finance masters (part i)

Finance Masters: A Brief History of InternationalFinancial Centers

October 2016London WFC (Part I)

Finance Masters is a brief history of International FinancialCenters since their emergence 1,000 years ago

« Finance Masters is an amazing journey in time tobetter understand modern finance »

« For many readers, the most fascinating part will be thelast section, the book provides important insights

into the Great Recession »

« This is also a major contribution on finance ethics »Pr. Seamus Grimes, Emeritus Professor, Whitaker Institute, NUI Galway

« Finance Masters is an amazing journey in time tobetter understand modern finance »

« For many readers, the most fascinating part will be thelast section, the book provides important insights

into the Great Recession »

« This is also a major contribution on finance ethics »Pr. Seamus Grimes, Emeritus Professor, Whitaker Institute, NUI Galway

This presentation (Part I) is a short overview of thefirst half of Finance Masters which has been

released in October 2016 in Singapore

After the early fairs of St Giles, the French fairs ofChampaign became the first finance hub of the Middle Ages

Comments :• In the 11th century, the fair of St. Giles

(England) became the largest in Europe

• It fostered both a large trading andinternational financial business

• As such, it is known as the ancestor ofInternational Financial Centers (IFCs)

• Then the fairs of Champaign (France)became its most illustrious successor

• In the 12th century, those fairs attractedmerchants all over Europe and became themain mart for international trade

Comments :• In the 11th century, the fair of St. Giles

(England) became the largest in Europe

• It fostered both a large trading andinternational financial business

• As such, it is known as the ancestor ofInternational Financial Centers (IFCs)

• Then the fairs of Champaign (France)became its most illustrious successor

• In the 12th century, those fairs attractedmerchants all over Europe and became themain mart for international trade

Source: Résumé de l’histoire de Champagne (19th century)

Medieval Florentine and Jewish money changers attendinglarge fairs laid the foundation of modern finance

“On one side the peasantry living almost secluded in their village, [ … ], on theother side an emerging market economy inventing our modern economy”

Fernand BraudelThe Dynamic of Capitalism

Florence financiers acted all over Europe as a ferment of theCommercial Revolution

Comments :• The end of the 11th century brought a slight

resurgence of business in Italian cities

• Florence managed to assert its mastery offinancial techniques related to trade

• The Florin, a new gold coin minted in1252 brought an immense prestige

• Florentine money changers could beseen on the fairs all over Europe

• Beside politics the Medici family wasdeeply involved in trading and usury

• Florence never became a financial hub sinceit was more busy with arts and politics

Comments :• The end of the 11th century brought a slight

resurgence of business in Italian cities

• Florence managed to assert its mastery offinancial techniques related to trade

• The Florin, a new gold coin minted in1252 brought an immense prestige

• Florentine money changers could beseen on the fairs all over Europe

• Beside politics the Medici family wasdeeply involved in trading and usury

• Florence never became a financial hub sinceit was more busy with arts and politicsSource: Florence in a 1493 woodcut from Hartmann Schedel's

Nuremberg Chronicle

The Church was actively involved in temporal matters andprohibited lending money with an interest as usury

“Although lending money with an interest was generally prohibited as usurious theconversion of debt in various currencies managed to create significant profits for both

lenders and money changers ”Finance Masters

In the 10-11th century, Venice became the first realinternational financial centre (IFC) from a modern perspective

“The Ducat was named after the Doge of Venice, the “louis d’or” after king Louis ofFrance” both were instruments of sovereignty

Charles P. KindlebergerA financial history of Western Europe

Source: Giovani Bellini (National Gallery)

The Lagoon City established a trading dominance on seaand in mastering the most advanced financial instruments

“Venice as a state city was not only in a capacity to trade but also to make war as needed”Finance Masters

Source: Tintoretto, Vienna, Kunsthistorisches Museum Source: Hulton Archives

In 1405, about 6,200 nautical miles from Venice, an army ofshipbuilders was preparing China for its greatest sea adventure

Comments :• The Great Ming armada was preparing

for its seven diplomatic journeys underthe command of admiral Zheng He

• He visited 37 countries through SEA toAfrica and Arabia

• The Great Fleet included 28,000 menon 317 ships

• In spite of the Zheng He and MarcoPolo travels, both Western and Easternworlds would never trade directly

• But neither the feared galley fleet ofVenice nor the “Great Fleet” ever met

Comments :• The Great Ming armada was preparing

for its seven diplomatic journeys underthe command of admiral Zheng He

• He visited 37 countries through SEA toAfrica and Arabia

• The Great Fleet included 28,000 menon 317 ships

• In spite of the Zheng He and MarcoPolo travels, both Western and Easternworlds would never trade directly

• But neither the feared galley fleet ofVenice nor the “Great Fleet” ever met

Source: Zheng He statue in Fuzhou (PRC)

From 1500 to 1550, the loss of Venice domination turned thewheel, Antwerp emerged as a world class finance centre

