This book exposes, for the first time in modern scholarship, the role that the rise of the Carry Trade played in British financial crises between 1825 and 1866, how in reaction the Bank of England improved its management of monetary policy after 1866 and how those lessons have been forgotten since the 1970s. Britain is one of the few major capitalist economies in the world to have avoided policy-induced systemic financial crises for more than 100 years of its history―between 1866 and 1973. Beforehand, it suffered a series of serious banking panics, in 1825, 1837, 1847, 1857-58 and 1866. Since the 1970s banking instability has returned again, with the global financial crisis of 2007-09 hitting Britain hard. Economists and policymakers have asked what can be learnt from Britain’s experience of the disappearance and reappearance of crises to help efforts to prevent future ones. This book answers that question with a major reassessment of Britain’s financial history over the past two centuries. It does so by applying the long-neglected ideas of the British Banking School to explain how crises can occur because of the Carry Trade. This book is essential reading for economists and historians of modern Britain, practitioners and policymakers, as well as anyone who is affected by financial crises and their consequences.
Author(s): Charles Read
Series: Palgrave Studies in Economic History
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 380
City: Cham
Acknowledgements
Contents
Abbreviations
List of Figures
List of Tables
1 Introduction
1.1 The Carry Trade and the Banking School
1.2 A British Bank Is Run with Precision?
1.3 Current Research in Economic History
1.4 The Monetary Thought of the Non-conformist Conscience
1.5 Re-introducing the Banking School
Notes
2 Peel’s Economic-Policy Regime Change in Britain During the Early Nineteenth Century
2.1 Peel’s Policies
2.2 Opening up Trade
2.3 Currency
2.4 Interest Rates
2.5 Conclusion
Notes
3 The Ideas and Policies of the Banking School
3.1 The Banking School as a Reaction Against Peel’s Policies
3.2 The Banking School and Interest Rates
3.3 Testing the Banking School’s Theories with Charts
3.4 Testing the Banking School’s Theories with Econometrics
3.5 Summary of Conclusions
Notes
4 The Crises of 1825 and 1837–1839
4.1 1825: An Overview of the First Crisis of the Gold Standard Era
4.2 The Run-Up to the 1825 Crisis
4.3 The Bullion Drain of 1810
4.4 The Drain of 1816–1818
4.5 The Drain of 1825
4.6 The Wider Consequences of the 1825 Crisis
4.7 The Crises of 1837–1839
4.8 The Effect of the Slavery Abolition Act of 1833
4.9 The Two Schools and the 1830s Crises
4.10 Consequences of the 1830s Crises
Notes
5 The 1847 Crises
5.1 An Overview of the Crises
5.2 The First Phase of the Crisis
5.3 The Second Phase of the Crisis
5.4 The Consequences of the Crisis
Notes
6 The 1857–1858 Crisis
6.1 The Currency School’s and Banking School’s Ideas in the 1850s
6.2 An Overview of the 1857–1858 Crisis
6.3 Bullion Flows to France and the Continent
6.4 Capital Flows and the United States
6.5 Capital Flows to Egypt, India and China
6.6 The Worst Period of the Crisis
6.7 The Consequences of the Crisis
Notes
7 The Uncertainties of the 1860s and the Crisis of 1866
7.1 The Banking School and the Crisis of 1866
7.2 The Background to the Crisis of 1866
7.3 The American Civil War and the Cotton Industry
7.4 Europe and the Crisis of 1864
7.5 The Indian Connection to the Crisis of 1866
7.6 Limited Companies or Interest Rates?
7.7 Consequences of the Crisis
Notes
8 The Fading Away of Crises After 1866
8.1 An Overview of the Period
8.2 The Build-Up to Problems in 1873
8.3 The Peak of the 1873 Mini-Crisis
8.4 Mini-Crises in the Remainder of the Nineteenth Century
8.4.1 1878
8.4.2 1882
8.4.3 1884–1885
8.4.4 1888
8.4.5 1890
8.4.6 The Late 1890s
Notes
9 The Twentieth and Twenty-First Centuries: From the Banking School to the Carry Trade
9.1 Lessons from the Banking School’s Ideas
9.2 The Carry Trade and Economic Theory
9.3 Carry Trades, Interest Rates, Capital Flows and Crises
9.4 The Interwar and Post-War Years
9.5 The Secondary Banking Crisis of 1973–1975
9.6 The Crisis of 2007–2009
9.7 The Covid-19 Pandemic and Beyond
9.8 Policy Prescriptions
Notes
10 Conclusion: Calming the Storms
10.1 Going Back and Forth for Two Centuries
10.2 The Disappearance and Reappearance of British Banking Crises
10.3 The Carry Trade in British History
Notes
Appendix: Details of Econometric Analysis in Chapter 2
Table 2.1
Table 2.2
Table 2.3
Table 2.4
Table 2.6
Table 2.7
Table 2.8
Table 2.9
Table 2.10
Bibliography
Index
