scholarly journals How to stabilize the banking system: lessons from the pre-1914 London money market

2016 ◽  
Vol 23 (1) ◽  
pp. 1-20 ◽  
Author(s):  
Carolyn Sissoko
Keyword(s):  
World War I ◽  
Capital Markets ◽  
Banking System ◽  
Money Market ◽  
Structural Reform ◽  
World War ◽  
High Quality ◽  
Money Markets ◽  
Successful Model ◽  
Reasonable Explanation

This article argues that the British financial system in the era prior to World War I provides modern policymakers with a successful model of how to stabilize the banking system. This model had two components: incentives were structured to ensure that all banks that originated or traded assets on the money market sought only to trade in high-quality assets; and macro-prudential regulation promoted the segregation of money markets from capital markets, monitored the growth of money market credit, and restricted trade on the money market in assets issued by entities and sectors whose money market liabilities were growing so fast that the most reasonable explanation was that the money market was being used to finance longer-term investment. These facts indicate that policymakers can successfully stabilize the banking system through a combination of structural reform and regulation of the growth of credit.

Banking and Economic Growth in Sweden before World War I

1978 ◽  
Vol 38 (3) ◽  
pp. 650-680 ◽  
Author(s):  
Lars G. Sandberg
Keyword(s):  
Economic Growth ◽  
World War I ◽  
International Comparisons ◽  
Banking System ◽  
Commercial Banking ◽  
World War ◽  
Paper Money ◽  
History Of

The article sketches the history of Swedish commercial banking from 1656 until World War I, with special attention to the post-1850 period. Emphasis is placed on the relationships between economic growth and banking. International comparisons based on the quantitative measures developed by Rondo Cameron and Raymond Goldsmith are made. It is concluded that at all stages of its early industrialization Sweden had a remarkably large and efficient banking system. This, in turn, was largely the result of the general population's long experience with banking and paper money and their generally high levels of literacy and education.

scholarly journals The Monetary Crisis and Foundation for Reserve Bank of India (1890-1935)

2020 ◽  
Author(s):  
M. Balaji
Keyword(s):  
World War I ◽  
Interwar Period ◽  
Banking System ◽  
Economic Interest ◽  
Stabilization Policy ◽  
British India ◽  
World War ◽  
Reserve Bank ◽  
The World ◽  
Reserve Bank Of India

The monetary policy of British India was highly controversial during the interwar period as it aimed to protect the budgetary obligations and private commerce. The currency stabilization policy was seen as a tool to protect the British economic interest while they ruled India. The currency came under serious pressure during the World War I and Great depression, the facets of Indian currency’s dependence was exposed through the modified council bill system and Gold exchange standard. The much-needed currency reforms and banking system were conceded by the colonial administration after much wrangling for half a century.

A Reconsideration of Federal Reserve Policy during the 1920–1921 Depression

1966 ◽  
Vol 26 (2) ◽  
pp. 223-238 ◽  
Author(s):  
Elmus R. Wicker
Keyword(s):  
World War I ◽  
Federal Reserve ◽  
Agricultural Sector ◽  
Banking System ◽  
Railway Transportation ◽  
World War ◽  
Quick Recovery ◽  
Member Bank ◽  
Reserve System ◽  
Federal Reserve Policy

Criticism of the Federal Reserve Board for not advancing rates earlier in 1919 to halt a rampant inflation is seldom as severe or nearly as devastating as the criticism heaped upon it for not easing credit sooner during the sharp but brief depression episode of 1920–1921. After the collapse of prices in May 1920, the immediate goal of Federal Reserve policy was to prevent a widespread financial crisis by maintaining the liquidity of the banking system. Congress had created the Federal Reserve System for the specific purpose of preventing a recurrence of the financial panics that had plagued our pre-World War I monetary experience. In 1920 the Federal Reserve Banks succeeded in this task by making funds freely available at relatively high discount rates. Somewhat surprising is the fact that there was no liquidation of bank credit nor decline in the money supply during the first six months of the downswing. Loans at commercial banks continued to increase, and member-bank indebtedness continued to rise. The action taken by System officials probably warded off what might easily have been the worst financial catastrophe in our history. Unfortunately, the policy they pursued, though successful in preventing a banking crisis, was inimical to a quick recovery of business activity. Inventory decumulation, particularly in the agricultural sector, was hampered by a bumper harvest and a railway transportation bottleneck which was not eliminated until October.