Comments :• A dynamic financial Sephardic Jewish

community settled in Antwerp

• The Antwerp city opened a bourse in1515

• Portuguese merchants were activein the port trading the New World gold

• In 1590s, the Antwerp money marketcollapsed

• For almost 100 years, Antwerp hadremained the commercial capital ofNorthern Europe

Comments :• A dynamic financial Sephardic Jewish

community settled in Antwerp

• The Antwerp city opened a bourse in1515

• Portuguese merchants were activein the port trading the New World gold

• In 1590s, the Antwerp money marketcollapsed

• For almost 100 years, Antwerp hadremained the commercial capital ofNorthern Europe

Source: Old map of Antwerp, Antwerp library

Genoa, Venice arch-rival, was just waiting for its time in the16th to become a successor world financial center to Antwerp

“On par with the Florence bankers in the 13th century, the bankers from thePiazza De Ferrari were seen as the few people capable of mastering the best

finance techniques”Finance Masters

Genoa was supported by the Spanish Empire as its financial armto recycle the inflows from the New World, skipping Flanders

Comments :• The genius of the Genoese finance was

to use silver inflows from the NewWorld to create a powerhouse

• The bank of Saint George was acting both asa trading and reserve bank

• Genoese merchant bankers masteredsecured international money transfers

• Andrea Doria made the city state a satellite ofthe Spanish empire and ended family feuds

• The suspension of Genoese funding to Spaindue to war was the signal of the city decline

Comments :• The genius of the Genoese finance was

to use silver inflows from the NewWorld to create a powerhouse

• The bank of Saint George was acting both asa trading and reserve bank

• Genoese merchant bankers masteredsecured international money transfers

• Andrea Doria made the city state a satellite ofthe Spanish empire and ended family feuds

• The suspension of Genoese funding to Spaindue to war was the signal of the city decline

Source: Bank of Saint George, Genoa

“The Genoese system of international finance stands alone in history up until the present day as anexemple of an International Financial Center”

David ScholeyCEO, S.G. Warburg

In 1588, the defeat of the Invincible Armada paved the wayfor the English – Dutch dominance on international trade

Comments :• After the Spanish conquered Antwerp

many Jewish merchants fled toAmsterdam

• They established a strong businesscommunity and opened new routes (India)

• The Dutch East India Company (VOC)was created in 1602

• The powerful bank of Amsterdambegan operations in 1609

• In 1610, the Amsterdam patriciansapproved the plan of the 3 canalsto further extend the city

Comments :• After the Spanish conquered Antwerp

many Jewish merchants fled toAmsterdam

• They established a strong businesscommunity and opened new routes (India)

• The Dutch East India Company (VOC)was created in 1602

• The powerful bank of Amsterdambegan operations in 1609

• In 1610, the Amsterdam patriciansapproved the plan of the 3 canalsto further extend the city

Source: National Maritime Museum, Greenwich

As early as the 17th century, a large option market hademerged in Amsterdam now the leading financial center

Comments :• A first large scale bubble originated

from the 1636-37 Tulip mania

• The forward and option market provided allthe necessary background

• The highest bid reached 20 times theannual income of an honest craftsman

• In Haarlem, during a routine auction,the highest bidder ran triggering panic

• Despite the scandal, this was of negligibleconsequence on the real economy andtenure of Amsterdam as an IFC

Comments :• A first large scale bubble originated

from the 1636-37 Tulip mania

• The forward and option market provided allthe necessary background

• The highest bid reached 20 times theannual income of an honest craftsman

• In Haarlem, during a routine auction,the highest bidder ran triggering panic

• Despite the scandal, this was of negligibleconsequence on the real economy andtenure of Amsterdam as an IFC

Source: Bollettino Telematico dell'Arte, Bibioteca Nazionale Centraledi Roma

Bankers started to relocate to London following the degradation ofthe relationships between England and the Dutch Republic

“Gradually, the scale of English navy overtook the Dutch in the first half of the18th century”

Finance Masters

Source: John Cleveley the Elder, The Royal George at Deptford

To be continued (in Part II) …

“John Law de Lauriston is said to have mentioned to Victor Emmanuel II that hehad discovered the secret to turn paper into gold”

Finance Masters

Source: Lorient, Museum of Compagnie des Indes

Author’s Biography - Olivier Coispeau

Resume

• Olivier Coispeau, CFAF

• Co-Founder of Maverlinn Strategic Finance

• Strategy and Finance with leadingconsulting practices and investment banks

• Taught economics at Paris-Sorbonneuniversity

• Frequently invited guest speaker tointernational finance forums

• Education: Stanford University, ParisDauphine University and Sciences Po Paris

Resume

• Olivier Coispeau, CFAF

• Co-Founder of Maverlinn Strategic Finance

• Strategy and Finance with leadingconsulting practices and investment banks

• Taught economics at Paris-Sorbonneuniversity

• Frequently invited guest speaker tointernational finance forums

• Education: Stanford University, ParisDauphine University and Sciences Po Paris

Leading a world of change, together

finance masters (part i)

Economy & Finance