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Johnny
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Posted: 2004-12-09 10:37

The Pound is so strong because it is the global reserve currency, the currency of international trade
and the currency of the greatest economy on Earth.

London is so expensive because it is the capital city of the greatest economy on Earth, the centre of
an Empire upon which the sun never sets. London is the global centre of international trade and
finance.

I am writing this from the historical perspective of 1879.

 


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LondonPete


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Posted: 2004-12-09 10:38

Interesting article in the FT a few weeks ago saying GBP could reach 2.30 with continuing shitty USD and when high EUR hits Eurozone exports and makes GBP & CHF more attractive than EUR...

Let's hope that won't be the caseWink  Now, that'd be expensive.


You might very well think that, I couldn't possibly comment.

LondonPete


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Posted: 2004-12-09 10:41
Took 50 years to topple GBPs dominance as global reserve currency.  Is this coming up to the first 15 years for the start of the end for USD?

You might very well think that, I couldn't possibly comment.

Nonius
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Posted: 2004-12-09 10:47

Is that why it is strong in 2004? 

A friend of mine thinks so, that is, since England spent so many centuries raping,

pillaging, and plundering the world, that there is a lingering effect of wealth

and prosperity that is felt up to today.  Agree?


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Johnny
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Posted: 2004-12-09 11:02

It's interesting to take a historical perspective, but no I don't agree.

The British economy underperformed the US economy and the economies of other European
countries in the post-war period up until about 1980. In the early 80's the British economy was
overtaken in size by the French economy and even the Italian economy. Today, largely due to the
economic reforms of the Thatcher government during the 1980's, the British economy has prospered
and is the 4th largest in the world, after the US, Japan and Germany, all countries with much larger
populations than Britains.

The reason why London in particular is so expensive is due to two industries, being finance and the
media. As LP posted recently, London accounts for 31% of global fx trading, more than the total of
its nearest four competitors. As everyone on the phorum knows, London also occupies top (or high)
positions in derivatives, hedge funds (more money is managed in St James than in the whole of
Frankfurt!), equities and corporate finance.

History certainly plays its part here: London (The City) has been a financial and trading centre since
the Romans (deep Thames water in the East of London makes for docks and trading, shallow
Thames water in the West of London allowed the invading Romans to cross the Thames at
Westminster, the historical (and current) site of government in England). However, the financial
sector was falling apart in the post-war period. Successive Labour governments drove tax rates
higher, thus driving more and more money offshore and into the hands of foreign competitors.

Today's finance industry owes more to micro-economic reforms in the 1980's such as Big Bang and
macro reforms such as simplification of tax codes and lowering of tax rates.

London is expensive because it is an economically successful city with a modern knowledge based
economy principally built around finance and media. Although both of these industries have strong
historical roots, their current success owes more to events in the 1980's than the 1880's.

My 2d.


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Nonius
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Posted: 2004-12-09 11:06

I thought Venice and maybe a few other Italian city states were the trading centers during the 1200s 1300s, not London.  Am I wrong?

but I see you wrote "a trading center" not "the trading center".

anyway, yes, I guess conventional wisdom is that it was Thatcher reforms + the history of the City being a financial center that has made England prosper and London expensive. 


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Johnny
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Posted: 2004-12-09 11:10

There, it's so much better just to edit responses than to write whole new posts. Good one. Smiley

Yes, the Thatcher reforms. But I do agree with your friend about the importance of the historical
roots in Empire. Without these, London might have been as strong a trading centre as, say, Paris or
Frankfurt. European trade would be dominated by Amsterdam. Or Lisbon. Ha!

 

 


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Nonius
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Posted: 2004-12-09 11:14

Dude, you were very close to being in the bullseye again, but thanks for editing your post.


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LondonPete


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Posted: 2004-12-09 11:14

The Spanish empire was a proper "raping" empire.  They sought (mined, stole and rode the high seas) gold and silver and sent it back home.

