|
|
|
|
 |
Daily Speculations Dedicated to value creation and ballyhoo deflation. Write to us at:
|
|
21-Mar-06
Book Review:
A History of Interest Rates, by Homer and Sylla. Review by Dennis Vako
Below are some selected summaries:
On Wars (revolutions, civil wars, political breakdowns), wars are
associated with:
Super taxes;
Monetary inflation on great scale;
Economic crises, political disturbances;
End of prosperity;
Bankruptcy of the great cities;
Ruinous confiscations;
Destroyed faith in property rights;
Financial stagflation;
Heavy penalties and fines levied against a losing side;
Seizure of most of the cash resources of a losing side;
Exhaustion of supplies of liquid capital;
Default on debts;
Increase in yields of debts;
Increase in debts outstanding;
Peaks of interest rates;
Price of debts often depends on fortunes of war;
On Peace and prosperity, associated with:
Peace and trade revival;
Technological improvements brought an impressive revival;
Winning wars;
Debts reductions;
Continuous payment of interest;
On Dutch and low countries:
Public usuries were under special protection of princes, who
participated through heavy license fees;
Extensive trade;
No expensive courts;
Frugal people saved and invested;
Confidence in the honesty of the government was unshaken, people
trusted it, so government can pledge the nations credit;
Most debts were funded, only in emergencies unfunded debts were used;
Yet no complete disclosure of debts outstanding-England will do that
first to improve on Italian and Dutch;
On Church, superstition and vested interest against economic freedom:
Church the biggest land owner, temples did lend, yet they were against usury;
Wider prohibition of usury directly affected the development of trade
and banking;
Only in 1950 Catholic Church declared that bankers earn their
livelihood honesty;
Interruption of commerce (in dark Ages, during siege of Europe by
Arabs) accelerated the ruin of merchants and the decline of cities
superstition throve;
On Venice:
Modern money market began in 12th century Italy;
Community of refugees on the sand islands of islands of Adriatic has
been able to repel the barbarians and develop secure independence;
Obtained concessions, freedom from customs and establishment of a
Venetian factory and colony on the Bosphorus;
No serfdom in Venice, almost entire population engaged in maritime trade;
In spite of opposition from Papacy, Venice developed trade with the
Moslem world and traded with the enemy;
Traded on such a scale, which required a financial infrastructure and
standards;
Lost war to League of Cambrai, so lost her mainland power, lost a
series of wars to Turks, hence lost her Eastern empire;
On economic recovery, associated with:
The population began to rise;
Founding of new towns by merchants, ruled by merchants;
Commercial code development;
Merchants' money started to buy political and economic concessions;
Mobility of money increased;
Contracts and insurance became widespread, as well as fairs and
trading societies;
Education spread because merchants found education advantageous in
their business;
Active trade was assisted by growing supply of money from mines, prices rose;
Agriculture became specialized;
Merchants start making local loans on land and property at interest,
and thus a rentier class developed;
Flemish and Italian merchants made loans to English wool growers,
hence a beginning of international banking;
Decline of interest rates;
On economic decline, associated with:
Excessive debts;
Plague-black death;
Decline in population;
Land values and rents fall;
Rise in wages;
Sharp fall in agricultural prices;
Civil discontent;
Social strive;
Strikes;
Protectionism;
On capital laws:
Capital accumulation led to increase in population and opening up of
vast new areas i.e. building of cities;
Disorders in Flanders brought skilled textile labor to England;
Interruption of trade, leads to discovery of alternative trade routes;
On defaults and bankruptcies:
Defaults destroyed many great merchants because they lent to a few
Royal families- Ego? Bad judgement? no diversification in assets
class, geographically, or by industry? i.e. Faggars, Florence and
Genoa merchants.
State bankruptcy market the end of prosperity of the entire market for
bills in 1557 France.
Vinh Tu adds:
3000 plus years is an awfully long time, and the nature of war has not been constant during that interval. The nation state as we know it has only evolved over the course of the last 300 years. There have been tribal wars, religious wars, national wars, world wars... Some would argue there have been class wars; also, wars on drugs, on poverty, on diseases. And are we now in a war on terror. Is this a new form of war?
I will have to add Homer and Sylla to the top of my reading list, but my question is, how should we apply a rule that "10% a year can only be achieved in a leader country" to a situation with non-conventional, asymmetric war?
(not clickable).