the history of money and financial markets by ken and brett nelson [email protected]...
TRANSCRIPT
Banking Crises – 18th Century
Crisis of 1763, started in Amsterdam, begun by the collapse of Leendert Pieter de Neufville, spread to Germany and Scandinavia
Crisis of 1772–1773 in London and Amsterdam, begun by the collapse of the bankers Neal, James, Fordyce and Down.
Panic of 1792, New York
Panic of 1796–1797, Britain and United States
Banking Crises – 19th Century
Panic of 1819, a U.S. recession with bank failures; culmination of U.S.'s first boom-to-bust economic cycle
Panic of 1825, a pervasive British recession in which many banks failed, nearly including the Bank of England
Panic of 1837, a U.S. recession with bank failures, followed by a 5-year depression
Panic of 1847, United Kingdom
Panic of 1857, a U.S. recession with bank failures
Panic of 1866, Europe
Panic of 1873, a U.S. recession with bank failures, followed by a 4-year depression
Panic of 1884, United States and Europe
Panic of 1890, mainly affecting the United Kingdom and Argentina
Panic of 1893, a U.S. recession with bank failures
Australian banking crisis of 1893
Banking Crises – 20th Century
Panic of 1907, a U.S. economic recession with bank failures
Showa Financial Crisis, a 1927 Japanese financial panic that resulted in mass bank failures across the Empire of Japan.
Great Depression, the worst systemic banking crisis of the 20th century
Secondary Banking Crisis of 1975-1977 in the UK
Japanese Asset Bubble (1986–2003)
Savings and Loan Crisis of the 1980s and 1990s in the U.S.
Finnish Banking Crisis 1990
Swedish Banking Crisis 1990 – Failure of Swedish Model
Venezuela Banking Crisis of 1994
Chinese Currency Crisis of 1994
1997 Asian Financial Crisis
1998 collapse of Long Term Capital Management
1998 Russian Financial Crisis
Argentine Economic Crisis 1998-2002
Ecuador Banking Crisis 1998-1999
Banking Crises – 21st Century
•2002 Uruguay Banking Crisis•Late 2000’s Financial Crisis, including:•Subprime Mortgage in the U.S. starting in 2007•2009 United Kingdom Banking Crisis•2008-2009 Belgian Financial crisis•2008-2012 Icelandic Financial Crisis•2008-2009 Russian Financial Crisis•2008-2009 Ukrainian Financial Crisis•2008-2012 Spanish Financial Crisis•2008-2012 Spanish Financial Crisis•2008 – 2011 Irish Financial Crisis •Venezuelan Banking Crisis 2008-2009
Countries on the rise. Countries that have doubled their share of world GDP from 1913 to 1990:
Japan 2.62% to 8.57%
Korea 0.34% to 1.38%
Malaysia 0.10% to 0.33%
Singapore 0.02% to 0.06%
Taiwan 0.09% to 0.74%
Brazil 0.70% to 2.74%
Colombia 0.23% to 0.59%
Mexico 0.95% to 1.91%
Venezuela 0.12% to 0.59%
Countries in decline: Countries that have seen their share of world GDP fall significantly from 1913 to 1990
India 7.47% to 4.05%
Myanmar 0.31% to 0.11%
Austria: 0.86% to 0.48%
Belgium 1.18% to 0.63%
France 5.29% to 3.79%
Germany 8.68% to 4.67%
Countries in decline: Countries that have seen their share of world GDP fall significantly from 1913 to 1990
Hungary 0.60% to 0.25%
Poland 1.70% to 0.72%
Romania 0.80% to 0.30%
Russia 8.50% to 4.25%
United Kingdom 8.22% to 3.49%
Uruguay 0.14% to 0.07%
Economic Changes in Regions: Share of World GDP 1913 to 1990
Africa 1.18% to 2.38%
Asia 22.01% to 26.17%
Europe 44.53% to 28.11%
Latin America 3.74% to 7.83%
US 18.93% to 21.41%
Sovereign Defaults
Greece announced they’re issuing more government bonds last week….
The offering was oversubscribed sevenfold!
