Tag: money

Education and London’s Centrality in Global Finance: Then and Now

To understand our world, we have to go back to classics of understanding such as Lombard Street [Project Gutenberg ebook] which gives one a vivid sense of London’s rise as world’s banker, already in 1873. 

Our current world was certainly shaped by these long-term historical trends.

…But very few persons are aware how much greater the ready balance—the floating loan-fund which can be lent to any one or for any purpose—is in England than it is anywhere else in the world. A very few figures will show how large the London loan-fund is, and how much greater it is than any other. The known deposits—the deposits of banks which publish their accounts—are, in

London (31st December, 1872). . . . . . . .£120,000,000
Paris (27th February, 1873) . . . . . . . . . .13,000,000
New York (February, 1873) . . . . . . . . . .40,000,000
German Empire (31st January, 1873) . . .8,000,000

And the unknown deposits—the deposits in banks which do not publish their accounts—are in London much greater than those in any other of these cities. The bankers’ deposits of London are many times greater than those of any other city—those of Great Britain many times greater than those of any other country.

Of course the deposits of bankers are not a strictly accurate measure of the resources of a Money Market. On the contrary, much more cash exists out of banks in France and Germany, and in all non-banking countries, than could be found in England or Scotland, where banking is developed. But that cash is not, so to speak, “Money-Market money”: it is not attainable. Nothing but their immense misfortunes, nothing but a vast loan in their own securities, could have extracted the hoards of France from the custody of the French people. The offer of no other securities would have tempted them, for they had confidence in no other securities. For all other purposes the money hoarded was useless and might as well not have been hoarded. But the English money is “borrowable” money. Our people are bolder in dealing with their money than any continental nation, and even if they were not bolder, the mere fact that their money is deposited in a bank makes it far more obtainable. A million in the hands of a single banker is a great power; he can at once lend it where he will, and borrowers can come to him, because they know or believe that he has it. But the same sum scattered in tens and fifties through a whole nation is no power at all: no one knows where to find it or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause which has made the Money Market of England so exceedingly rich, so much beyond that of other countries.

…

…I believe that our system, though curious and peculiar, may be worked safely; but if we wish so to work it, we must study it. We must not think we have an easy task when we have a difficult task, or that we are living in a natural state when we are really living in an artificial one. Money will not manage itself, and Lombard Street has a great deal of money to manage.

Is History the Story of Technology? Dreiser’s Novel

Due to the welter of inventions and gadgets around us, we have come to understand the entire past our “path to the present” as the story of technical milestones. This is a very narrow-gauge view of the world, but it is part of our “epochal waters” that buoy us up (i.e., our minds immediately go there without our knowing quite why). Consider the opening paragraph of Dreiser’s (died in 1945) novel, The Financier. The past is explained as a setting for technical change by itself:

The Philadelphia into which Frank Algernon Cowperwood was born was a city of two hundred and fifty thousand and more. It was set with handsome parks, notable buildings, and crowded with historic memories. Many of the things that we and he knew later were not then in existence the telegraph, telephone, express company, ocean steamer, city delivery of mails. There were no postage stamps or registered letters. The street car had not arrived. In its place were hosts of omnibuses, and for longer travel the slowly developing railroad system still largely connected by canals.

Theodore Dreiser (Chapter I, opening paragraph of the novel)

The larger story is described here. Notice the Panic of 1873 as pivotal:

In Philadelphia, Frank Cowperwood, whose father is a banker, makes his first money by buying cheap soaps on the market and selling it back with profit to a grocer. Later, he gets a job in Henry Waterman & Company, and leaves it for Tighe & Company. He also marries an affluent widow, in spite of his young age. Over the years, he starts embezzling municipal funds. In 1871, the Great Chicago Fire redounds to a stock market crash, prompting him to be bankrupt and exposed. Although he attempts to browbeat his way out of being sentenced to jail by intimidating Mr. Stener, politicians from the Republican Party use their influence to use him as a scapegoat for their own corrupt practices. Meanwhile, he has an affair with Aileen Butler, a young girl, subsequent to losing faith in his wife. She vows to wait for him after his jail sentence. Her father, Mr. Butler dies; she grows apart from her family. Frank divorces his wife. Sometime after being released, he invests in stocks subsequent to the Panic of 1873, and becomes a millionaire again. He decides to move out of Philadelphia and start a new life in the West.

This is Book 1 of the “Trilogy of Desire.”