Friday, September 21, 2007

Banks andTrade

After the Fall of the Roman Empire, Europe entered a long period of stagnation dominated by feudalism, tribalism, and urbanization. During this time, Islam spread from Babylon to Gaul. The Islamic Empire built cities and temples the same way the Roman Empire did during its reign, and in these urban centers, Byzantine and Greek scholarship flourished.

Western Europe discovered the Classics. Hellenic and Hellenistic scholarship passed through the Islamic conduit, and the Renaissance had begun.

Like the Roman Empire, the Islamic Empire facilitated international trade by building infrastructure and encouraging good deals amongst sovereigns.

After years of medieval stagnation, Europe saw the rebirth of international trade.

Advances in transportation and navigation technology, basic accounting, early statistics, and other mathematics spurred the economic growth.

Banks are at the center of the commerce. Paper money and bills of exchange emerge as a reaction to the transport demands of trade. Naturally, each empire coins its own currency. Exchange rates are born.

Soon, banks serve as money-changers, lenders, and depositories. Bankers such as the Medicis in Italy and the Fuggers in Germany rise to such wealth and power that they become the financiers of kings, cities, and popes.

At the same time, the international trade volume creates a high demand for information - especially information regarding commodities prices in foreign ports. This demand for data gives birth to commodity exchanges. Stock exchanges soon follow.

The availability of information leads to the genesis of speculation.


As the European Renaissance broke out across the Continent, lenders began to shake the sinful stigma of usury. The Catholic Church began to relax its stance on usury because it began to understand the concept of risk. Church leaders first realized that commerce was the source of power, then they realized that lenders kick-start commerce. Lenders deserved to profit from their loans because they bore most of the risk. Lenders were no longer condemned for usury. Debt wrought the birthpangs of the free market.

Sunday, September 16, 2007

Yield Curves*

  • map the relationship between spot rates and maturity
  • usually upward sloping because future investors require higher incentives to leave money in the market longer
  • a dip in the yield curve often predicts an economic slowdown --> RISK
    • short term prices fall - decrease in demand
    • long term prices rise - increase in demand
    • nervous investors buy long term securities because they fear what will happen in the near term
*content based on lecture notes from Jennifer Conrad's Financial Tools. UNC Kenan Flagler

Bond Valuation*

  • Kd
  • Rates
    • discount
    • appropriate"
    • "risk-adjusted"
    • "forward-looking"
  • Expected future cash flows
    • coupons
    • maturity payments: face value, par value
*content based on lecture notes from Jennifer Conrad's Financial Tools. UNC Kenan Flagler

Crude Oil Prices: 1869 to 2004


The foundation of a Republic is its limited government. Free markets area a benefit of prosperous societies. Republics, and other forms of government, set limits for everything. However, markets push those limits. Free markets push boundaries to the limit. Free markets ensure limited government. Indeed, governments set limits and markets test them.

Sunday, September 09, 2007

A Hipster's Guide to Revolution

United States History: 1491 to 1901

I. 1491
A. Peru y Mexico
B. Pizarro Cortes y Atahualpa y Moctezuma
C. Columbus y Barolome de las Casas

II. Jamestown

III. The Protestant Ethic
A. Calvinism
B. The English Revolution (or, depending on your preferred parlance, The English Civil War)
C. The Puritans, John Winthrop, and "A Model of Christian Charity"
D. King Phillip's War

IV. Land and Labor
A. Indentured Servants, the Headright System, and Bacon's Rebellion
B. Plantation Slavery
C. Northern Laborers: Wage Slaves?

V. The History of the Blues

VI. The American Identity
A. Us vs. Them
B. Clashes with the Natives
C. The French and Indian War
D. History is Indeed Written by the Winners: Patriots, Militias, Demagogues, War Profiteers, Privateers, and The American Revolution
E. The Absolute Genius of the Declaration of Independence

VII. Greece and Rome
A. Plato's Republic
B. Greek Democracy
C. Roman Republicanism

VIII. George Washington
A. What Makes a Hero?
B. Hero Worship
C. History as Propaganda
D. "Mankind, when left to themselves, are unfit for their own government." -- GW 1786

IX. The Constitution

X. Alexander Hamilton
A. Federalism and Executive Power
B. The First American Economy
C. The Bank of the United States
D. War Debt

XI. Thomas Jefferson, Part I
A. The Democratic-Republican Party
B. The Revolution of 1800

XII. Thomas Jefferson, Part II
A. The Louisiana Purchase
B. Slavery and Paternalism
C. Sally Hemings

XIII. Andrew Jackson
A. Indian Wars
B. Indian Removal

XIX. Slavery
A. The Transatlantic Slave Trade
B. Slave Rebellions
C. Abolitionism: Douglass, Garrison, and Tubman

XX. The Industrial Revolution, Part I
A. The American Money Machine
B. Railroads
C. The Cotton Gin
D. The Steam Engine
E. Factories
F. Labor and Capital
G. Karl Marx's 25th Birthday

XXI. Westward Expansion
A. Manifest Destiny
B. Cotton
C. The Missouri Compromise
D. Texas
E. Revolutions of 1848 - Europe
E. The Mexican War - American Imperialism
F. California Gold Rush
G. The Compromise of 1850
H. Bleeding Kansas
I. John Brown

XXII. The History of Protest Music
A. Slave Spirituals
B. Blues and Gospel
C. Rock and Roll
D. Hip Hop

XXIII. Abraham Lincoln

XXV. The War

XXIV. The Industrial Revolution, Part II
A. The Costs and Opportunity Costs of War
B. Industry: The Civil War's Most Lasting Effect
C. Robber Barons and War Profiteers
D. Andrew Carnegie's Wealth
E. Finance and Oil - JP Morgan and John D. Rockefeller
F. Immigration, Urbanization, and Social Darwinism

XXV. Booker T. Washington, WEB DuBois, and Marcus Garvey

XXVI. The Labor Movement
A. The Great Railroad Strikes of 1877
B. The Haymarket Affair - 1886
C. The Homestead Steel Strike - 1892
D. The Pullman Strike - 1894
E. Anarchism

XXVII. American Imperialism
A. Alfred Thayer Mahan
B. Rudyard Kipling's The White Man's Burden
C. Wounded Knee - 1890
D. Spanish-American War - 1898
E. Hawaii
F. Prelude to Vietnam? American Imperialism in the Phillipines
G. The Panama Canal - The US, Colombia, and the Creation of Panama

XXVIII. Jazz, Reconstruction, and the Ku Klux Klan

XXXIX. The Assassination of William McKinley
A. Presidential Disappearing Acts: McKinley's Predecessors
B. The Haymarket Martyrs
C. Emma Goldman and Alexander Berkman
D. The Failed Assassination of Henry Clay Fricke
E. Leon Czolgosz
F. The Pan American Exposition - Buffalo, New York
G. President McKinley
H. John Philips Sousa, Folk Music, and the Player Piano
I. The Assassination of William McKinley
J. Vice President Theodore Roosevelt Takes Control
K. The 20th Century Has Begun