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Visualizing History

The Real Price of Oil (1861 – 2008)

Source: Eyal Dvir & Kenneth Rogoff, Three Epochs of Oil 

From the Archives

The New York Times (November 25, 1973)

The Financial History of Empires & Conflict (Course)

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  • How financial markets were impacted by previous invasions and wars
  • The role of financial innovations in predicting the outcome of war
  • Russia’s 1917 revolution & the closing of its exchange for 75 years
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Sunday Reads

There is so much quality content and articles in today’s Sunday Reads that I do not want to waste too much time on the introduction. For example, today’s articles focus on very pertintent and relevant topics facing investors today like:

  • War and inflation
  • Globalization and wars
  • How oil prices have been impacted by world wars
  • The historical relationship between oil prices and stocks
  • How financial firms mitigated risks after the 1911 Chinese Revolution
  • How a European loan helped paved the way for the Triple Entente in WW1
  • And MUCH more.

However, with all of the stories of how various multinational corporations are pulling out of Russia due to Putin’s invasion of Ukraine, I wanted to highlight a historical example of boycotting certain products (i.e., Russian oil) and business protests: 18th century Quakers and slavery.

Economic Protest: 18th Century Quakers 

The following excerpt comes from historian Julie L. Holcomb’s article in The Conversation

“Buying items that are fair trade, organic, locally made or cruelty-free are some of the ways in which consumers today seek to align their economic habits with their spiritual and ethical views. For 18th-century Quakers, it led them to abstain from sugar and other goods produced by enslaved people.

Quaker Benjamin Lay, a former sailor who had settled in Philadelphia in 1731 after living in the British sugar colony of Barbados, is known to have smashed his wife’s china in 1742 during the annual gathering of Quakers in the city. Although Lay’s actions were described by one newspaper as a “publick Testimony against the Vanity of Tea-drinking,” Lay also protested the consumption of slave-grown sugar, which was produced under horrific conditions in sugar colonies like Barbados.

In the late 17th and early 18th centuries, only a few Quakers protested African slavery. Indeed, individual Quakers who did protest, like Lay, were often disowned for their actions because their activism disrupted the unity of the Quaker community. Beginning in the 1750s, Quakers’ support for slavery and the products of slave labor started to erode, as reformers like Quaker John Woolman urged their co-religionists in the North American Colonies and England to bring about change.

In the 1780s, British and American Quakers launched an extensive and unprecedented propaganda campaign against slavery and slave-labor products. Their goal of creating a broad nondenominational antislavery movement culminated in a boycott of slave-grown sugar in 1791 supported by nearly a half-million Britons.

How did the movement against slave-grown sugar go from the actions of a few to a protest of the masses? As a scholar of Quakers and the antislavery movement, I argue in my book “Moral Commerce: Quakers and the Transatlantic Boycott of the Slave Labor Economy” that the boycott of slave-grown sugar originated in the actions of ordinary Quakers seeking to draw closer to God by aligning their Christian principles with their economic practices.

And now, let’s get into today’s Sunday Reads!

Uncertainty and Hyperinflation: European Inflation Dynamics after World War I

Basement of a bank full of banknotes, at the time of the Mark devaluation, during the economic crisis, Weimar Republic (Germany), 1923

Why This is Relevant: 

With the CPI figure hitting another four-decade high this week, there continue to be concerns around how Russia’s invasion of Ukraine will worsen the existing inflation problem in America. That said, this paper focuses on how a previous European conflict – World War I – impacted inflation / hyperinflation after the war ended.


“Fiscal deficits, elevated debt-to-GDP ratios, and high inflation rates suggest hyperinflation could have potentially emerged in many European countries after World War I. We demonstrate that economic policy uncertainty was instrumental in pushing a subset of European countries into hyperinflation shortly after the end of the war. Germany, Austria, Poland, and Hungary (GAPH) suffered from frequent uncertainty shocks – and correspondingly high levels of uncertainty – caused by protracted political negotiations over reparations payments, the apportionment of the Austro-Hungarian debt, and border disputes.

In contrast, other European countries exhibited lower levels of measured uncertainty between 1919 and 1925, allowing them more capacity with which to implement credible commitments to their fiscal and monetary policies. Impulse response functions show that increased uncertainty caused a rise in inflation contemporaneously and for a few months afterward in GAPH, but this effect was absent or much more limited for the other European countries in our sample. Our results suggest that elevated economic uncertainty directly affected inflation dynamics and the incidence of hyperinflation during the interwar period.”

Visualizing History:

Notable Quote:

“financial crises that threaten a country’s ability to repay its debt may quickly become self-fulfilling, and lead to a debt crisis. The parallel to fiscal policy and inflation expectations in the interwar period is clear. If economic agents believed that GAPH [Germany, Austria, Poland, Hungary] debts could not be repaid as long as budget discipline was non-existent, then tipping into hyperinflation becomes self-fulfilling.”