Sovereign Defaults 1300 - 1799
Austria: 1796
England:1340, 1472, 1594, 1594
France: 1558. 1624, 1648, 1661, 1701, 1715. 1770, 1788
Germany (Prussia): 1683
Portugal: 1560
Spain: 1557, 1575, 1596, 1607, 1627, 1647
Newfoundland
1928 – 1933 Fish process fall 48%. Fishery industry fails. Newsprint prices fall 35%. Total exports fall by 27%.
1931 – Welfare spending increases dramatically. Debt service difficulties begin. The government has to borrow to service its debts.
February 1933 – The British government appoints a commission to examine the future of Newfoundland
Dec 1933 – The Loan Act passed giving up sovereignty to Canada to avoid default.
Government Bond default led to loss of Sovereignty.
Newfoundland
Year Total Public Debt
Ratio of Debt to Revenue
Interest Payments / Revenues
1928 79.9 8.4 0.4
1929 85.5 8.6 0.39
1930 87.6 7.6 0.36
1931 87.6 9.0 0.44
1932 90.1 11.4 0.59
1933Ave ratio of defaults
98.5 12.64.2
1.58
Sovereign Defaults 1800 - 1824
Austria – Hungary: 1802, 1805, 1811, 1816
France: 1812
Germany – Hesse: 1814
Germany – Prussia: 1807, 1813
Germany – Westphalia: 1812
Netherlands: 1814
Spain: 1809, 1820
Sweden: 1812
Sovereign Defaults 1825-1849
Greece: 1826, 1843
Portugal: 1828, 1837, 1841, 1845
Russia: 1839
Spain: 1831, 1834
Argentina: 1827
Chile: 1826
Colombia: 1826
Costa Rica: 1828
Ecuador: 1826
El Salvador: 1828
Guatemala: 1828
Honduras: 1828
Mexico: 1827, 1833, 1844
Nicaragua: 1828
Peru: 1826
Venezuela: 1826,1848
Sovereign Defaults 1850-1874
Tunisia: 1867
Austria-Hungary: 1868
Germany – Schleswig-Holstein: 1850
Greece: 1860
Portugal: 1852
Spain: 1851,1867,1872
Columbia: 1850, 1873
Costa Rica: 1874
Dominican Republic: 1872
Ecuador: 1868
Honduras: 1873
Mexico: 1866
Paraguay: 1874
Venezuela: 1860,1865
Sovereign Defaults 1875-1899
Egypt: 1876
Greece: 1893
Portugal: 1890
Russia: 1885
Spain: 1882
Turkey: 1876
Argentina: 1890
Bolivia: 1875
Brazil: 1898
Chile: 1880
Colombia: 1880
Costa Rica: 1895
Dominican Republic: 1892, 1897, 1899
Ecuador: 1894
El Salvador: 1898
Guatemala: 1876,1894,1899
Mexico: 1898
Nicaragua: 1894
Paraguay: 1892
Peru: 1876
Uruguay: 1876, 1891
Venezuela: 1892, 1898
Percentage of Time a County was in Default. 1800-2008
Venezuela: 38.4% Costa Rica: 38.2% Hungary: 37.1% Colombia: 36.2% Guatemala: 34.4% Poland: 32.6% Argentina: 32.5%
Percentage of Time a County was in Default. 1800-2008. The Big Defaulters
Honduras 64% Ecuador 58.2% Greece: 50.6% Nicaragua: 45.2% Mexico: 44.6% Peru: 40.3% Russia: 39.1%
Independence The Spanish colonies in Central and South America gained their
Independence from 1811 to 1830. There was a large need and demand for their government bonds.
1811: Paraguay and Uruguay
1816: Argentina
1818: Chile
1819: Colombia
1821: Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua
1822: Brazil, Poyais
1825: Bolivia
1830: Venezuela
Poyais? “General Sir” Gregor MacGregor had fought as a mercenary in Simon
Bolivar’s army.
He returned to the United Kingdom and said that he was the “Prince of Poyais”
He claimed that the Capital City of Saint Joseph had, “broad boulevards, colonnaded buildings, and a splendid domed cathedral.
He convinced many Scots to help settle Poyais and said that those who did would be able to build sawmills and gold mines to exploit the natural resources.
In 1822, he convinced London Bankers to underwrite a government bond offering at 6% interest (the same rate that Argentina, Chile, Colombia, and Peru were paying.