The British empire was based on trade.  Empire came into existance with the City.  Surplus capital from the landed elites in England, for whom industrial investment was unacceptable became involved in the first financial institutions that were created to invest overseas.  Another misconception is that all the money went into Empire.  Taking 1914 as an example, £1780MM was invested in Empire; £1983.3MM outside of Empire (mainly US, Argentina, Brazil, and Russia).

Can't find anything to hand on historic net flows of capital.  I recall though that you may be suprised (re: "raping the world") if I can find them.


You might very well think that, I couldn't possibly comment.

Johnny
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Posted: 2004-12-09 11:23

Yes, LP, you're right. But two things, first 1914 was very late in the day and second, what you call
"trade" is now referred to as "drug trafficking" and "slavery".

First of all 1914 was very late in the day: by this stage The Empire was a big cash cow. The issue
wasn't how to finance The Empire, but what to do with the cash it generated. So yes, a lot of it
went to the US (which by 1914 had already been the largest economy in the World for a quarter
century or more and which then - as now - was the natural home for outward British investment). In
1914 Argentina was a major economy - at the start of the 20th Century it was the 4th largest in the
World, so it's unsurprising that a great deal of British investment went there. A great deal of British
investment went into financing the infrastructure of emergent Argentinian cities, including the
notorious default by Buenos Aires that led to the original Barings bust. But anyway, the point is that
by 1914 The Empire was a net generator of cash. Your argument would be more convincing if you
talked about 1814. Or 1714. But you know that the numbers are not on your side.

Next, The Empire revolved around two triangles. To the West was the Slaves-Sugar-Cash triangle.
To the East the Tea-Opium-Cash triangle. Investment in The Empire consisted of establishing Naval
dominance and then using it to beat the shits out of anyone who dared challenge Her Brittanic
Majesty's right to trade drugs and slaves. Does this count as a "raping" empire? Without being all
mealy-mouthed and liberal, I think we can agree that it does. Don't you?

 


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Nonius
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Posted: 2004-12-09 11:24

yes indeed, I was about to respond with

http://www.infoplease.com/ce6/history/A0836734.html

it was trade....but totally evil and forced trade.


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LondonPete


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Posted: 2004-12-09 11:33

OK, I admit 1914 numebrs are distorted - late in the game, but they are all I had to hand.

Also I'd refer to the British "empires", First (pre-1776), Second (until ~1850s), and the Third until ~1930s/50s.  The First really was driven by trade, many colonies in North America were essentially limited companies (Virginia Company for example) and over in India the East India Company with its private army.  Now the Slave triangle (for the British) broke down mid-Second empire with the rise of Evangelical Christianity in Britain calling for a ceasation of the immoral practice.  As for the Opium trade, that was very a significant problem creating the biggest group of addicts (i.e. China) the world had ever seen, and was backed up by gunboat diplomacy (force); First & Second Opium Wars.  This was not unique, however, with everyone on the bandwagon - it happens Britain was the most successful.

Therefore one must refer to the different empires, as they had their own specific characteristics.  It was care for the well-being of Indians that the East India Company (and essentially India) was progressively nationalised from the 1800 to 1850s.  Moreover, you are attaching modern views on what is immoral and unethical to the past  - a dangerous thing to do.  Not wrong, but dangerous.  Very much similar to school kids being told Parliamentry Reform in 1832 was driven by the abundance of corruption.


You might very well think that, I couldn't possibly comment.

Johnny
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Posted: 2004-12-09 11:34

But then there's good stuff too. Everywhere the British went, they rode rough shod over local cultures and imposed common law, education, government, civil service, efficient transport systems. In short, The Empire imposed the institutional infrastructure that modern development economics theory says is necessary for nations to emerge from agrarian poverty. Australia, Canada, the United States, India, Hong Kong, Singapore and many others all owe their economic success to The Empire. Those (like Zimbabwe) that chose to throw away the benefits of British institutions have, without exception, fallen back into the mire.

Score card: totally evil and forced trade (BAD) vs institutional foundations necessary for economic development (GOOD).

EDIT: posts crossed. I agree with a lot of what you say.

