Hostname: page-component-848d4c4894-xfwgj Total loading time: 0 Render date: 2024-07-05T15:31:46.597Z Has data issue: false hasContentIssue false

The invisible stabiliser: asset arbitrage and the international monetary system since 17001

Published online by Cambridge University Press:  12 September 2008

R. C. Michie
Affiliation:
University of Durham

Abstract

Image of the first page of this content. For PDF version, please use the ‘Save PDF’ preceeding this image.'
Type
Articles
Copyright
Copyright © European Association for Banking and Financial History 1998

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

2 See Schwartz, A. J., ‘Introduction’, in Bordo, M. D. and Schwartz, A. J. (eds), A Retrospective on the Classical Gold Standard, 1821–1931 (Chicago/London, 1984), p. 6Google Scholar; Harley, C. K., ‘International capital movements and the gold standard: British domestic investment and American railways in the 1880s’, in Thompson, F. M. L. (ed.), Landowners. Capitalists and Entrepreneurs (Oxford, 1994), p. 18Google Scholar; Eichengreen, B., Golden Fetters: The Gold Standard and the Great Depression, 1919–1939. (New York/Oxford, 1992), pp. xi, 390Google Scholar; Officer, L. H., Between the Dollar-Sterling Gold Points: Exchange Rates, Parity and Market Behaviour (Cambridge, 1996), p. 198CrossRefGoogle Scholar; Feinstein, C. H., Temin, P. and Toniolo, G., ‘International economic organisation: banking, finance and trade in Europe between the wars’, in Feinstein, C. H. (ed.), Currency and Finance in Europe Between the Wars (Oxford, 1995), pp. 1617CrossRefGoogle Scholar; Gallarotti, G. M., The Anatomy of an International Monetary Regime: The Classical Gold Standard, 1880–1914 (New York, 1995), pp. 6, 8, 12Google Scholar; Dick, T. J. O. and Floyd, J. E., Canada and the Gold Standard: Balance of Payments Adjustments, 1871–1913 (Cambridge, 1992), pp. 10, 170–3Google Scholar; Ally, R., Gold and Empire: The Bank of England and South Africa's Gold Producers, 1886–1926 (Johannesburg, 1994), p. 8Google Scholar; and Eichengreen, B.Central bank co-operation and exchange rate commitments: the classical and interwar gold standards compared’, Financial History Review, 2 (1995), p. 99.CrossRefGoogle Scholar

3 Einzig, P., A Textbook on Foreign Exchange (London, 1966), pp. 1213Google Scholar; James, H., International Monetary Co-operation since Bretton Woods (Washington, DC, 1996), ch. 17Google Scholar; and Financial Times, 5 06. 1996.Google Scholar

4 Officer, Dollar-Sterling Gold Points, pp. 9, 36, 39, 49, 51.Google Scholar

5 Clare, G., The ABC of the Foreign Exchange: A Practical Guide (London, 1895), p. 34Google Scholar; see also Brooks, H. K., Foreign Exchange Textbook (Chicago, 1906), p. 5.Google Scholar

6 Quoted in Moggridge, D. E., British Monetary Policy, 1924–1931: The Norman Conquest of $4.86 (Cambridge, 1972), p. 260.Google Scholar

7 Friedman, M. and Schwartz, A. J., Monetary Trends in the United States and the United Kingdom: Their Relations to Income, Prices and Interest Rates, 1867–1975 (Chicago, 1982), p. 161CrossRefGoogle Scholar; Jonung, L., ‘Swedish experience under the classical gold standard, 1873–1914’, in Bordo, and Schwartz, , Retrospective, pp. 368–9Google Scholar; Muhleman, A. L., Monetary Systems of the World (New York, 1896), pp. 177–8Google Scholar; and Triffin, R., Our International Monetary System: Yesterday, Today and Tomorrow (New York, 1968), p. 23.Google Scholar

8 Spufford, P., Money and its Use in Medieval Europe (Cambridge, 1988), pp. 254–5.CrossRefGoogle Scholar

9 McCusker, J. S., Money and Exchange in Europe and America, 1600–1775: A Handbook (London, 1978), p. 18.CrossRefGoogle Scholar

10 de Vries, J. and Van der Woude, A., The First Modern Economy: Success, Failure and Perseverence of the Dutch Economy, 1500–1815 (Cambridge, 1997), pp. 130–1, 134.CrossRefGoogle Scholar

