Michael D. Bordo, Alan M. Taylor and Jeffrey G. Williamson (eds.), Barry R. Chiswick and Timothy J. Hatton, 'International Migration and the Integration of Labor Markets', in Michael D. Bordo, Alan M. Taylor and Jeffrey G. Williamson (eds.), Globalization in Historical Perspective Globalization in Historical Perspective (Chicago, 2003), pp. 65-120. (Chicago, 2003), pp. 65-120.

12 Maurice Obstfeld and Alan M. Taylor, 'Globalization and Capital Markets', in Michael D. Bordo, Alan M. Taylor and Jeffrey G. Williamson (eds.), Maurice Obstfeld and Alan M. Taylor, 'Globalization and Capital Markets', in Michael D. Bordo, Alan M. Taylor and Jeffrey G. Williamson (eds.), Globalization in Historical Perspective Globalization in Historical Perspective (Chicago, 2003), pp. 173f. (Chicago, 2003), pp. 173f.

13 Clark, Clark, Farewell Farewell, chs. 13, 14.

14 David M. Rowe, 'The Tragedy of Liberalism: How Globalization Caused the First World War', David M. Rowe, 'The Tragedy of Liberalism: How Globalization Caused the First World War', Security Studies Security Studies, 14, 3 (Spring 2005), pp. 1-41.

15 See for example Fareed Zakaria, See for example Fareed Zakaria, The Post-American World The Post-American World (New York, 2008) and Parag Khanna, (New York, 2008) and Parag Khanna, The Second World: Empires and Influence in the New Global Order The Second World: Empires and Influence in the New Global Order (London, 2008). (London, 2008).

16 Jim Rogers, Jim Rogers, A Bull in China: Investing Profitably in the World's Greatest Market A Bull in China: Investing Profitably in the World's Greatest Market (New York, 2007). (New York, 2007).

17 Robert Blake, Robert Blake, Jardine Matheson: Traders of the Far East Jardine Matheson: Traders of the Far East (London, 1999), p. 91. See also Alain Le Pichon, (London, 1999), p. 91. See also Alain Le Pichon, China Trade and Empire: Jardine, Matheson & Co. and the Origins of British Rule in Hong Kong, 1827-1843 China Trade and Empire: Jardine, Matheson & Co. and the Origins of British Rule in Hong Kong, 1827-1843 (Oxford / New York, 2006). (Oxford / New York, 2006).

18 Rothschild Archive London, RFamFD/13A/I; 13B/1; 13C/I; 13D/1; 13D/2; 13/E. Rothschild Archive London, RFamFD/13A/I; 13B/1; 13C/I; 13D/1; 13D/2; 13/E.

19 Henry Lowenfeld, Henry Lowenfeld, Investment: An Exact Science Investment: An Exact Science (London, 1909), p. 61. (London, 1909), p. 61.

20 John Maynard Keynes, John Maynard Keynes, The Economic Consequences of the Peace The Economic Consequences of the Peace (London, 1919), ch. 1. (London, 1919), ch. 1.

21 Maddison, Maddison, World Economy World Economy, table 2-26a.

22 Lance E. Davis and R. A. Huttenback, Lance E. Davis and R. A. Huttenback, Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912 Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912 (Cambridge, 1988), p. 46. (Cambridge, 1988), p. 46.

23 Ra.n.a.ld Michie, 'Reversal or Change? The Global Securities Market in the 20th Century', Ra.n.a.ld Michie, 'Reversal or Change? The Global Securities Market in the 20th Century', New Global Studies New Global Studies (forthcoming). (forthcoming).

24 Obstfeld and Taylor, 'Globalization'; Niall Ferguson and Moritz Schularick, 'The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880-1913', Obstfeld and Taylor, 'Globalization'; Niall Ferguson and Moritz Schularick, 'The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880-1913', Journal of Economic History Journal of Economic History, 66, 2 (June 2006). But see also Michael A. Clemens and Jeffrey Williamson, 'Wealth Bias in the First Global Capital Market Boom, 1870-1913', Economic Journal Economic Journal, 114, 2 (2004), pp. 304-37.

25 The definitive study is Michael Edelstein, The definitive study is Michael Edelstein, Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850-1914 Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850-1914 (New York, 1982). (New York, 1982).

