Archive for the ‘Blogs to Read’ Category

An interesting chronology of evolution of US Dollar

May 23, 2017

Nice bit from Visual Capitalist Blog. True to its name, it has superb pictures showing how US Dollar came into being…

Should Walmart be allowed to get into banking?

May 17, 2017

Prof Lawrence White of Stern School has a piece on Walmart entry into banking. He says we should actually ask the following question: Why shouldn’t Walmart get into banking?

By the way I also learnt from the article that the retail giant entered banking in Canada and Mexico. In Mexico it sold off its banking business in 2014. The one in Canada continues. The issue is whether it should be allowed in America as well.

Prof White says:

One question to ask might be, “Why should Walmart be allowed to enter banking?” But a more relevant question would be, “Why shouldn’t Walmart be allowed to enter banking?” 

After all, the U.S. economy is generally market-oriented, and entry is generally recognized as potentially beneficial for consumers, as entrants can bring new ideas, innovations, and efficiencies to the market. Of course, incumbents usually don’t like the idea of entrants’ disrupting the status quo; and often those incumbents lobby for regulation and/or legislation that creates barriers to entry. But, for most markets, the presumption in broad U.S. economic policy is that entry should be encouraged—or at least, that policy should be neutral between incumbents and entrants—so that the benefits of entry can be enjoyed by consumers.

Of course, banking is special—as the regular readers of this blog are well aware. And how the specialness of banking and the presence of Walmart in banking can be reconciled must be addressed, and will be addressed below.

But first, consider what the entry of Walmart into banking might well achieve: Walmart is well known for providing reasonably priced goods to low- and moderate-income households. Its position as the largest company in the United States—as measured by sales and by employment—is a testament to that reputation.

But it is exactly this demographic group—low- and moderate-income households—that is most in need of reasonably priced financial services. The percentage of U.S. households that are unbanked (i.e., do not have a bank account) or underbanked (i.e., have an account but rely on non-bank providers for some financial services and products) has been a longstanding policy concern. The most recent data (from a FDIC report that covers 2015) in this regard—based on a survey of more than 36,000 households nationwide—show that 7% of all households were unbanked and an additional 20% of all households were underbanked. Unsurprisingly, the percentages are substantially larger for low- and moderate-income households (see table)


The post also has a interesting discussion on the complex financial regulation setup in US:

So, how would the entry of Walmart—and, presumably, other non-financial companies that are interested in entering banking—fit into that system of prudential regulation?

The crucial concept is that the “Walmart Bank” that would provide banking services to the public would be organized as a separate subsidiary of the parent Walmart company. In essence, the parent Walmart company would be a bank holding company (BHC), which is a common ownership structure for U.S. banks. The Walmart Bank subsidiary would be expected to abide by all prudential regulations—including adequate net worth (capital) requirements—that apply to banks.


However, because it is relatively easy for the owners (including BHCs) of a bank to drain the bank of its assets—for example, by paying excessive dividends to its owners, or by making loans to the owners that are not repaid, or even by paying excessive prices for any materials that it buys from the owners—it is essential that any transactions between the bank and its owners be on arm’s-length terms. U.S. bank regulators have long been aware of this danger of the draining of a bank by its owners and have rules in place (which are embodied in Sections 23A and 23B of the Federal Reserve Act) that insist on this arm’s-length standard.

Current U.S. banking policy has much of this story right.  But where policy has gone “off the rails” is the insistence that a BHC cannot be engaged in commerce—that is, in non-financial services activities. This restriction on scope was embodied in the Bank Holding Company Acts of 1956 and 1970 and remains established policy for banks and banking in 2017. Its persistence as policy is more a testament to the lobbying strength of the incumbent bankers (who clearly prefer less competition) rather than to a concern about the economic welfare of consumers. It also yields the economically absurd result that it is okay for a local car dealer to own a bank (so long as the dealer doesn’t form a BHC that involves the car dealership); but it is not okay for AutoNation (a publicly traded company that operates hundreds of car dealerships) to own a bank.