scholarly journals The Origin of the Polish National Loan Fund and Its Operation on the Polish Lands

2019 ◽  
Vol 28 (3 ENGLISH ONLINE VERSION) ◽  
pp. 45-69
Author(s):  
Eliza Komierzyńska-Orlińska
Keyword(s):  
World War I ◽  
Banking System ◽  
Emergency Situation ◽  
First World War ◽  
World War ◽  
Loan Fund ◽  
Monetary Unit ◽  
The First World War ◽  
The Government ◽  
First World

The idea of establishing the Bank of Poland as the central bank of the Second Polish Republic and introducing a new currency appeared shortly after Poland regained its independence. At the beginning of 1919, in the economic circles it was believed that one of the initial steps taken by the government would be to establish a new issuing bank in place of the Polish National Loan Fund, which had appeared on the Polish territory in an emergency situation—during the First World War, and which, contrary to the original (both German and Polish) plans survived for 7 years and was transformed after the war into the first bank of issue in the now independent Polish State. The Polish National Loan Fund established by the Germans as an issuing institution by way of the ordinance of December 9, 1916 establishing the Polnische Landes Darlehnskasse was granted the privilege of issuing a new currency, that is a new monetary unit under the name marka polska. The German authorities were guided by various objectives when creating the new issuing institution—first of all, the aim was to limit the area of circulation of the German mark and to create an instrument that would draw in the occupied area of the Polish territory to finance the war, contrary to the assurances of the occupying authorities that the PKKP would be an institution supporting the economy and banking system of the country—the Kingdom of Poland, whose creation was envisaged after the end of World War I.

Money, Markets, and the State: Social Democratic Policies since 1918. By Ton Notermans. New York: Cambridge University Press, 2000. 312p. $59.95.

2001 ◽  
Vol 95 (1) ◽  
pp. 244-245
Author(s):  
Carles Boix
Keyword(s):  
New York ◽  
World War I ◽  
The Netherlands ◽  
Historical Data ◽  
World War ◽  
Money Markets ◽  
Social Democratic ◽  
Cambridge University ◽  
Universal Suffrage ◽  
The Social

Notermans has written a bold and ambitious book in which he purports to explain the conditions under which social democratic policies, and therefore the social democratic project, have been successful in modern democracies. The book, which relies heavily but not exclusively on historical data, examines the ebb and flow of social democratic domi- nance in five countries-Germany, the Netherlands, Norway, Sweden, and Britain-since roughly the introduction of (male) universal suffrage after World War I.

scholarly journals Jealous Monopolists? British Banks and Responses to the Macmillan Gap during the 1930s

2007 ◽  
Vol 8 (4) ◽  
pp. 881-919 ◽  
Author(s):  
Peter Scott ◽  
Newton Newton
Keyword(s):  
World War I ◽  
Market Entry ◽  
Banking System ◽  
World War ◽  
Upper Limit ◽  
Monopoly Position

By the end of World War I successive merger waves had produced an oligopolistic, tightly cartelized, English banking system, which was widely viewed as having restricted lending to small-medium-sized firms—the famous 'Macmillan Gap' in industrial finance. We explore the reasons behind the failure of market entry to bridge this gap. The clearing banks are shown to have acted as 'jealous monopolists', obstructing the activities of the Credit for Industry Ltd (CFI), the only significant firm established to breach the gap (rather than narrow its upper limit). By poaching many clients it had vetted and approved, the banks blocked CFI's growth, deterring further market entry, and thus, preserving their monopoly position.