Poyais He disappeared with all the money When they settlers arrived, they found nothing but
jungle.
US Defaults
January 1790: Interest rates maintained at 6%, but payment of interest was deferred for 10 years. This happened in a period of very high inflation.
1841-1842: 9 States defaulted on their debt. 3 States repudiated 100% of their debt.
1873-1874: 10 States defaulted on their debt. West Virginia didn’t settle their debt until 1919.
1933: US did not honor the gold clause. We refused to pay Panama the gold annuity that was negotiated in 1903. The dispute was settled in 1936.
Hyperinflation
Angola: May 1996 – 84.1% Argentina: 1989 - 3,079.5% (other source says
12,000%), March 1990 – 197% Armenia: January 1992 – 73.1%, November 1993 –
438% Austria: August 1922 – 129%, Full year 1922 – 1,426% Azerbaijan: January 1992 – 118% Belarus: June 1992 159%, August 1994 - 53.4% Bolivia: February 1985 – 183%
Hyperinflation
Bosnia Herzegovina: June 1992 – 322% Brazil: 1987 – 228.3%, March 1990 82.4%, Full
Year 1990 – 2,947.7% Bulgaria: Feb 1997 - 123% Chile: Full Year 1973 – 700%, October 1973: 87.6%, China: June 1945 – 302%, April 1948 – 5,070% Estonia: January 1992 – 87.2% France: August 1796 – 304%
Hyperinflation
Georgia: March 1992: 198%, September 1994: 211%
Greece: 1922 - 54.2%, 1923 - 72.6%, November 1944 – 13,800%
Italy: 1917 - 43.8%, 1920 - 56.2%
Japan: 1944 -26.6%, 1945 – 568.1%
Kazakhstan: January 1992 – 141%, November 1993 – 55.5%
Kyrgyzstan: January 1992: 157%
Serbian Krajina (Reincorporated into Croatia in 1995). In 1992, the highest denomination was 50,000 dinara. In 1993, the highest denomination was 50,000,000,000 dinara.
Hyperinflation
Nicaragua: 50,000,000,000 1988 Cordobas was worth 1 1991 Cordoba
Peru: September 1988 – 114%, August 1990 – 397%
Philippines: January 1944 – 60%
Poland: 1921 – 988,223%, Nov 1923 – 275%, January 1990: 77.3%
Srpska (Breakaway region of Bosnia): January 1994: 297,000,000%
Russia / Soviet Union: 1922 – 213%, 1992 – 2,520%
Taiwan: August 1945: 399%, February 1947 – 50.8%, October 1948 – 399%
Hyperinflation
Tajikistan: January 1992: 201%, November 65.2% Turkey: 1990 – 60.3%, 1994 – 106.3% Turkmenistan: November 1993 – 429%, January
1996 – 62.5% Ukraine: Jan 1992: 252% Uzbekistan: Jan 1992: 118% Yugoslavia: January 1994: 313,000,000,000% Zaire: 1992 – 114%, 1993: 250%, 1998: 78.5%
HyperInflation
Germany: 1920 - 66.5%, 1923 - 22,220,194,522%. In 1923, the Weimar Republic was issuing 2 trillion mark banknotes, and 50 billion mark postage stamps. One US dollar was worth 4 trillion German Marks.
Hungary: July 1946 – 41.9 quadrillion percent for the month. Prices doubled every 15 hours. The Hungarian National Bank issued the largest denomination bank note ever: 100 quintillion pengo. 100,000,000,000,000,000,000 pengo.
Zimbabwe Hyperinflation
At Independence in 1980, 1 Zimbabwe dollar was worth $1.25 US dollars. In 1998, President Robert Mugabe began a land redistribution program, taking land from white farmers and giving to black farmers (and cronies). Zimbabwe turned from a food exporter to importer and capital fled. In 2004, inflation reached 624%. In 2006, 1,730%. In June 2007, 11,000%. In July 2007 inflation reachd 2,200,000%. As of July 2008, one US dollar was worth 688 billion Zimbabwe dollars. On August 1st 2008, the Zimbabwe dollar was revalued. One new Zimbambe dollar for each 30,000,000,000 old Zimbabwe dollars. Inflation peaked in November 2008 at 89,700,000,000,000,000,000,000%. Prices doubled every 24.7 hours.