Until 1999 there was a potential way around this no-commerce restriction on the activities of a holding company: the holding company of a savings and loan (S&L or thrift) institution faced no such restriction, and at various times companies such as the Ford Motor Company, Fuqua Industries, Weyerhaeuser, ITT, Gulf & Western, Household International, and Sears, Roebuck have owned S&Ls via the formation of thrift holding companies.

In the middle of the 1990s, Walmart decided to try to enter banking by becoming a thrift holding company. However, before Walmart was able to become a thrift holding company, the Gramm-Leach-Bliley Act of 1999 (which was primarily focused on allowing commercial banks—via BHCs—to enter investment banking) forbade the creation of any new thrift holding companies that could engage in commerce. It also restricted the sale of an existing thrift holding company to a non-financial company, such as Walmart.

There was a second, more limited way around the “no commercial owner” restriction: a few states—most notably Utah—offered “industrial loan company” (ILC) charters that allowed a commercial firm to own a financial institution that could issue deposits and make loans and thus could function as a bank. But in order to operate, the ILC would need to obtain deposit insurance from the FDIC.

Walmart duly obtained a Utah ILC charter and in 2005 applied for FDIC deposit insurance. In 2007 Walmart withdrew its application after it was clear that the FDIC would not grant it deposit insurance. Further, the Dodd-Frank Act of 2010 placed a three-year moratorium on the granting of deposit insurance to any new (or newly acquired) ILC. Although the moratorium expired in 2013, bank regulators appear to have “gotten the message” that the commerce-finance barrier should remain intact.

Another example of how despite best intentions, regulations leave many gaps to be filled.

But overall a good discussion about many aspects of economics and finance..

Is modern central banking an elaborate waste of time?

May 5, 2017

Anantha Nageshwaran is one of those rare columnists who hits hard through his columns. (His Mint column is titled as Bare Talk but should be Bold Talk).

He points me to his recent post which hits modern central banks out of the park (in response to my post):

With all their self-importance, modern central banking (has been in the service of financial markets. It takes care of their post-central banking career, speaking engagements and book contracts.

In reality, they should be ensuring financial stability and hence, economic stability. If they do, they would be hurting the financial services industry and its short-term fortunes, profits and executive compensation. Buddies would not be buddies anymore. Friendships formed in Universities would be in vain.  They won’t help to secure chunky speaking fees.

So, in the name of the economy, of labour, central bankers of advanced nations (with Federal Reserve being the principal villain) continue to serve the most unproductive and predatory capitalists – the financial markets and the financial services industry!

This blog had labelled this coterie with central bank at its head as Finocracy a few months ago.

It is incredible how deep the nexus of elites of financial world.

500th anniversary of Protestant reformation

May 1, 2017

Bruno Gonçalves Rosi writes on a very important milestone in political and economic history:

This year we celebrate 500 years of the Protestant Reformation. On October 31, 1517, the then Augustinian monk, priest, and teacher Martin Luther nailed at the door of a church in Wittenberg, Germany, a document with 95 theses on salvation, that is, basically the way people are led by the Christian God to Heaven. Luther was scandalized by the sale of indulgences by the Roman Catholic Church, believing that this practice did not correspond to the biblical teaching. Luther understood that salvation was given only by faith. The Catholic Church understood that salvation was a combination of faith and works.

The practice of nailing a document at the door of the church was not uncommon, and Luther’s intention was to hold an academic debate on the subject. However, Luther’s ideas found many sympathizers and a wide-spread protestant movement within the Roman Catholic Church was quickly initiated. Over the years, other leaders such as Ulrich Zwingli and John Calvin joined Luther. However, the main leaders of the Roman Catholic Church did not agree with the Reformers’ point of view, and so the Christian church in the West was divided into several groups: Lutherans, Anglicans, Reformed, Anabaptists, later followed by Methodists, Pentecostals and many others. In short, the Christian church in the West has never been the same.