11 Ellis, A., The Rationale of Market Fluctuations (London, 1876), p. 72Google Scholar; Margraff, A. W., International Exchange (Chicago, 1903), p. 31Google Scholar; Withers, H., Money-Changing: An Introduction to Foreign Exchange (London, 1913)Google Scholar; Clare, , ABC of the Foreign Exchange, pp. 2932Google Scholar; and Brooks, , Foreign Exchange, p. 12O.Google Scholar

12 McCusker, , Money and Exchange, p. 22Google Scholar; Spufford, , Money and its Use, pp. 255–6, 395Google Scholar; and Einzig, P., History of Foreign Exchange (London, 1962), pp. 67, 71, 123.Google Scholar

13 Aris, S., The Jews in Business (London, 1970), pp. 66–7Google Scholar; Spufford, , Money and its Use, p. 395Google Scholar; and McCusker, , Money and Exchange, pp. 71123.Google Scholar

14 Jonker, J., Merchants. Bankers. Middlemen: The Amsterdam Money Market During the First Half of the 19th Century. 1814–1863 (Amsterdam, 1997), pp. 23, 91, 126, 189, 236, 242, 301Google Scholar; Einzig, , History of Foreign Exchange, pp. 122, 134, 137Google Scholar; Eagly, R. V. and Smith, V. K., ‘Domestic and international integrity of the London money market, 1731–1789’, Journal of Economic History, 36 (1976), pp. 207, 210–11CrossRefGoogle Scholar; Neal, L., ‘The integration and efficiency of the London and Amsterdam stock markets in the eighteenth century’, Journal of Economic History, 47 (1987), p. 115CrossRefGoogle Scholar; Oppers, S. E., ‘The interest rate effect of Dutch money in eighteenth century Britain’, Journal of Economic History, 53 (1993), p. 40CrossRefGoogle Scholar; Schubert, E. S., ‘Arbitrage in the foreign exchange markets of London and Amsterdam during the eighteenth century’, Explorations in Economic History, 26 (1989), pp. 122, 280CrossRefGoogle Scholar; Neal, L., The Rise of Financial Capitalism: International Capital Markets in the Age of Reason (Cambridge, 1994), pp. 275, 279, 281Google Scholar; de Vries, and Woude, Van der, First Modern Economy, pp. 120, 144Google Scholar; 't Hart, M., Jonker, J. and Van Zanden, J. L., A Financial History of the Netherlands (Cambridge, 1997), pp. 52, 55, 57–8, 92CrossRefGoogle Scholar; and Perkins, E. J., American Public Finance and Financial Services, 1700–1815 (Columbus, Ohio, 1994), pp. 305, 313, 315, 336, 356.Google Scholar

15 Mitchell, B. R., British Historical Statistics (Cambridge, 1988), pp. 600–1.Google Scholar

16 Mortimer, T., Everyman his own Broker or a Guide to Exchange Alley (London, 2nd ed., 1761), p. 34.Google Scholar

17 Platt, D. C. M., Foreign Finance in Continental Europe and the United States. 1815–1870 (London, 1984), pp. 1011Google Scholar; Michie, R. C., The London and New York Stock Exchanges. 1850–1914 (London, 1987), pp. 3541Google Scholar; Jonker, , Merchants. Bankers. Middlemen, pp. 22–3, 30, 71, 126, 189–93, 238–43, 312, 326, 363Google Scholar; English, W. B., ‘Understanding the costs of sovereign default: American state debts in the 1840s’, American Economic Review, 86 (1996), p. 261Google Scholar; and 't Hart, et al. , Financial History of Netherlands, pp. 92, 102, 105–6, 111–12.Google Scholar

18 Officer, Dollar-Sterling Gold Points, pp. 103, 108, 182, 184, 191.Google Scholar

19 Michie, , London and New York, pp. 3642Google Scholar; Platt, , Foreign Finance, pp. 1314, 19Google Scholar: Kindleberger, C. P., A Financial History of Western Europe (London, 1984), pp. 13, 283–4Google Scholar; and Garbade, F. D. and Silber, W. L., ‘Technology, communications and the performance of financial markets 1840–1975’, Journal of Finance, 33 (1978), pp. 827–8.CrossRefGoogle Scholar

20 Michie, , London and New York, pp. 42–7.Google Scholar

21 Escher, F. E., Elements of Foreign Exchange (New York, 1911), pp. 137–8.Google Scholar

22 Edelstein, M., Overseas Investment in the Age of High Imperialism: The United Kingdom 1850–1914 (London, 1982), pp. 82, 330.Google Scholar See also Michie, R. C., ‘Friend or foe? Information technology and the London Stock Exchange since 1700’, Journal of Historical Geography, 23 (1997).CrossRefGoogle Scholar

