Archive for February 24th, 2016

From Antwerp to London: The decline of financial centres in Europe

February 24, 2016

A superb paper by Prof. Peter Spufford on the topic:

When Ortelius, Abraham Ortel, the humanist son of a successful merchant, was born in Antwerp in 1527, it was already the commercial metropolis of Europe and had also become its dominant financial centre. As a young man in the 1540s and 1550s he lived through the years of Antwerp’s greatest prosperity. He did not die until 1598, by which time Antwerp had been reduced from the great metropolis of the west to a place of only regional commercial importance for the Spanishoccupied Netherlands. Nevertheless it was still the financial centre of Europe. This time lag between industrial and commercial decline on the one hand and decline as a financial centre on the other is one that has been repeated time and again.

As an historian whose metier compels him to study change over time, I am aware that our present arrangements, like those of Ortelius’ lifetime, are not anything more than temporary. Antwerp was by no means the first financial centre in the west. London will by no means be the last. And in this lecture, named after Ortelius, I will try to explore some aspects of the continuous rise and fall of financial centres like Antwerp and London over the last seven centuries, and even to glance back a little earlier to Arras and Genoa.

At the beginning of the fourteenth century there were two dominant financial centres in Europe, Florence for southern Europe, and Bruges for northern Europe. Communication between the two was by couriers, who, by the mid-century, were setting out in each direction once a week and took about three weeks to cover the distance. What then gave Florence and Bruges their financial pre-eminence? Both developed as focal points for industry, and as commercial centres, before becoming financial centres. This turns out to have been the normal pattern for seven centuries.

 

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How is it that Indian private sector banks don’t have NPAs and losses?

February 24, 2016

The blogger got into a very interesting discussion with friends who are financial market professionals and very savvy ones at that.

One question that cropped up was how is it that losses in banking are limited mostly to the public sector banks and not the private sector ones? If we have the same set of corporates, why is it that corporates choose to default with public banks and not private ones?  Before viewers think this was some left oriented socialistic leaning group, it was just the opposite. The views of the discussants had emerged after seeing the way banking has been working in India and globally.

This question is going to be dismissed by most as a worthless discussion. Public sector banks make losses as they are owned by govt, have governance issues etc. Obviously, this answer chooses to ignore the kinds of malfeasance we are seeing in global private banks. But this issue of public vs private banks cannot be easily dismissed now with huge losses showing in a foreign bank which actually believes itself as an Indian player.

So what exactly is going on?

In the discussion, one was enlightened on how banking actually works between public and private banks:

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Keynes’s General Theory at 80 and will it be valid in 2036 as well?

February 24, 2016

Robert Skidelsky, Keynes biographer writes on the 80th anniversary of Keynes’ magnum opus – The General Theory.

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