The Protestant Reformation was obviously a movement of great importance in world religious history. I also believe that few would disagree with its importance in the broader context of history, especially Western history. To mention just one example, Max Weber’s thesis that Protestantism (especially Calvinism, and more precisely Puritanism) was a key factor in the development of what he called modern capitalism is very accepted, or at least enthusiastically debated. But I would like to briefly address here another impact of the Protestant Reformation on world history: the development of freedom of conscience.


On doing economic history (and its importance!)

May 1, 2017

Thanks to Clark medal 2017 , it is one of those rare moments when people are excited about economic history. Though the field is in precarious state  but still atleast there is some discussion. The question is whether it will meet the same fate as the 1993 prize when economic history was honored but again was ignored after some initial excitement.

This post by Vincent Geloso on Notesonliberty blog is a nice read on doing economic history:

And there is economic history properly done. It tries to answer which theory is relevant to the question asked. The purpose of economic history is thus to find which theories matter the most.

Take the case, again, of asymetric information. The seminal work of Akerlof on the market for lemons made a consistent theory, but subsequent waves of research (notably my favorite here by Eric Bond) have showed that the stylized predictions of this theory rarely materialize. Why? Because the theory of signaling suggests that individuals will find ways to invest in a “signal” to solve the problem. These are two competing theories (signaling versus asymetric information) and one seems to win over the other.  An economic historian tries to sort out what mattered to a particular event.

Now, take these last few paragraphs and drop the words “economic historians” and replace them by “economists”.  I believe that no economist would disagree with the definition of the tasks of the economist that I offered. So why would an economic historian be different? Everything that has happened is history and everything question with regards to it must be answered through sifting for the theories that is relevant to the event studied (under the constraint that the theory be consistent). Every economist is an economic historian.

As such, the economic historian/economist must use advanced tools related to econometrics: synthetic controls, instrumental variables, proper identification strategies, vector auto-regressions, cointegration, variance analysis and everything you can think of. He needs to do so in order to answer the question he tries to answer. The only difference with the economic historian is that he looks further back in the past.

The problem with this systematic approach is the efforts needed by practitioners.  There is a need to understand – intuitively – a wide body of literature on price theory, statistical theories and tools, accounting (for understanding national accounts) and political economy. This takes many years of training and I can take my case as an example. I force myself to read one scientific article that is outside my main fields of interest every week in order to create a mental repository of theoretical insights I can exploit. Since I entered university in 2006, I have been forcing myself to read theoretical books that were on the margin of my comfort zone. For example, University Economics by Allen and Alchian was one of my favorite discoveries as it introduced me to the UCLA approach to price theory. It changed my way of understanding firms and the decisions they made. Then reading some works on Keynesian theory (I will confess that I have never been able to finish the General Theory) which made me more respectful of some core insights of that body of literature. In the process of reading those, I created lists of theoretical key points like one would accumulate kitchen equipment.

This takes a lot of time, patience and modesty towards one’s accumulated stock of knowledge. But these theories never meant anything to me without any application to deeper questions. After all, debating about the theory of price stickiness without actually asking if it mattered is akin to debating with theologians about the gender of angels (I vote that they are angels and since these are fictitious, I don’t give a flying hoot’nanny). This is because I really buy in the claim made by Douglass North that theory is brought to life by history (and that history is explained by theory).


The global history of tea (and much more)..

April 25, 2017

A superb post by Maddy’s Ramblings blog. We take tea so much for granted in India, that we hardly pay any attention on how it became such an important drink for us.

Tea became a drink favored by all the Indian classes only in the 20th century and was at times associated with the working classes or certain religions. For example in Tamil Nadu, tea was considered a Mussalman’s drink while Coffee was popularized by the Brahmins according to Chalapathy’s research. What is of course interesting is that tea became a commonplace drink in India only after the arrival of the British. The routes that this simple leaf took to become a perennially favorite drink of the masses presents a remarkable story of ingenuity and single mindedness of the Englishman, perhaps in pursuit of refinements to his otherwise unsatisfactory life back in the blighty and the hope of minting more sterling. This leaf as you may recall, went on to become the symbol of national resistance back here in America when in 1773, Bostonians destroyed a good amount of British tea laden in three ships when rebelling against the tea act.

