Finance: Past, Present and Future

The European Association for Banking and Financial History has just started a new working paper series, with Chris Colvin as one of the editors. Along with my co-authors, I have a new working paper available in this series. The paper looks at ownership diffusion in the last half of the nineteenth century. Surprisingly, we find that ownership was much more diffused in the past than we expected. It was also diffuse compared to twenty-first century corporations. The paper is available here .

Is the global financial crisis entering a third phase? Phase 1 was when banks in the US, UK and several other major economies required taxpayers to rescue them. Phase 2 was the Eurozone crisis. Will Phase 3 be a financial crises across emerging markets? (see Bloomberg coverage here  and Guardian coverage here ). In recent weeks, currencies and stocks in emerging markets have been falling. In response, central banks in these economies, most notably in India, South Africa and Turkey, have been forced to increase interest rates. Why is this happening? How bad will it be? What effect will it have on economic growth in developed economies? Will an emerging market crisis strangle economic recovery in the US and UK? How will US monetary authorities respond to this? Will they continue to taper their bond-buying schemes? I have no doubts that all will be revealed in the coming months!      

President Obama tackled inequality head on in his State of the Union  address yesterday.  Michael Spence , a Nobel laureate, discusses in this Project Syndicate op-ed some of the ways in which inequality can be tackled without harming economic growth. You can read a selection of articles on inequality at Project Syndicate's Unequal at Any Speed . 

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

In the video clip below, Jeremy Paxman grills Mark Carney, the Bank of England's Governor. When Carney came into office, he said that interest rates wouldn't rise until unemployment fell to 7%. With the unemployment rate at 7.1%, Carney seems to be backtracking on this commitment. This is a perfect example of the time inconsistency problem .

Inequality has been the theme of my posts this week since it is being much discussed in the media thanks to the annual World Economic Forum meeting at Davos. Here is Robert Peston's take and in the short clip below, Jeremy Paxman grills Bill Gates about inequality. 

Queen's University Centre for Economic History has advertised a PhD scholarship in financial history. Click here for further information. Queen's University Management School has also advertised scholarships in economics, finance, and economic history - see here for details.

Following on from Monday's post, click here to read an op-ed on the pros and cons of inequality, which draws heavily on Angus Deaton's work. It argues that inequality is good if it occurs as a result of industrialisation / innovation and if it spurs further innovation.  However, too much inequality can undermine support for the political system and private enterprise.  In other words, there is an optimal amount of inequality!

Below is a short video where Angus Deaton talks about his new book: The Great Escape: Health, Wealth and Inequality .  In this book, Deaton looks at why, about 250 years ago, gaps opened up between nations in terms of their wealth and health. He also looks at why those gaps persisted and what can be done to improve the well-being of all nations.

The Labour leader, Ed Miliband, has come out today and attacked Britain's banks for being too big ( story here ). He argues that too much power has been concentrated in the hands of a few banks and, as a result, these big banks have been poor servants of the real economy for decades. Miliband wants to place a cap on the market share that any one bank can enjoy. British banking hasn't always been dominated by big banks. In 1900, banking in the UK was competitive, with the top five banks having less than 25 per cent of the deposit market.  By 1921, however, the top five banks had close to 80 per cent of the deposit market. What happened? Between 1900 and 1921, there was a series of mergers which resulted in banking behemoths. Fabio Braggion, Lyndon Moore and Narly Dwarkasing have a nice paper which looks at this merger movement - click here . The big question, however, is have big British banks failed the real economy for the past century? I feel a new book coming on!! ...

This is my first post of 2014. I've been so busy working on research projects and getting ready for the new semester, that I've neglected my blog! So as its my first post of 2014, I want to talk about something uplifting. How about Britain's impending financial crash and debt crisis? The video below by MoneyWeek is part scaremongering and part drumming up business, but it worth watching as it does make some salient points. Most people want to ignore the scale of the UK's debt problem, but this documentary tackles it head on. Happy 2014!