26 Michael Edelstein, 'Imperialism: Cost and Benefit', in Roderick Floud and Donald McCloskey (eds.), Michael Edelstein, 'Imperialism: Cost and Benefit', in Roderick Floud and Donald McCloskey (eds.), The Economic History of Britain since 1700, The Economic History of Britain since 1700, vol. II (2nd edn., Cambridge, 1994), pp. 173-216. vol. II (2nd edn., Cambridge, 1994), pp. 173-216.

27 John Maynard Keynes, 'Foreign Investment and National Advantage', in Donald Moggridge (ed.), John Maynard Keynes, 'Foreign Investment and National Advantage', in Donald Moggridge (ed.), The Collected Writings of John Maynard Keynes The Collected Writings of John Maynard Keynes, vol. XIX (London, 1981), pp. 275-84.

28 Idem Idem, 'Advice to Trustee Investors', in ibid., pp. 202-6.

29 Calculated from the data in Irving Stone, Calculated from the data in Irving Stone, The Global Export of Capital from Great Britain, 1865-1914 The Global Export of Capital from Great Britain, 1865-1914 (London, 1999). (London, 1999).

30 See the very useful stock market index for Shanghai Stock Exchange between 1870 and 1940 at See the very useful stock market index for Shanghai Stock Exchange between 1870 and 1940 at http://icf.som.yale.edu/sse/.

31 Michael Bordo and Hugh Rockoff, 'The Gold Standard as a "Good Housekeeping Seal of Approval" ', Michael Bordo and Hugh Rockoff, 'The Gold Standard as a "Good Housekeeping Seal of Approval" ', Journal of Economic History Journal of Economic History, 56, 2 (June 1996), pp. 389-428.

32 Marc Flandreau and Frederic Zumer, Marc Flandreau and Frederic Zumer, The Making of Global Finance, 1880-1913 The Making of Global Finance, 1880-1913 (Paris, 2004). (Paris, 2004).

33 Ferguson and Schularick, 'Empire Effect'. , pp. 283-312. Ferguson and Schularick, 'Empire Effect'. , pp. 283-312.

34 For a full discussion of this point, see Niall Ferguson, 'Political Risk and the International Bond Market between the 1848 Revolution and the Outbreak of the First World War', For a full discussion of this point, see Niall Ferguson, 'Political Risk and the International Bond Market between the 1848 Revolution and the Outbreak of the First World War', Economic History Review Economic History Review, 59, 1 (February 2006), pp. 70-112.

35 Jean de [Ivan] Bloch, Jean de [Ivan] Bloch, Is War Now Impossible? Is War Now Impossible?, trans. R. C. Long (London, 1899), p. xvii.

36 Norman Angell, Norman Angell, The Great Illusion: A Study of the Relation of Military Power in Nations to their Economic and Social Advantage The Great Illusion: A Study of the Relation of Military Power in Nations to their Economic and Social Advantage (London, 1910), p. 31. (London, 1910), p. 31.

37 Quoted in James J. Sheehan, Quoted in James J. Sheehan, Where Have all the Soldiers Gone? Where Have all the Soldiers Gone? (New York: Houghton Mifflin Co., 2007), p. 56. (New York: Houghton Mifflin Co., 2007), p. 56.

38 O. M. W. Sprague, 'The Crisis of 1914 in the United States', O. M. W. Sprague, 'The Crisis of 1914 in the United States', American Economic Review American Economic Review, 5, 3 (1915), pp. 505ff.

39 Brendan Brown, Brendan Brown, Monetary Chaos in Europe: The End of an Era Monetary Chaos in Europe: The End of an Era (London / New York, 1988), pp. 1-34. (London / New York, 1988), pp. 1-34.

40 John Maynard Keynes, 'War and the Financial System', John Maynard Keynes, 'War and the Financial System', Economic Journal, Economic Journal, 24, 95 (1914), pp. 460-86. 24, 95 (1914), pp. 460-86.

41 E. Victor Morgan, E. Victor Morgan, Studies in British Financial Policy, 1914-1925 Studies in British Financial Policy, 1914-1925 (London, 1952), pp. 3-11. (London, 1952), pp. 3-11.

42 Ibid., p. 27. See also Teresa Seabourne, 'The Summer of 1914', in Forrest Capie and Geoffrey E. Wood (eds.), Ibid., p. 27. See also Teresa Seabourne, 'The Summer of 1914', in Forrest Capie and Geoffrey E. Wood (eds.), Financial Crises and the World Banking System Financial Crises and the World Banking System (London, 1986), pp. 78, 88f. (London, 1986), pp. 78, 88f.