Trying to find out when and how tea drinking originated is quite difficult and there are quite a few conclusions, but most agree that it all started in South Eastern regions of today’s China, many eons ago, in any case before the advent of the Common Era. Legends and lore have also crept in such as the sprouting of the tea plant from the eyelids of the south Indian monk Bodhidharma, at Shaolin. Tea preparation and its drinking became a ritual, an art so to speak in various Chinese regions and it is rumored that the Manchurian method was what popularized the so called ‘builders cup’ or concoction with milk and sugar. It is also said that one Mme de La Sabliére, a French hostess of an influential literary salon during the 17th century, is among the first to add milk to tea.

Some others opine that milk was added to stop porcelain from cracking, or there is this story that unscrupulous employers added milk to cool down tea quickly and therefore reduce the time taken for tea breaks. Tea cups, saucers and the pots of course originated in China, so also the fine porcelain medium or bone china in their manufacture. And as time went by, the Chinese and British spent time sipping it daintily from ornate chinaware or brassware and perfecting the art of serving and drinking tea in elaborate sessions, the people of Kerala perfected the art of slurping tea from the omnipresent standard ribbed tea glass! You won’t miss it, for that is what they serve it in at any Chayakada, to date!

From those Chinese regions, tea traveled to the Middle East and the Mediterranean lands to become somewhat popular with the Arabs though coffee was their forte, till all of a sudden, they turned in the 19th century to embrace tea. The first to port tea to Europe was either the Portuguese or the Dutch, a matter still hotly debated, not really the British, but they quickly caught on, as we shall soon see. Back here in India, the EIC had by then firmly entrenched themselves in the various regions and went on to enrich themselves and Britain with trade of various goods from and to India. 

There is much more in the post and is fascinating throughout.

Global history becomes really fascinating when you track it via commodities like say cotton, coffee or tea. There are just so mnay factors, planned and unplanned which go into making these commodities the key to global affairs..

Will Reserve Bank of New Zealand have dual objective like Fed? Inflation and employment?

April 18, 2017

How tides keep turning. Reserve Bank of NZ was the first bank to start inflation targeting formally in 1989. Since then, inflation targeting has become a huge buzzword across central banking circles with more and more central banks taking up targeting inflation.

Now the pioneer of inflation targeting could be made to reconsider and change its single mandate. If the Labour government comes to power in NZ, there are high chances that the RBNZ Act will be changed and employment will be added to the single objective.

The superb blog on NZ economy – Croaking Cassandra blog reports:

I’ve already written a bit about Labour proposals on monetary policy (here and here) and, for now at least, I don’t want to write anything more about the proposed changes to the decision-making process or the plan to require the Monetary Policy Committee to publish its minutes.  If there are all sorts of issues around the details of how, I haven’t seen anyone objecting to the notion of moving from a single decisionmaker model to a a legislated committee, or objecting to proposals to enhance the transparency of the Bank’s monetary policy.    The Bank was once a leader in some aspects of monetary policy transparency, but is now much more of a laggard.

Where there has been more sceptical comment is around Labour’s proposal to add full employment to the statutory monetary policy objective.    At present, section 8 of the Reserve Bank Act reads as follows:

The primary function of the Bank is to formulate and implement monetary policy directed to the economic objective of achieving and maintaining stability in the general level of prices.

Responding to this aspect of Labour’s announcement hasn’t been made easier by the lack of any specificity: we don’t know (and they may not either) how Labour plans to phrase this statutory amendment.    There are some possible formulations that could really be quite damaging.  But there are others that would probably make little real difference to monetary policy decisionmaking quarter-to-quarter.  Probably each of us would prefer to know in advance what, specifically, Labour plans.  But this is politics, and I’m guessing that there is a range of interests Labour feels the need to manage.  In that climate, specificity might not serve their pre-election ends.  One could get rather precious on this point, but it is worth remembering that there are plenty of other things that may matter at least as much that we currently know little about.  Under current legislation, who becomes the Governor of the Reserve Bank matters quite a lot to shorter-term economic outcomes, and we have no idea who that will be.   The details of the PTA can matter too, and under the governments of both stripes the process leading up to the signing of new PTAs has been highly secretive (often even after the event).  For the moment, we probably just have to be content with the “direction of travel” Labour has outlined.