Dark Matter Credit

2019 ◽  
Author(s):  
Philip T. Hoffman ◽  
Gilles Postel-Vinay ◽  
Jean-Laurent Rosenthal
Keyword(s):  
Economic Growth ◽  
World War I ◽  
Economic History ◽  
Banking System ◽  
Credit Market ◽  
The United States ◽  
Financial Instruments ◽  
World War ◽  
Mortgage Debt ◽  
Private Network

Prevailing wisdom dictates that without banks countries would be mired in poverty. Yet somehow much of Europe managed to grow rich long before the diffusion of banks. This book draws on centuries of loan data from France to reveal how credit abounded well before banks opened their doors. The book shows how a vast system of shadow credit enabled nearly a third of French families to borrow in 1740, and by 1840 funded as much mortgage debt as the American banking system of the 1950s. The book traces how this extensive private network outcompeted banks and thrived prior to World War I—not just in France but in Britain, Germany, and the United States—until killed off by government intervention after 1918. Overturning common assumptions about banks and economic growth, the book paints a revealing picture of an until-now hidden market of thousands of peer-to-peer loans made possible by a network of brokers who matched lenders with borrowers and certified the borrowers' creditworthiness. The book challenges widespread misperceptions about French economic history, such as the notion that banks proliferated slowly, and the idea that financial innovation was hobbled by French law. By documenting how intermediaries in the shadow credit market devised effective financial instruments, this compelling book provides new insights into how countries can develop and thrive today.

scholarly journals INTERBANK LINKAGES AND CONTAGION RISK IN THE PORTUGUESE BANKING SYSTEM

2020 ◽  
Vol 38 (2) ◽  
Author(s):  
Maria Rosa Borges ◽  
Lara Fernandes
Keyword(s):  
Banking System ◽  
Money Market ◽  
Money Markets ◽  
Banking Systems ◽  
Contagion Effects ◽  
Contagion Risk

Interbank money markets can be a channel through which problems in one institution can spread to the remaining ones. We characterize the Portuguese overnight interbank money market between 1999 and 2009 and analyze its inherent potential for contagion, based on bilateral interbank exposures. We conclude that: (i) the Portuguese overnight interbank money market has a multiple money center structure; (ii) although unlikely, the failure of one institution can have contagion effects, pushing others into failure; (iii) however, even under the most extreme assumptions, banks that fail by contagion represent less than 10% of the total banking systems assets.

Divergent Paths, United States and France: Capital Markets, the State, and Differentiation in Transportation Systems, 1840–1940

2009 ◽  
Vol 10 (3) ◽  
pp. 449-497
Author(s):  
Jim Cohen
Keyword(s):  
United States ◽  
World War I ◽  
Capital Markets ◽  
High Speed ◽  
The United States ◽  
Transportation Systems ◽  
The State ◽  
Transport Systems ◽  
World War ◽  
Defining Moment

Why do the United States and France, both capitalist economies that were dominated by private railways in the 19th and early 20th centuries, have very different transport systems today? After World War II France developed 200 mph high speed trains, while railways in the United States declined to near irrelevance. This paper argues that cross-national divergence was caused by private and public actions that structured capitalmarkets and controlled planning. In the United States private financial institutions used capital markets to shape rail development. In France, by way of contrast, the state directly intervened in financial markets and controlled planning. Both systems thrived until World War I. But, then, faced with growing competition from cars, buses and trucks and burdened by excessive debt, they declined towards bankruptcy. The Great Depression became a defining moment as a Socialist-dominated government in France nationalized railways while in the United States, President Roosevelt's New Deal failed to enact policies to ensure the competitive viability of rail in relation to motorized transport. Rarely used archival sources provide much of the evidence for this argument.

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