43 Sprague, 'Crisis of 1914', p. 532. Sprague, 'Crisis of 1914', p. 532.

44 Morgan, Morgan, Studies Studies, p. 19.

45 Seabourne, 'Summer of 1914', pp. 80ff. Seabourne, 'Summer of 1914', pp. 80ff.

46 See most recently William L. Silber, See most recently William L. Silber, When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy (Princeton, 2007). (Princeton, 2007).

47 Morgan, Morgan, Studies Studies, pp. 12-23.

48 David Kynaston, David Kynaston, The City of London The City of London, vol. III: Illusions of Gold, 1914-1945 Illusions of Gold, 1914-1945 (London, 1999), p. 5. (London, 1999), p. 5.

49 Calculated from isolated prices quoted in Calculated from isolated prices quoted in The Times The Times between August and December 1914. between August and December 1914.

50 Kynaston, Kynaston, City of London, City of London, p. 5. p. 5.

51 For details see Niall Ferguson, 'Earning from History: Financial Markets and the Approach of World Wars', For details see Niall Ferguson, 'Earning from History: Financial Markets and the Approach of World Wars', Brookings Papers in Economic Activity Brookings Papers in Economic Activity (forthcoming). (forthcoming).

52 See Lyndon Moore and Jakub Kaluzny, 'Regime Change and Debt Default: The Case of Russia, Austro-Hungary, and the Ottoman Empire following World War One', See Lyndon Moore and Jakub Kaluzny, 'Regime Change and Debt Default: The Case of Russia, Austro-Hungary, and the Ottoman Empire following World War One', Explorations in Economic History Explorations in Economic History , 42 (2005), pp. 237-58. , 42 (2005), pp. 237-58.

53 Maurice Obstfeld and Alan M. Taylor, 'The Great Depression as a Watershed: International Capital Mobility over the Long Run', in Michael D. Bordo, Claudia Goldin and Eugene N. White (eds.), Maurice Obstfeld and Alan M. Taylor, 'The Great Depression as a Watershed: International Capital Mobility over the Long Run', in Michael D. Bordo, Claudia Goldin and Eugene N. White (eds.), The Defining Moment: The Great Depression and the American Economy in the Twentieth Century The Defining Moment: The Great Depression and the American Economy in the Twentieth Century (Chicago, 1998), pp. 353-402. (Chicago, 1998), pp. 353-402.

54 Rawi Abdelal, Rawi Abdelal, Capital Rules: The Construction of Global Finance Capital Rules: The Construction of Global Finance (Cambridge, MA / London, 2007), p. 45. (Cambridge, MA / London, 2007), p. 45.

55 Ibid., p. 46. Ibid., p. 46.

56 Greg Behrman, Greg Behrman, The Most n.o.ble Adventure: The Marshall Plan and the Time when America Helped Save Europe The Most n.o.ble Adventure: The Marshall Plan and the Time when America Helped Save Europe (New York, 2007). (New York, 2007).

57 Obstfeld and Taylor, 'Globalization and Capital Markets', p. 129. Obstfeld and Taylor, 'Globalization and Capital Markets', p. 129.

58 See William Easterly, See William Easterly, The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics (Cambridge, MA., 2002). (Cambridge, MA., 2002).

59 Michael Bordo, 'The Bretton Woods International Monetary System: A Historical Overview', in Michael Bordo, 'The Bretton Woods International Monetary System: A Historical Overview', in idem idem and Barry Eichengreen (eds.), and Barry Eichengreen (eds.), A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (Chicago / London, 1993), pp. 3-98. (Chicago / London, 1993), pp. 3-98.

60 Christopher S. Chivvis, 'Charles de Gaulle, Jacques Rueff and French International Monetary Policy under Bretton Woods', Christopher S. Chivvis, 'Charles de Gaulle, Jacques Rueff and French International Monetary Policy under Bretton Woods', Journal of Contemporary History Journal of Contemporary History, 41, 4 (2006), pp. 701-20.

61 Interview with Amy Goodman: Interview with Amy Goodman: http://www.democracynow.org/ article.pl?sid=04/11/09/1526251 article.pl?sid=04/11/09/1526251.

62 John Perkins, John Perkins, Confessions of an Economic Hit Man Confessions of an Economic Hit Man (New York, 2004), p. xi. (New York, 2004), p. xi.

63 Joseph E. Stiglitz, Joseph E. Stiglitz, Globalization and Its Discontents Globalization and Its Discontents (New York, 2002), pp. 12, 14, 15, 17. (New York, 2002), pp. 12, 14, 15, 17.

64 Abdelal, Abdelal, Capital Rules, Capital Rules, pp. 50f., 57-75. pp. 50f., 57-75.

65 Paul Krugman, Paul Krugman, The Return of Depression Economics The Return of Depression Economics (London, 1999). (London, 1999).

66 'The Fund Bites Back', 'The Fund Bites Back', The Economist The Economist, 4 July 2002.

67 Kenneth Rogoff, 'The Sisters at 60', Kenneth Rogoff, 'The Sisters at 60', The Economist The Economist, 22 July 2004. Cf. 'Not Even a Cat to Rescue', The Economist The Economist, 20 April 2006.

68 See the cla.s.sic study by Fritz Stern, See the cla.s.sic study by Fritz Stern, Gold and Iron: Bismarck, Bleichroder and the Building of the German Empire Gold and Iron: Bismarck, Bleichroder and the Building of the German Empire (Harmondsworth, 1987). (Harmondsworth, 1987).

69 George Soros, George Soros, The Alchemy of Finance: Reading the Mind of the Market The Alchemy of Finance: Reading the Mind of the Market (New York, 1987), pp. 27-30. (New York, 1987), pp. 27-30.

70 Robert Slater, Robert Slater, Soros: The Life, Times and Trading Secrets of the World's Greatest Investor Soros: The Life, Times and Trading Secrets of the World's Greatest Investor (New York, 1996), pp. 48f. (New York, 1996), pp. 48f.

71 George Soros, George Soros, The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means (New York, 2008), p. x. (New York, 2008), p. x.

72 Slater, Slater, Soros Soros, p. 78.

73 Ibid., pp. 105, 107ff. Ibid., pp. 105, 107ff.

74 Ibid., p. 172. Ibid., p. 172.

75 Ibid., pp. 177, 182, 188. Ibid., pp. 177, 182, 188.

76 Ibid., p. 10. Ibid., p. 10.

77 Ibid., p. 159. Ibid., p. 159.

78 Nicholas Dunbar, Nicholas Dunbar, Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It (New York, 2000), p. 92. (New York, 2000), p. 92.

79 Dunbar, Dunbar, Inventing Money Inventing Money, pp. 168-73.

80 Andre F. Perold, 'Long-Term Capital Management, L.P. (A)', Harvard Business School Case 9-200-007 (5 November 1999), p. 2. Andre F. Perold, 'Long-Term Capital Management, L.P. (A)', Harvard Business School Case 9-200-007 (5 November 1999), p. 2.

81 Perold, 'Long-Term Capital Management, L.P. (A)', p. 13. Perold, 'Long-Term Capital Management, L.P. (A)', p. 13.

82 Ibid., p. 16. Ibid., p. 16.

83 For a history of the efficient markets school of finance theory, see Peter Bernstein, For a history of the efficient markets school of finance theory, see Peter Bernstein, Capital Ideas: The Improbable Origins of Modern Wall Street Capital Ideas: The Improbable Origins of Modern Wall Street (New York, 1993). (New York, 1993).

84 Dunbar, Dunbar, Inventing Money Inventing Money, p. 178.

85 Roger Lowenstein, Roger Lowenstein, When Genius Failed: The Rise and Fall of Long-Term Capital Management When Genius Failed: The Rise and Fall of Long-Term Capital Management (New York, 2000), p. 126. (New York, 2000), p. 126.

86 Perold, 'Long-Term Capital Management, L.P. (A)', pp. 11f., 17. Perold, 'Long-Term Capital Management, L.P. (A)', pp. 11f., 17.

87 Lowenstein, Lowenstein, When Genius Failed When Genius Failed, p. 127.

88 Andre F. Perold, 'Long-Term Capital Management, L.P. (B)', Harvard Business School Case 9-200-08 (27 October 1999), p. 1. Andre F. Perold, 'Long-Term Capital Management, L.P. (B)', Harvard Business School Case 9-200-08 (27 October 1999), p. 1.

89 Lowenstein, Lowenstein, When Genius Failed When Genius Failed, pp. 133-8.

90 Ibid., p. 144. Ibid., p. 144.

91 I owe this point to Andre Stern, who was an investor in LTCM. I owe this point to Andre Stern, who was an investor in LTCM.