In some quarters, Labour’s plans for adding a full employment objective have been described as “cosmetic”, as if to describe them thus is to dismiss them.    That is probably a mistake.  When I went hunting, I found that cosmetics have been around for perhaps 5000 years (rather longer than central banks).   People keep spending scarce resources on them for, apparently, good reasons.     Why?  They can, as it were, accentuate the positive or eliminate the negative –  highlighting features the wearer wants to draw attention to, or covering up the unsightly or unwanted marks of ageing.    They (apparently) accomplish things for the wearer.


Further, in all NZ elections central bank objective has been a focal point:

What is the relevance of all this to monetary policy?  Well, there has been a long-running discontent with monetary policy in New Zealand, especially (but not exclusively) on the left.  In the 28 years since the Act was passed there has not yet been an election in which some reasonably significant party was not campaigning to change either the Act or the PTA.  We haven’t seen anything like it in other advanced countries.   Personally, I think much of the discontent has been wrongheaded or misplaced –  the real medium-term economic performance problems of New Zealand have little or nothing to do with the Reserve Bank –  and many of the solutions haven’t been much better (in the 1990s, eg, Labour was campaigning to change the target to a range of -1 to 3 per cent and NZ First wanted to target the inflation rates of our trading partners, whatever they were).     But that doesn’t change the fact that there has been discontent –  and more than is really desirable.

But what about the trade-off?

I’m quite clear that there is no long-run trade-off adverse trade-off between achieving and maintaining a moderate inflation rate (the sorts of inflation rates we’ve targeted since 1990) and unemployment.  And since something akin to general price stability generally helps the economy function better (clearer signals, fewer tax distortions etc) there is at least the possibility that maintaining stable price might help keep unemployment a little lower than otherwise.  Milton Friedman argued for that possibility.

But I don’t think that is really the issue here.

Because it is not as if there are no other possible connections between monetary policy and unemployment.   Pretty much every analyst and policymaker recognises that there can be short-term trade-offs between inflation and unemployment (or excesss capacity more generally –  but here I’m focusing on unemployment).   Those trade-offs aren’t always stable, even in the short-term, or predictable, but they are there.    Thus, getting inflation down in the 1980s and early 1990s involved a sharp, but temporary, increase in the unemployment rate.  That was all but inescapable.  And when the unemployment rate was extremely low in the years just prior to 2008, that went hand in hand with core inflation rising quite a bit.  Monetary policy decisions will typically have unemployment consequences.    Unelected technocrats are messing, pretty seriously, with the lives of ordinary people.   It is all in a good cause (and I mean that totally seriously with not a hint of irony intended) but the costs, and disruptions, are real –  and typically don’t fall on the policymaker (or his/her advisers).

And it isn’t as if monetary policymakers are typically oblivious to the pain.   There was plenty of gallows humour around the Reserve Bank in the disinflation years, a reflection of that unease.  And yet often the official rhetoric is all about inflation –  as if, in some sense, what look like relatively small fluctuations around a relatively low rate of inflation, matter more than lives disrupted by the scourge of unemployment.

So perhaps that is why cosmetics can matter, and serve useful ends even in areas like monetary policy.

Hmm..age old debates once again come to the surface when we were told they have been addressed. Inflation targeting was seen as the only thing that worked given NZ’s experiences. Now with pioneer considering changes, will it lead to change in thinking in other countries too?

There is little doubt that central banks though may just be targeting inflation but their actions have wide ramifications on the entire economy. This is particularly tricky in case of growth/employment issues which have to be answered by politicians. Thus, central banking is far more politicised than we imagine.

Interesting times. Who knows we could be going back to old central bank debates if we see so called cosmetic changes in RBNZ…

How did the DSGE name begin and become so important in world of macro/monetary economics ?

