Proposal preview

Money markets, monetary areas and their institutions XVII-XXth centuries

Research on the space dimension in monetary and financial history is no longer the blank space it was for long time. While the main questions debated today in the field of monetary markets are those of international or regional monetary systems, it seems interesting to focus on the earlier phases of monetary integration as well as on the transition periods like industrialization. In the recent discussions about monetary systems a strong trend suggests that more local scales are a better field to try to analyse the functioning of the relationships between currencies. The aim of the present session is to deal with the setting up of national monetary markets, from the establishment of the different national currencies which are one of the pillars of the building up of the national states to the attempts to building up monetary regional areas.
At the level of a specific country, what are the ways leading to the monetary unification and what were the main actors of this unification: merchants, banks, the state? The reasons of this monetary unification were the need to accompany the extension of trade, the easing of taxes payments, the will to smooth the differences between the regional interest rates when they were to wide. The setting up of a national monetary system was closely linked with these of the domestic money market, notably through the development of a large enough discount market. We have also to consider the fact that the space of money market is not always the national space as seen in the case of the Euro.
The shape of money markets varies according to the unified character of the money circulation. It precedes and arouses the creation of central banks. National economies were never closed or isolated from the rest of the world; the trading of goods and services, the flows of money therefore let to numerous links between national currencies areas: the firsts forms of national markets have immediately international features. Thus, national capital markets must be studied in interaction with international capital markets: the two levels are to be studied together for they are linked.
The history of the German Mark or that of the American dollar for example are rich in problems and questions concerning the progressive building-up of the national monetary areas which depends just as well on the international relationship as on the formation of a national economic market. In which the discount markets are at the same time signs, factors, and consequences. What leads at the other end of the scale to consider the attempts of monetary unions or of international monetary unification.
The aim of this session is to gather scholars interested in exploring some of these issues or other in the same field of the history of money markets. The organizers welcome papers dealing with cases from different parts of the world and different time periods.

Organizer(s)

  • André Straus CNRS Paris strausandre22@gmail.com France
  • Laure Quennouëlle Corre CNRS Paris lqcorre@gmail.com France

Session members

  • Chislain Moupebele Makadjoka, EHESS Paris
  • Anders Ögren, University of Lund
  • André Straus, CNRS Paris
  • Laure Quennouëlle Corre, CNRS Paris
  • Francisco Cebreiro Ares, Facultade de Historia Universidade de Santiago de Compostela
  • Maria Stella Chiaruttini, European University Institute
  • Ivo Maes, National Bank of Belgium
  • Rebeca Gomez, Lyon 2 University
  • Sylvie Diatkine, PHARE and University of Paris Est

Discussant(s)

  • Richard Sylla Stern New York University rsylla@stern.nyu.edu
  • Catherine Schenk Glasgow University catherine.schenk@glasgow.ac.uk

Papers

Panel abstract

The purpose of this session is to consider the various modalities of the constitution of the national money markets. Starting from local or regional circulation, national monetary spaces have gradually been established through monetary unification processes that have accompanied the extension of the money markets to increasingly large areas. In this process private agents, merchants or bankers have played an important role by extending the discount markets and by ensuring the relations between different economic areas through the foreign exchange markets. Banks have thus played a vital role in allowing the liquidity of private credit through discounting and rediscounting. This liquidity of the money markets is dependent on the exchange markets but also on the public debt which underlines their political dimension. In all cases the advent of monetary spaces has found expression in the emergence of central banks whose degree of dependence on state power has always been problematic.

1st half

Ratio pecuniam parit. Accounting and the making of financial markets in the Early Modern Age

Nadia Matringe

Literature on accounting and capitalism has focused on assessing the capacity of the double-entry form to promote “rational” decision-making based on profit calculation. Research in the archives of early modern Italian banks reveals the necessity to consider the link between accounting and capitalism from the perspective of infrastructures. It shows that accounting played a crucial role in creating, shaping and developing Europe’s two most important international monetary markets in the early modern age: the foreign exchange and the fair deposit market. Accounting tables became the sole material support for a growing number of international fund transfers and credit operations performed at these markets. Furthermore, the fair deposit market was itself a direct consequence of the need to clear accounts at the end of each fair. The European payment system thus relied on an accounting infrastructure, which contributed to the emergence and expansion of financial capitalism.