23 Veenendaal, A. J. Jr, Slow Train to Paradise: How Dutch Investment Helped Build American Railroads (Stanford, Ca, 1996), pp. 25, 60, 93–4, 125, 130, 171–4Google Scholar; Michie, , London and New York, pp. 4857Google Scholar; Thomas, W. A., ‘An intra-empire capital transfer: the Shanghai Rubber Company boom 1909–1912’, Liverpool Research Papers in Economics, Finance and Accounting, no. 9610 (1996), p. 20Google Scholar; Carlos, A. M. and Lewis, F. D., ‘Foreign financing of Canadian rockroads: the role of information’, in Bordo, M. D. and Sylla, R. (eds), Anglo-American Financial Systems: Institution and Markets in the Twentieth Century (New York, 1995), p. 399Google Scholar; and Goldsmith, R. W., Comparative National Balance Sheets: A Study of Twenty Countries, 1688–1918 (Chicago, 1985), Appendix A.Google Scholar

24 Bloomfield, A. I., Short-Term Capital Movements under the Pre-1914 Gold Standard (Princeton, NJ, 1903). pp. 38, 40, 76Google Scholar; Lindert, P. H., Key Currencies and Gold, 1900–1913 (Princeton, NJ, 1969), pp. 16, 17, 29Google Scholar; Clare, , ABC of the Foreign Exchange, p. 107Google Scholar; Brooks, , Foreign Exchange, pp. 136, 193Google Scholar; and Escher, , Elements, pp. 1112, 31, 54, 72, 122.Google Scholar

25 Einzig, , Foreign Exchange, p. 183Google Scholar; and League of Nations, International Currency Experience. Lessons of the Inter-War Period (Geneva, 1944), pp. 1314.Google Scholar

26 For the need to have such a rapid adjustment mechanism, see McCloskey, D. N. and Zecher, J. R., ‘How the gold standard worked 1880–1913’, in Frenkel, J. A. and Johnson, H. G. (eds), The Monetary Approach to the Balance of Payments (London, 1976), p. 385.Google Scholar

27 Conant, C. A., ‘The balance of trade’, in Gibson, T. (ed.), Special Market Letters for 1908 (New York, 1909), p. 59.Google Scholar

28 Paish, G., The Trade Balance of the United States (Washington, DC, 1910), p. 165.Google Scholar

29 Officer, Dollar-Sterling Gold Points, pp. 103, 107, 182–4, 191–2, 217, 272, 274–5, 281.Google Scholar

30 ibid., p. 198. See also Michie, , London and New York, pp. 153–7.Google Scholar

31 Conant, C. A., The Functions of the Stock Exchange (New York, 1914), pp. 1415.Google Scholar

32 See Michie, R. C. (ed.), Financial and Commercial Services (London, 1994), pp. xli–liv.Google Scholar

33 Gallarotti, , International Monetary Regime, pp. 29, 41, 55, 85, 123, 176, 205, 208Google Scholar; Dick, and Floyd, , Canada and the Gold Standard, pp. 128, 160, 166–7, 170–3Google Scholar; and James, , International Monetary Co-operation, pp. 1216.Google Scholar

34 Kirkaldy, A. W. (ed.), Credit, Industry and War (London, 1915), p. 246.Google Scholar

35 Royal Institute of International Affairs [hereafter RIIA], The Problem of International Investment (Oxford, 1937), pp. 130, 155–6Google Scholar; and Lewis, C., America's State in International Investments (Washington, DC, 1938), pp. 117, 544.Google Scholar

36 Kirkaldy, A. W. (ed.), British Finance During and After the War. 1914–1921 (London, 1921), p. 355.Google Scholar See also Eichengreen, , Golden Fetters, pp. 3, 4255.Google Scholar

37 Withers, H., War and Lombard Street (London, 1915), pp. 85, 110–11, 118.Google Scholar

38 Michie, , London and New York, pp. 150, 236Google Scholar; Myers, M. G., Paris as a Financial Centre (London, 1936), p. 162Google Scholar; Kirkaldy, , British Finance, p. 2Google Scholar; and 't Hart, et al. , Financial History of the Netherlands, pp. 92, 102, 105–6, 111–12, 124, 130.Google Scholar