April 4, 2017

Beatrice Cherrier has a post on the topic.

According to JSTOR, it was Robert King and Charles Plosser who, in  their famous 1984 paper titled Real Business Cycles, used the term DSGE for the first time, though with a coma (their 1982 NBER draft did not contain the term): “Analysis of dynamic, stochastic general equilibrium models is a difficult task. One strategy for characterizing equilibrium prices and quantities is to study the planning problem for a representative agent,” they explained upon deriving equilibrium prices and quantities.

There is lot more in the post.

The profession is really poor with naming such terms/models. Most of the time these names just scare/intimidate you. One does not know whether that is the intended purpose as well.

When Marginal Revolution Blog visits Lasalgaon Onion Market

March 30, 2017

One very important module in all economics training should be visiting and understanding local markets. It is appalling how as economics students we don’t know how markets/shops work in our neighbourhood and markets in our city of training. It is as if markets only exist in textbooks. They are just all around us but we hardly care. It might be just a great idea if we students understood these markets and look to make them better.

So it was interesting to read this post on MR blog by Alex Tabarrok who visited Lasalgaon’s onion market. It was also nice to read that he was invited by an avid blog reader!


In today’s finance, there is return free risk, but no risk free return…

March 27, 2017

Prof JR Varma just nails it in this post. He quotes from John Cochrane’s blog whose notion of risk is way too simplistic even despite recent crises.

He says economists continue to believe in risk free return whereas more accurately it is return free risk:


Post Charolette Hogg Resignation: Thinking about senior central bank appointments

March 17, 2017

I had blogged about the recent case of Ms. Charolette Hogg who had to resign from Deputy Governorship of Bank of England. It is not any simple resignation with many lessons on central bank governorship. It should be discussed much widely.

CroakingCassandra  Blog, the goto blog on NZ economy and central banking issues thankfully has a post on the issue. He draws lessons for Reserve Bank of New Zealand and quite a bit applies to Reserve Bank of India as well (barring lack of female participation at top central bank roles. Unlike RBNZ, RBI has had females at the helm, though much more needs to be done.)


Are we all macroprudentialists?

March 7, 2017

Julien Noizet of Spontaneous Finance is back to blogging after a break. He questions the government/central bank intervention in financial matters.

In his recent post, he asks the question: Are we all macroprudentialists?


Historically some of the truly radical innovations in finance have come from criminal enterprises…

February 27, 2017

Prof JR Varma has a blog post which debates Uberisation of finance. They key idea here is whether innovations in finance can/should be ahead of regulation. Moreover, should regulation kill or allow innovation?

He quotes from a paper by Pollman and Barry in regulatory arbitrage. The business is done under the assumption that law shall be changed in their favor overtime. In finance we are seeing a surge in technology which also relies on regulatory arbitrage. So, how do we think this will pan out?

Prof Varma points firstly current finance players are fairly tech savvy and know the game. Second and more interestingly is this thing that historically most finance innovations come from criminal enterprise itself!


Would implementation of FSLRC have strengthened the RBI Board?

January 26, 2017

Stuff continues to be written on RBI Board. After its (mysterious) role in demonetisation, we have seen flurry of articles from comparing it to SEBI to international central bank boards. Then this blog looked at historical evolution of RBI Board and another one on fullness or emptiness of the Board in recent years.

This blog had also written about why there is no discussion of FSLRC’s recommendations on RBI Board. Apparently, one article picked the post and asked broader questions.

Now, in another long must read post Bhargavi Zaveri adds more clarity to the debate. She says on the contrary FLSRC would have strengthened the RBI Board. Would it have altered the outcome of demonetisation?


Focus Economics – Top Economics & Finance Blogs of 2017

January 26, 2017

Focus Economics, a global economics analysis firm publishes its list of top economics and finance blogs for 2017.

It is wonderful to see Mostly Economics featuring in the list. Thanks once again to all the visitors for carrying the word forward.


Are there any banks on New York’s Bank Street?

January 23, 2017

Amy Farber of NY Fed’s Liberty Street blog has an interesting post.

