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The Social Meaning of Money: “Special Monies”

Viviana A. Zelizer

in Economic Lives: How Culture Shapes the Economy

This chapter argues that the utilitarian approach to money is a theoretical and empirical straitjacket. Money belongs to the market, but not exclusively so. And while money is indeed an objective ... More

This chapter argues that the utilitarian approach to money is a theoretical and empirical straitjacket. Money belongs to the market, but not exclusively so. And while money is indeed an objective means of rational calculation, it is not only that. It first considers the traditional interpretation of money, that is, as “market money,” and then proposes an alternative model of “special monies” that incorporates the social and symbolic significance of money. Next, it presents a historical case study of domestic money as one example of a special money. It argues that domestic money—which includes a wife's money, husband's money, and children's money—is a special category of money in the modern world. The discussion focuses on the changing meaning of married women's money between the 1870s and 1930s, showing how this money, whether given by the husband or earned in the household or in the labor market, was marked as a different form of currency from an ordinary dollar.Less

London as an International Banking Center, 1950–1980

Mae Baker and Michale Collins

in London and Paris as International Financial Centres in the Twentieth Century

The late 1950s and early 1960s marked the beginning of a period of important structural change and innovation within British banking. After the war, of course, the City's fortune was far from assured ... More

The late 1950s and early 1960s marked the beginning of a period of important structural change and innovation within British banking. After the war, of course, the City's fortune was far from assured — with the UK's relative economic weakness, the weak international financial legacy from sterling's experience in the 1930s and during the Second World War, and the continued unfavourably restrictive international financial environment facing City institutions. This chapter examines the re-emergence of London as an international banking centre by focusing on the rapid growth of foreign banks locating in the City in the 1950s, 1960s, and 1970s, and the consequent competition they posed for British banks.Less

Paris, London, and the International Money Market: Lessons from Paribas, 1885–1913

Marc Flandreau and François Gallice

in London and Paris as International Financial Centres in the Twentieth Century

This chapter deals with one aspect of short-term capital movements over the period 1885-1913. It studies the role of the French haute banque in the operation of the international monetary system. It ... More

This chapter deals with one aspect of short-term capital movements over the period 1885-1913. It studies the role of the French haute banque in the operation of the international monetary system. It adopts a monographic approach, examining the international balances of the Banque de Paris et des Pays-Bas (Paribas), in an attempt to reinterpret what is known of the pre-1914 international money market's structure. The novelty of this methodology is that it uses microeconomics as a financial probe to reveal a number of more general problems. This is in contrast with macroeconomic studies of statistical interrelations among national interest rates which treat markets as black boxes.Less

Foreign Exchange and Money Markets

Roy C. Smith, Ingo Walter, and Gayle Delong

in Global Banking

This chapter discusses the evolution of two essential markets to global banks. Foreign exchange markets allow for the trading of foreign currencies, using instruments such as spot transactions, ... More

This chapter discusses the evolution of two essential markets to global banks. Foreign exchange markets allow for the trading of foreign currencies, using instruments such as spot transactions, futures, forwards, and swaps. Money markets link international lenders of short-term funds with borrowers using instruments such as Eurocurrencies and Eurobonds. Such loans are priced using the London Interbank Offered Rate (LIBOR). The chapter details how the money markets froze up during the global financial crisis in 2008 and explains why the foreign exchange market stayed liquid.Less

From Domestic to International, 1850–1914

Ranald C. Michie

in The London Stock Exchange: A History

The first section of this chapter looks at the internationalization of the London securities market over the period from 1850 to 1914. This was influenced both by transferable securities becoming ... More

The first section of this chapter looks at the internationalization of the London securities market over the period from 1850 to 1914. This was influenced both by transferable securities becoming commonplace for governments and businesses around the world, and by the transformation of communications with the development of the telegraph and then the telephone. These developments necessitated increased capacity to cope with the growing volume of securities traded, which included expansion of the trading floor, increasing membership, and the attraction of new people into the profession of stockbroking. The second section looks at the accompanying changes in the organizational and physical structure of the London Stock Exchange. The remaining sections look specifically at the expansion of membership, relationships and rivalry within the Stock Exchange, and the relationship of the Exchange to the money and capital (securities) markets.Less

The Changing Market Place Between the Wars

Ranald C. Michie

in The London Stock Exchange: A History

As a successor to the previous chapter, which looked at organizational change in the London Stock Exchange between the two World Wars, this one looks at the changing market place over the same ... More

As a successor to the previous chapter, which looked at organizational change in the London Stock Exchange between the two World Wars, this one looks at the changing market place over the same period. The first part of the chapter discusses competition from British provincial stock exchanges, from international arbitrage, and from North American and continental banks. The second part looks at the money market, and the last looks at the capital (securities) market and reduced international market.Less

Drifting Towards Oblivion, 1950–1959

Ranald C. Michie

in The London Stock Exchange: A History

This chapter look at the decline of the London Stock Exchange during the 1950s. The first part discusses the ways that the Stock Exchange raised money to enable it to survive in the early 1950s, ... More

This chapter look at the decline of the London Stock Exchange during the 1950s. The first part discusses the ways that the Stock Exchange raised money to enable it to survive in the early 1950s, relations between it and the government (which were conducted informally through confidential exchanges between the Governor of the Bank of England and the Chairman of the Stock Exchange), the restoration of option dealing, and the use of the Stock Exchange by the government to police activities regarding securities. The second part discusses the policing of the members of the Stock Exchange, and the third discusses the growing competition from the provincial stock exchanges, closer integration with the London‐based North American brokerage houses, and the Stock Exchange's lack of concern with international business. The last section looks at money and capital (securities) markets in the face of the decline of the Stock Exchange over the 1950s.Less

Prelude to Change, 1970–1979

Ranald C. Michie

in The London Stock Exchange: A History

The first section of this chapter outlines the growing threats to the London Stock Exchange through the 1970s, including the ability of its members to block new proposals by the Council of the Stock ... More

The first section of this chapter outlines the growing threats to the London Stock Exchange through the 1970s, including the ability of its members to block new proposals by the Council of the Stock Exchange, the investigation by the Monopolies Commission into the various restrictive practices of the Stock Exchange, relations with and attitude of the government, the formation of the Council of the Securities Industry (CSI), which was to take over responsibility for the Stock Exchange and other components of the securities market. The second section of the chapter discusses the limited responses of the Stock Exchange to these threats. The next two sections discuss technology and competition (from computerized trading systems), and change among the members (mergers, which resulted in a disproportionately large number of large firms as members, and a loss in numbers of jobbers). The last section looks at market opportunities––domestic corporate securities, government debt securities, loss of the foreign securities, traded options, the collapse of the securities market in 1974, and the by‐now limited role of the money market.Less

Failing to Adjust, 1960–1969

Ranald C. Michie

in The London Stock Exchange: A History

This chapter addresses the continuing decline and failure of the London Stock Exchange to adjust to change during the 1960s, when the government rather than the market continued to be the major ... More

This chapter addresses the continuing decline and failure of the London Stock Exchange to adjust to change during the 1960s, when the government rather than the market continued to be the major influence over the way it developed. The first section of the chapter discusses relations with the government. The next discusses relations with the members––where the desire was to create a level playing field for both members and non‐members, and now became an equal desire to ensure that all members had both the training and the capital to enable them to play an active role in the market, whilst not posing a threat to others; however, the members themselves were hostile to the admission of both women and foreigners, both of whom were keen to become members. The third section of the chapter discusses continuing competition with provincial and foreign stock exchanges, and the failure of the London Stock Exchange to capture or retain foreign business. The last section looks at money and capital (securities) markets in the 1960s.Less

The Indigenous Origins of the ‘Colonial Economy’

C. A. Bayly

in Rulers, Townsmen and Bazaars: North Indian Society in the Age of British Expansion 1770-1870

This chapter examines the origins of the colonial economy in north India during the later part of the eighteenth century to the early part of the nineteenth century. It explains that during this ... More

This chapter examines the origins of the colonial economy in north India during the later part of the eighteenth century to the early part of the nineteenth century. It explains that during this period the East India Company and the European private traders considered the consolidation of Benares as the main money market for eastern India and the growth of Mirzapur as the key commodity mart between Bengal, Hindustan, and central India as the most important developments in north India's pre-colonial commercial geography. It discusses the improvement in European relations with the great trading corporations of Benares and the motives and conditions which led Indian merchant families to associate with European enterprises. The chapter also provides a summary of the failures and impediments to trade which drew the British into territorial dominion in India.Less

Shattered Dominance: The First World War, 1914–1918

Ranald C. Michie

in The London Stock Exchange: A History

This chapter looks at the change from a dominant position of the London Stock Exchange before the First World War, to its severely diminished position after it. The Stock Exchange emerged from the ... More

This chapter looks at the change from a dominant position of the London Stock Exchange before the First World War, to its severely diminished position after it. The Stock Exchange emerged from the war as a fundamentally different institution, as a result of internal changes in rules and regulations, changes forced upon it (including government intervention) and the different world within which it now operated; and there was no guarantee that the conditions that had allowed it to acquire such a central position would ever reappear. The chapter traces these developments in three sections, which discuss the outbreak of war, the effects of war, and money and capital (securities) markets.Less

International Money and Foreign Exchange Markets

Roy C. Smith and Ingo Walter

in Global Banking

While foreign exchange dealings have been taking place since the fifteenth century, the past 30 years have been especially marked by new developments, growth, and change in money‐market instruments ... More

While foreign exchange dealings have been taking place since the fifteenth century, the past 30 years have been especially marked by new developments, growth, and change in money‐market instruments and methods. The most important involve Eurocurrencies, Euro‐CDs (certificates of deposit), new forms of commercial paper, floating rate notes, note issuance facilities, and revolving underwriting facilities. Explains how these have affected foreign exchange trading practices.Less

Responding to the Bear Market: Money Market Funds

Matthew P. Fink

in The Rise of Mutual Funds: An Insider’s View

This chapter discusses the impact of the 1970s bear market on the mutual fund industry. Just as three decades of a strong stock market, from 1940 to 1970, spurred mutual fund growth, the prolonged ... More

This chapter discusses the impact of the 1970s bear market on the mutual fund industry. Just as three decades of a strong stock market, from 1940 to 1970, spurred mutual fund growth, the prolonged bear market of the 1970s devastated mutual funds. Fund assets plummeted due to falling portfolio values and net redemptions of fund shares. The 1970s were also a terrible time for consumers, who paid high interest rates on their borrowings but were limited by federal law to receiving low interest rates on their savings. The mutual fund industry turned lemons into lemonade by sponsoring money market funds, which earned high short-term rates that were passed on to shareholders. Money market funds enjoyed spectacular success and revolutionized the fund industry and the entire American financial system.Less

Responding to the Bear Market: Money Market Funds

Matthew P. Fink

in The Rise of Mutual Funds: An Insider's View

The prolonged bear market of the 1970s devastated mutual funds. Fund assets plummeted due to falling portfolio values and net redemptions of fund shares. Consumers paid high interest rates on their ... More

The prolonged bear market of the 1970s devastated mutual funds. Fund assets plummeted due to falling portfolio values and net redemptions of fund shares. Consumers paid high interest rates on their borrowings but were limited by federal law, Regulation Q, to receiving low interest rates on their savings. The fund industry sponsored money market funds, which earned high short-term rates that were passed on to fund shareholders. Money funds enjoyed spectacular success and revolutionized the fund industry and the entire American financial system.Less

The Gold Standard and Public Finance, 1924–1931

G. C. Peden

in The Treasury and British Public Policy, 1906–1959

Treasury officials successfully guided ministers to complete the post-war return to fiscal and monetary orthodoxy by restoring the gold standard. On the other hand, questions must be asked about the ... More

Treasury officials successfully guided ministers to complete the post-war return to fiscal and monetary orthodoxy by restoring the gold standard. On the other hand, questions must be asked about the utility of attempts to impose rigid doctrines on public finance. Both Winston Churchill and Philip Snowden resorted to fiscal window dressing in order to achieve the appearance of a balanced budget, although the budget constraint on spending departments was real enough. The confidence of international money markets in British public finance was shaken in 1931 when it became apparent that the cost of unemployment relief was unbalancing the budget to an unknown extent. The very rigidity of the doctrines that the Treasury had imposed on monetary policy and public finance made it difficult in 1931 to absorb shocks from the international economy. The period 1924–1931 further broadened the experience of those Treasury officials who had to deal with economic theory in relation to unemployment or international finance, as the world moved into a depression.Less

The New World of Money

in New World Gold: Cultural Anxiety and Monetary Disorder in Early Modern Spain

This chapter focuses on the price revolution and the new monetary economy during the first half of the sixteenth century. Although credit was central to the networks of continental commerce, the ... More

This chapter focuses on the price revolution and the new monetary economy during the first half of the sixteenth century. Although credit was central to the networks of continental commerce, the general public believed that the financial instruments introduced by money changers and banking firms had created a strange and opaque monetary order. They suspected the deceitful transactions that were going on in the money market, which increased the price of commodities and dissolved gold and silver pieces coming from the New World into the uncertainty of credit. The progressive abstraction of money and inflation led to the belief that money itself was beginning to break down altogether. By causing puzzlement and confusion, money gave rise to extensive parliamentary petitions, economic treatises, and literary reflections. The chapter considers such writings in chronological order, including those by Cristóbal de Villalón and Luis Saravia de la Calle, in order to assess the cultural and intellectual anxiety that accompanied the growth of the credit economy. The Indies became associated with the new commercial practices and acquired a prominent role in economic writing.Less

Instruments of Monetary Policy

Stephen H. Axilrod

in The Federal Reserve: What Everyone Needs to Know

This chapter discusses the Fed's monetary instruments. It looks at how the Fed's monetary instruments are employed in the policy process, which of the Fed's instruments are most significant for ... More

This chapter discusses the Fed's monetary instruments. It looks at how the Fed's monetary instruments are employed in the policy process, which of the Fed's instruments are most significant for implementing policy, how open market operations are employed in policy implementation, and how the federal funds rate connects with money market conditions in general. It considers how the funds rate decisions affect other credit markets and how key borrowers respond to changed market conditions. In addition, it asks: how do Federal Open Market Committee policy decisions adapt to market uncertainties? How do open market operations avoid creating too much money and inflation? And does the money market itself influence spending or is it mostly a policy conduit? Perhaps the Fed's powers are also used to influence the government securities market.Less