 


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LondonPete


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Posted: 2004-12-09 11:35

Sounds like you've been reading or watching Niall Ferguson, Johnny.  I like him but he goes a bit far in supporting the export of British political and economic development; despite many Anglicised countries success post-independence this was at the expense of their own culture and customs (which from a Western perspective) we regard as inferior.

EDIT: I don't seem to be able to type as fast as you guys.


You might very well think that, I couldn't possibly comment.

Johnny
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Posted: 2004-12-09 11:37
Sure. And the Discovery Channel. But perhaps all those interminable economic history lectures had something to do with it too. You never know.

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Johnny
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Posted: 2004-12-09 13:42

Now the Slave triangle (for the British) broke down mid-Second empire with the rise of Evangelical Christianity in Britain calling for a ceasation of the immoral practice.

Oh yes, the famous sugar boycott when right-thinking men and women tried to put
pressure on the slave-sugar-cash triangle. Consult your books again: the real reason for
the end of the trans-Atlantic slave trade was that so many slaves were being born in the US
that the price of slaves had fallen to a point where importing them from Africa was uneconomical.
Campaigning by Evangelical Christians was too little and too late to have any practical effect.


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Nonius
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Posted: 2004-12-09 14:02
Johnny, and you thought all those interminable history lectures would never come to use in real life.....

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kr
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Posted: 2004-12-09 14:08

you guys didn't elaborate on the mean-reversion point, this is the point I like best:

by this stage The Empire was a big cash cow. The issue
wasn't how to finance The Empire, but what to do with the cash it generated.

re: 'roughshod', doesn't always work, current history-in-the-making suggests that we're struggling with those oil-y characters


my bank got pwnd

bloodninja
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Posted: 2004-12-09 14:23

Not to get off topic here, but I just wanted to follow up on a comment by Balt. Locke's chapter on slavery is given below (for the interested). I'm not sure if this constitutes a justification of slavery (since Locke seems to equate the state of slavery with the state of war, which according to Locke is the antithesis of his ideal State of Nature; e.g., Locke at least seems to be saying that slavery --- when it exists --- does so outside of  his ideal). Perhaps this could be turned in to a justification by way of justification of the State of War. I don't now about that though. What I do know, as this chapter points out in the end, is that Locke uses God (the judeo / christian one) as a primary source for many of his arguments. But of course, God is Dead, so Locke's conclusion's are pretty clearly wrong. Instead, what remains (as discussed above) is Beaver. 

 

                          CHAP.  IV.



                          Of SLAVERY.



     Sec. 22.  THE natural liberty of man is to be free from any

superior power on earth, and not to be under the will or

legislative authority of man, but to have only the law of nature

for his rule.  The liberty of man, in society, is to be under no

other legislative power, but that established, by consent, in the

commonwealth; nor under the dominion of any will, or restraint of

any law, but what that legislative shall enact, according to the

trust put in it.  Freedom then is not what Sir Robert Filmer

tells us, Observations, A. 55. a liberty for every one to do what

he lists, to live as he pleases, and not to be tied by any laws:

but freedom of men under government is, to have a standing rule

to live by, common to every one of that society, and made by the

legislative power erected in it; a liberty to follow my own will

in all things, where the rule prescribes not; and not to be

subject to the inconstant, uncertain, unknown, arbitrary will of

another man: as freedom of nature is, to be under no other

restraint but the law of nature.

     Sec. 23.  This freedom from absolute, arbitrary power, is

so necessary to, and closely joined with a man's preservation,

that he cannot part with it, but by what forfeits his

preservation and life together: for a man, not having the power

of his own life, cannot, by compact, or his own consent,

enslave himself to any one, nor put himself under the absolute,

arbitrary power of another, to take away his life, when he

pleases.  No body can give more power than he has himself; and he

that cannot take away his own life, cannot give another power

over it.  Indeed, having by his fault forfeited his own life, by

some act that deserves death; he, to whom he has forfeited it,

may (when he has him in his power) delay to take it, and make use

of him to his own service, and he does him no injury by it: for,

whenever he finds the hardship of his slavery outweigh the value

of his life, it is in his power, by resisting the will of his

master, to draw on himself the death he desires.