She points how NY’s Bank Street does not have any banks. Infact, it is not even the street where banks were originally localted. It is a street where banks relocated due to yellow fever in NY:

Bank Street in New York City is a quaint little six-block stretch in Greenwich Village (see this 48-second video) with a huge cultural legacy—but no banks. Many cities and towns have a Bank Street and often the street is so named because that’s where most of the banks were originally located. (It is not likely that any Bank Street got its name because of its proximity to a riverbank.) However, New York City’s Bank Street is not where the banks were originally located and it’s not even in the financial district—it’s in Greenwich Village. Why, then, is it called “Bank Street?”

Okay, we cheated in that last paragraph. Manhattan’s banks were not on Bank Street originally but they were indeed there at some point—they moved northward from Wall Street in the late eighteenth and early nineteenth centuries in an effort to escape yellow fever. A post on the Forgotten New York website explains how there were two main waves of the epidemic in the city and that Bank Street was essentially named for the first bank to relocate, not the set of banks that eventually moved there:

Though most neighboring streets are named for local personalities in the Village’s early days (one early burgess, Charles Christopher Amos, had three streets named for him), Bank Street is named for one of the oldest institutions in NYC, the Bank of New York, which opened an office “uptown” after a yellow fever epidemic downtown on Wall Street in 1798 prompted a relocation. Several other banks followed suit in 1822 after a second outbreak.

One can view this relocation of banks as an early form of corporate contingency (or business continuity) planning. Think about how important continuity is in banking and how advantageous it would have been to keep those early New York banks functioning. In his 1922 book A Century of Banking in New York, 1822-1922, author Henry Lanier describes, in the chapter “The Year the Banks Migrated,” the Bank of New York’s forethought:

Some bankers and others had been more foresighted. As noted, one of the first deaths in the scourge of 1798 was a book-keeper in the Bank of New York. “Fearing another visitation of the pestilence, the bank made arrangements with the branch Bank of the United States to purchase two plots of eight city lots each, in Greenwich Village, far away from the city proper, to which they could remove in case of being placed in danger of quarantine. Here two houses were erected in the spring of 1799, and here the banks were removed in September of that year, giving their name, Bank Street, to the little village lane that had been nameless before. The last removal was made in 1822, when the yellow fever raged with unusual virulence, and the plot which had been purchased for $500 was sold in 1843 for $30,000.”

In this 1842 map of lower Manhattan, you can see Bank Street just to the right of the large “E” of the “Hudson River” label. (Here is a 1933 street view.) Of course, Wall Street is in the bottom tip of the island. Bank Street is about 2.7 miles north of Wall Street. Yes, it takes a bit of time to walk from one to the other—but not that long. 

There is further discussion on how such a small distance relocation helped banks.


Financiers of Victorian England would marvel at our nativity about markets and economics

January 19, 2017

An old post written in Oct 2016 but really fascinating.

Andrew Odlyzko, Professor of Mathematics (?!) and an interdisciplinary researcher writes about Victorian Finance:


Thinking about appropriate size of currency notes…

January 18, 2017

Wow. There is so much to learn and figure about monetary economics other than just inflation rates.

The Moneyness blog which has been a great source of education post 8 Nov 2016 has another post to think about. This one is on size of currency note. The blog says that India reducing size of the new Rs 500 and Rs 2000 note is in line with what practices elsewhere. He also points to this wonderful note which discusses various aspects of note design:


Should we replace money with guns/bullets?

January 17, 2017

Elaine’s Idle Mind blog has an interesting piece on history of currency in New England/Massachusetts.

The post says as money is nothing but an instrument of persuasion, what better than having guns to persuade :-). It further points how we actually had musket balls  a currency!: (more…)

Would postal stamping the old notes have helped in cash crunch?

January 9, 2017

JP Koning’s blog is the goto blog for monetray history especially post demonetisation.

In his recent post, he highlights how the postal stamping of old notes could have helped the government tide the cash crunch.

He starts with how the government missed a monetary historian in the team: