Finance: Past, Present and Future

I have been teaching monetary economics and money and banking for nearly two decades. Back in 1998 I gave a lecture on the future of cash and the possibility of a cashless society. In 2015, we are closer to having a cashless society than we were back in 1998 thanks to the likes of Google Wallet, Apple Pay, Bitcoin, and ubiquitous credit cards. However, we still use cash and lots of it. Why? Convenience, anonymity, and the grey economy go some way to explaining our demand for cash. The cost to small retailers of going cashless is also playing a role. However, a lack of trust in the security of electronic payments skews the preference of many away from e-money towards cash. In addition, many low-income families do not have access to electronic payments systems because they are unbanked.   The Bank of England video below gives an excellent overview of the future of cash. Will we be cashless by 2035? I for one doubt it.

Last week the Federal Reserve did not raise it interest rate despite signalling for months beforehand that it would do so (so-called forward guidance). Why did they do so? Why did markets react negatively to the announcement? In the video below, the FT's Martin Wolf tackles these and other questions.

Could it be that stock-market bubbles occur because managers and CEOs overexpand their businesses simultaneously in a hubristic and possibly irrational fashion? Or could it be that managers and CEOs expand their business simply to maintain incumbent positions? Along with my colleague Gareth Campbell , I have recently published a paper in Business History which addresses these very questions. The paper is entitled Managerial Failure in Mid-Victorian Britain?: Corporate Expansion during a Promotion Boom . An earlier version of the paper is available here and the paper's abstract is as follows: This article examines the mid-1840s expansion of the British railway network, which was associated with a large deterioration in shareholder value. Using a counterfactual approach and new data on railway competition, we argue that the expansion of the railway companies, and their subsequent decline in financial performance, was not due to managerial failure. Rather, the promotion of new rou...

How should one value a firm or the overall stock market? Below is an interview with Robert Shiller on his cyclically-adjusted price/earnings ratio and its usefulness as a predictor of future market value. Shiller thinks that today's market is overvalued, but is not sure when the market will turn down.

Back at the start of June, I predicted that China's stock-market bubble was about to burst - click here . Over the summer, we saw the Chinese government attempt to pump liquidity into the bubble to keep it inflated, but if anything this backfired. So the big question for investors in the rest of the world is whether the turmoil in China's stock market is simply a bubble bursting or a bellwether of future economic difficulties for China? If it is the former, then investors in the West have nothing to fear. However, if it is the latter then the slowing of China will have major repercussions for those who export to China and for those who have benefited from the boom in commodity prices thanks to huge demand from China for raw materials and food.  As I highlighted in my post back at the start of June, China had all the ingredients for a classic stock-market bubble. However, its economy does have some major flaws which only a major shift in China's political institutions c...

The first academic review of my book Banking in Crisis has been published in the  Economic History Review . The review by Mark Billings   (University of Exeter) says that my "contextualization of crises provides an excellent concise history of the last two hundred years of banking in Britain". Mark Billings finishes off his review by saying that "not all historians of British banking would agree with all Turner's arguments, but all will surely want to read this stimulating book and recommend it to their students. Regulators and policy makers should also read the book, not least to be shaken from any post-crisis complacency by Turner's gloomy conclusions on the direction of banking regulation".