     Sec. 24.  This is the perfect condition of slavery, which

is nothing else, but the state of war continued, between a

lawful conqueror and a captive: for, if once compact enter

between them, and make an agreement for a limited power on the

one side, and obedience on the other, the state of war and

slavery ceases, as long as the compact endures: for, as has been

said, no man can, by agreement, pass over to another that which

he hath not in himself, a power over his own life.

I confess, we find among the Jews, as well as other nations,

that men did sell themselves; but, it is plain, this was only to

drudgery, not to slavery: for, it is evident, the person sold

was not under an absolute, arbitrary, despotical power: for the

master could not have power to kill him, at any time, whom, at a

certain time, he was obliged to let go free out of his service;

and the master of such a servant was so far from having an

arbitrary power over his life, that he could not, at pleasure, so

much as maim him, but the loss of an eye, or tooth, set him free,

Exod. xxi.


Don't try

James
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Posted: 2004-12-09 14:50
"History certainly plays its part here: London (The City) has been a financial and trading centre since
the Romans (deep Thames water in the East of London makes for docks and trading, shallow
Thames water in the West of London allowed the invading Romans to cross the Thames at
Westminster, the historical (and current) site of government in England)."

"And this also," said Marlow suddenly, "has been one of the dark places of the earth."

http://www.americanliterature.com/HD/HDINDX.HTML

"Reality is that which, when you choose not to believe in it, doesn't go away." Phillip K. Dick

James
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Posted: 2004-12-09 14:58
"current history-in-the-making suggests that we're struggling with those oil-y characters"

"Jensen: You have meddled with the primal forces of nature, Mr. Beale, and I won't have it, is that clear?! You think you have merely stopped a business deal -- that is not the case! The Arabs have taken billions of dollars out of this country, and now they must put it back. It is ebb and flow, tidal gravity, it is ecological balance! You are an old man who thinks in terms of nations and peoples. There are no nations! There are no peoples! There are no Russians. There are no Arabs! There are no third worlds! There is no West! There is only one holistic system of systems, one vast and immane, interwoven, interacting, multi-variate, multi-national dominion of dollars! petro-dollars, electro-dollars, multi-dollars!, Reichmarks, rubles, rin, pounds and shekels! It is the international system of currency that determines the totality of life on this planet! That is the natural order of things today! That is the atomic, subatomic and galactic structure of things today! And you have meddled with the primal forces of nature, and you will atone! Am I getting through to you, Mr. Beale? (pause) You get up on your little twenty-one inch screen, and howl about America and democracy. There is no America. There is no democracy. There is only IBM and ITT and AT&T and Dupont, Dow, Union Carbide and Exxon. Those are the nations of the world today. What do you think the Russians talk about in their councils of state -- Karl Marx? They pull out their linear programming charts, statistical decision theories and minimax solutions and compute the price-cost probabilities of their transactions and investments just like we do.
We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations, inexorably deter- mined by the immutable by-laws of business. The world is a business, Mr. Beale! It has been since man crawled out of the slime, and our children, Mr.Beale, will live to see that perfect world in which there is no war and famine, oppression and brutality --one vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock, all necessities provided, all anxieties tranquilized, all boredom amused. And I have chosen you to preach this evangel, Mr. Beale.
Howard: (humble whisper) Why me?
Jensen: Because you're on television, dummy. Sixty million people watch you every night of the week, Monday through Friday.

"Reality is that which, when you choose not to believe in it, doesn't go away." Phillip K. Dick

Johnny
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Posted: 2004-12-09 15:08

My education is lacking. I recognise the Heart of Darkness quote (although Heart of Dankness might be better for the London Docks Smiley ). What's the second one?

 


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Nonius
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Posted: 2004-12-09 15:21
second one sort of reminds me of Network.

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Nonius
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Posted: 2004-12-09 15:36
just googled, pretty sure I'm right on that one...

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Johnny
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Posted: 2004-12-09 15:42

Network? Don't know it ...

 


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