Literature on accounting and capitalism has focused on assessing the capacity of the double-entry form to promote “rational” decision-making based on profit calculation. Research in the archives of early modern Italian banks reveals the necessity to consider the link between accounting and capitalism from the perspective of infrastructures. It shows that accounting played a crucial role in creating, shaping and developing Europe’s two most important international monetary markets in the early modern age: the foreign exchange and the fair deposit market. Accounting tables became the sole material support for a growing number of international fund transfers and credit operations performed at these markets. Furthermore, the fair deposit market was itself a direct consequence of the need to clear accounts at the end of each fair. The European payment system thus relied on an accounting infrastructure, which contributed to the emergence and expansion of financial capitalism.

How to think Bank rate policy ? The "art of central banking" according to the 19th century English literature

Sylvie Diatkine

Monetary policies are the outcome of central banks practices which depend of monetary theories. I will focus on Bank rate monetary policy, which is a central issue for classical English economists. The question is: is it necessary to control the money market rate of interest? First, I will show that for the Banking School tradition Bank rate policy is necessary because of the instability of the rate of interest on the money market which needs controlling it. Second, objective of Bank rate monetary policy in this tradition is twofold: internal stability (regulation of credit) and external stability (regulation of the balance of trade). Third, on the contrary, in the other tradition, the one of the Currency School, there is no instability of interest rates. So there is no need for Bank rate policy. The only useful monetary policy is a rigid rule of base money control.

Monetary policies are the outcome of central banks practices which depend of monetary theories. I will focus on Bank rate monetary policy, which is a central issue for classical English economists. The question is: is it necessary to control the money market rate of interest? First, I will show that for the Banking School tradition Bank rate policy is necessary because of the instability of the rate of interest on the money market which needs controlling it. Second, objective of Bank rate monetary policy in this tradition is twofold: internal stability (regulation of credit) and external stability (regulation of the balance of trade). Third, on the contrary, in the other tradition, the one of the Currency School, there is no instability of interest rates. So there is no need for Bank rate policy. The only useful monetary policy is a rigid rule of base money control.

Regional monies, national currency – Lessons from the Swedish monetization

Anders Ögren

This paper focuses on the Swedish monetization and market integration that took place in the nineteenth century. To capture the forces behind this development we study the money market for formal as well as for informal (complementary) money. We focus especially on the period when Sweden experienced private banks that issued notes (1831 until 1906). These notes circulated at first regionally but were of importance for the national monetary integration. We also study the Swedish national bank, Bank of Sweden, as central bank’s role for the monetization and integration during this period.

This paper focuses on the Swedish monetization and market integration that took place in the nineteenth century. To capture the forces behind this development we study the money market for formal as well as for informal (complementary) money. We focus especially on the period when Sweden experienced private banks that issued notes (1831 until 1906). These notes circulated at first regionally but were of importance for the national monetary integration. We also study the Swedish national bank, Bank of Sweden, as central bank’s role for the monetization and integration during this period.

2nd half

Monetary Unification and Money Market in Germany in the 19th Century

André Straus

The nineteenth century’ Germany is a fertile ground for those interested in the history of markets and monetary policies or concerned with the relationship between monetary and financial conditions and growth. At the beginning of the 19th century, the future Germany presented itself as a mosaic of states, all of which had their own monetary autonomy. The great territorial fragmentation and the extreme diversity of monetary systems based on metallic coins were obviously a hindrance to economic development. On the eve of the First World War, unified Germany is Europe's leading industrial power. During this century it realized its political unity, its monetary unification and considerably developed its industry. It is the specificities and the rhythms of the development of the German money market, its relationship with growth and the links of this evolution with the main features of German politics that we approach here.

The nineteenth century’ Germany is a fertile ground for those interested in the history of markets and monetary policies or concerned with the relationship between monetary and financial conditions and growth. At the beginning of the 19th century, the future Germany presented itself as a mosaic of states, all of which had their own monetary autonomy. The great territorial fragmentation and the extreme diversity of monetary systems based on metallic coins were obviously a hindrance to economic development. On the eve of the First World War, unified Germany is Europe's leading industrial power. During this century it realized its political unity, its monetary unification and considerably developed its industry. It is the specificities and the rhythms of the development of the German money market, its relationship with growth and the links of this evolution with the main features of German politics that we approach here.