39 Sayers, R. S., The Bank of England. 1891–1944 (Cambridge, 1976), pp. 275–8, 298Google Scholar; Moggridge, , British Monetary Policy, pp. 9, 35, 232–3Google Scholar; Morton, W. A., British Finance 1930–1940 (Madison, Wis., 1943). p. 270Google Scholar; and Feinstein, et al. , ‘International economic organisation’, pp. 1417.Google Scholar

40 RIIA, International Investment, p. 108, but see also pp. 50, 73.Google Scholar

41 Kindersley, R. M., ‘British foreign investments’, Economic Journal, 40 (1930), pp. 176–77 and the companion article in 42 (1932), p. 193CrossRefGoogle Scholar; and Schubert, A., The Credit-Anstalt Crisis of 1931 (Cambridge, 1991), p. 11.Google Scholar

42 Officer, Dollar-Sterling Gold Points, p. 276 and see also pp. 103, 192.Google Scholar

43 Kindersley, R. M., ‘British foreign investments’, Economic Journal, 46 (1936), pp. 654Google Scholar; and see companion articles in 47 (1937), pp. 643, 650Google Scholar; 48(1938), p. 623 and 49 (1939), p. 689.Google Scholar

44 Eichengreen, B., Elusive Stability: Essays in the History of International Finance (Cambridge, 1990), pp. 152, 243, 271CrossRefGoogle Scholar; Drummond, I. M., The Floating Pound and the Sterling Area 1931–1939 (Cambridge, 1981), pp. 13, 18, 257CrossRefGoogle Scholar; Feinstein, et al. , ‘International economic organisation’, p. 29Google Scholar; League of Nations, International Currency Experience: Lessons of the Inter-War Period (Geneva, 1944), pp. 29, 87, 100, 142Google Scholar; Jones, G., British Multinational Banking. 1830–1990 (Oxford, 1993), pp. 139, 149, 182, 192–3Google Scholar; Morton, , British Finance, p. 270Google Scholar; Collins, M., Money and Banking in the UK: A History (London, 1988), p. 22Google Scholar; Truptil, R. J., British Banks and the Money Market (London, 1936), p. 136Google Scholar; and Schubert, , Credit-Anstalt, p. 93.Google Scholar

45 Bank of England, United Kingdom Overseas Investments, 1938 to 1948 (London, 1950), pp. 4, 6, 9Google Scholar; Cassese, S., ‘The long life of the financial institutions set up in the thirties’, special issue, Journal of European Economic History, 13 (1984), p. 276Google Scholar; Yeager, L. B., International Monetary Relations: Theory, History and Policy (New York, 1966), p. 331Google Scholar; Einzig, , History of Foreign Exchange, p. 303Google Scholar; and James, , International Monetary Co-operation, pp. 23, 27, 179–80.Google Scholar

46 Einzig, , Textbook on Foreign Exchange, p. 1.Google Scholar

47 Officer, Dollar-Sterling Gold Points, p. 103.Google Scholar

48 Michie, R. C., The City of London: Continuity and Change, 1850–1990 (London, 1992), pp. 92–5CrossRefGoogle Scholar; Einzig, , Textbook of Foreign Exchange, p. 22Google Scholar; Clendenning, E. W., The Euro-Dollar Market (Oxford, 1970), pp. v, 12, 611, 14, 40Google Scholar; The City Research Project, The Competitive Position of London's Financial Services (London, 1995), pp. 10, 1819, A9Google Scholar; Financial Times, 31 05 1996Google Scholar; and James, , International Monetary Co-operation, p. 447.Google Scholar

49 Einzig, P., The Euro-Bond Market (London, 1969), pp. 1113, 19, 35, 73, 7780, 147, 174, 190Google Scholar; and City Research Project, Competitive Position, pp. 10, 21–3.Google Scholar

50 Einzig, , Euro-Bond Market, p. 73.Google Scholar

51 City Research Project, Competitive Position, pp. 10, 16.Google Scholar

52 Michie, , City of London, pp. 140–41.Google Scholar

53 Financial Times, 12 07. 1995.Google Scholar See also ibid., 6 Oct. 1995; and Aliber, R., ‘Why markets are still worlds apart’ and Neuberger, A., ‘How to put a price on options’, both in Financial Times, Mastering Finance (London, 1997), n. p.Google Scholar

54 Triffin, R., Our International Monetary System (New York, 1968), pp. 1920, 23, 30.Google Scholar

55 Financial Times, 31 05 1996.Google Scholar See also ibid., 5 Jun. 1996.