The Lira: Token of National (Dis)union (1814-74)

Maria Stella Chiaruttini

It is still a matter of debate whether the creation in 1861 of a new nation state and, with it, of a new national currency, the Italian lira, was beneficial to the country as a whole in the long run. What is undeniable, instead, is that in the short run the monetary unification of Italy, carried out in haste without any preliminary agreement among Italian states, was rather traumatic, lengthy and ill-executed. This is particularly true for the South, which had to change its silver ducat for the bimetallic lira in a context of latent civil war and capital flight. International as well as domestic speculation between North and South was rampant and compounded by the unequal struggle between the Piedmontese and the Southern banks of issue. Note convertibility was soon abandoned, with further asymmetric shocks for the South, which under the Bourbon regime had enjoyed remarkable monetary stability.

It is still a matter of debate whether the creation in 1861 of a new nation state and, with it, of a new national currency, the Italian lira, was beneficial to the country as a whole in the long run. What is undeniable, instead, is that in the short run the monetary unification of Italy, carried out in haste without any preliminary agreement among Italian states, was rather traumatic, lengthy and ill-executed. This is particularly true for the South, which had to change its silver ducat for the bimetallic lira in a context of latent civil war and capital flight. International as well as domestic speculation between North and South was rampant and compounded by the unequal struggle between the Piedmontese and the Southern banks of issue. Note convertibility was soon abandoned, with further asymmetric shocks for the South, which under the Bourbon regime had enjoyed remarkable monetary stability.

Paul van Zeeland and the first decade of the US Federal Reserve System. An analysis from European central banker who was a student of Kemmerer

Ivo Maes, Rebeca Gomez

This paper goes into the analysis of Paul van Zeeland, a Belgian central banker who studied with Kemmerer in Princeton, of the first years of the Federal Reserve System. There are clear similarities in the analyses of both men, for instance in their adherence to the gold standard, quantity theory of money and real bills doctrine. Moreover, they shared a view that with the Fed in place, financial crises would be a distant memory. However, there were also important differences. So accorded van Zeeland a greater significance to the discount market (a key factor for the international role of the dollar) and to a stronger centralization of the Fed. Moreover, very specific for van Zeeland, is the importance given to the Fed's independence from the State (an element related to van Zeeland’s continental European background and Belgium's experience of monetary financing during the war).

This paper goes into the analysis of Paul van Zeeland, a Belgian central banker who studied with Kemmerer in Princeton, of the first years of the Federal Reserve System. There are clear similarities in the analyses of both men, for instance in their adherence to the gold standard, quantity theory of money and real bills doctrine. Moreover, they shared a view that with the Fed in place, financial crises would be a distant memory. However, there were also important differences. So accorded van Zeeland a greater significance to the discount market (a key factor for the international role of the dollar) and to a stronger centralization of the Fed. Moreover, very specific for van Zeeland, is the importance given to the Fed's independence from the State (an element related to van Zeeland’s continental European background and Belgium's experience of monetary financing during the war).

The Gabonese money market in the Franc area 1960-1974

Chislain Moupebele Makadjoka

The establishment of a public treasure in Gabon came up against, after independence, hit a serious problem: the shortage of savings and the lack of financial market do not allow it to provide sustainable fund so as to be the State’s banker every time. The placement of loans at the national level is as far as problematic as the systematical resort to international financial markets. It would harden the financial credibility and would affect the implementation of monetary policy. This survey aims at analyzing the gathered tools to guarantee the working of a non-institutional money market. It also aims to understanding the issue of the regulation of availability of money which is more important than their use.

The establishment of a public treasure in Gabon came up against, after independence, hit a serious problem: the shortage of savings and the lack of financial market do not allow it to provide sustainable fund so as to be the State’s banker every time. The placement of loans at the national level is as far as problematic as the systematical resort to international financial markets. It would harden the financial credibility and would affect the implementation of monetary policy. This survey aims at analyzing the gathered tools to guarantee the working of a non-institutional money market. It also aims to understanding the issue of the regulation of availability of money which is more important than their use.

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