The 1906 Loan that Paved the Way for The Entente Cordiale

Why This is Relevant: 

This article looks at the history of how a series of Russian loans at the turn of the 20th century helped pave the way for the Triple Entente alliance in World War I. This offers a key example of how finance and politics are interconnected.


“Sergei Witte, Chairman of the Council of Ministers, secured funds in the form of a bond issue from a group of French and British banks which kept alive the ailing regime… Witte had realized from the start of the war that European credit was the surest route to sustaining the military effort. He travelled to Paris in 1904, securing a bond issue which, despite the French foreign minister insisting on Russia buying French armaments, was favorable to Witte. After successive Russian defeats to the Japanese, Witte decided more funds were needed. He travelled to Berlin in early 1905, leveraging his favorable standing with the French financial elite against the competing German bankers to secure another bond issue of 231 million roubles.”

Notable Quote:

“When conditions demand it, even your adversary, who helped your enemy in war, who rebuffed your attempts for funds, who two generations ago invaded your land, can suddenly become your saviour. International finance can be a wedge for political reconciliation. Russia and Britain were, briefly, the best of friends.”


Coping with Disasters: Two Centuries of International Official Lending

Why This is Relevant:

The latest Russia-Ukraine crisis has demonstrated just how important financial relationships can be in times of crisis. Who countries lend money to (and how much) can have significant geopolitical ramifications. this paper looks at the long history of sovereign lending, and how such lending is affected by financial crises and war.


“Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015.

Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official cross-border finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration.

In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.”

Visualizing History:

Notable Quote:

“Cross-border official lending has been an important force in international finance both in the previous two centuries and today. Official lending tends to spike during wars and severe financial crises with the most notable episodes in World Wars 1 and 2, under Bretton Woods and in the 1930s Depression.”

The Allies, Spain, And Oil In World War II

Why This is Relevant:

The United States recently announced a ban on imports of Russian oil, but the politicization of oil is nothing new. In fact the United States wielded political influence and sought to exert financial pressure through oil during World War II. The below summary of the linked article comes from NBER:


“The United States and Britain imposed oil embargoes of various degrees against Spain for several reasons. Foremost among these was the Allies’ desire that Spain remain neutral throughout the war. They also hoped that sanctions would discourage Spain from allowing German spies to operate in Spain, that Spain would withdraw its “volunteer” troops fighting alongside the Germans on the Eastern front, and that Spanish Dictator Francisco Franco would rein in his nation’s virulently pro-Axis press.

Not least, the Allies wanted Spain to halt its exports to Germany of crucial raw materials, particularly tungsten, which was used in armor-piercing shells. The Allies also feared Spain’s re-exporting petroleum products, especially aviation fuel, to the Germans.

By analyzing month-by-month and product-by-product shipping records in the Spanish Archives, Caruana and Rockoff track the Allied economic pressures on Spain throughout the war. In doing so, the researchers identify three phases of sanctions. They also determine that the effectiveness of each phase depended largely on the goals of the nations imposing the sanctions and on the degree of accord between those nations.”

Visualizing History:

Notable Quote:

“Spain panicked, the researchers report, fearful for its transportation systems, fishing fleets, and industries. The country had no other access to oil, and appeals to Germany, which was concerned about fueling its war machine and industries, were of no avail. Franco was forced to seek accommodation with the Allies, and in return for an allotment of oil that amounted to about 80 percent of Spain’s consumption before the Spanish Civil War, Franco acceded to the Allied demands for neutrality.”


Investing in the New Republic: Multinational Banks, Political Risk, and the Chinese Revolution of 1911

Why This is Relevant:

This week the Financial Times reported that BlackRock funds have shed $17 billion in losses due to their Russian exposures. While this is relatively small in relation to the firm’s $10 Trillion in assets under management, it is representative of how many other managers are ailing from Russia’s invasion and subsequent sanctions.

This paper looks at how multinational banks dealt with similar political risk and fallout in China after the 1911 Revolution overthrew the Qing Dynasty.


“This article examines the strategies employed by multinational banks to mitigate political risk following the onset of revolution in their host countries during the early twentieth century. It does so by exploring the activities of multinational banks in China during the Revolution of 1911 and its aftermath. This article first describes the measures that multinational banks took to maintain China’s credit on foreign bond markets after the outbreak of revolution. It then examines how these bankers curtailed political instability by first withdrawing financial support from both the Qing government and the revolutionaries and then providing financial assistance to the new Chinese Republican government.”

Visualizing History:

Notable Quote:

“in the early twentieth century multinational banks were willing to use the withholding and supply of foreign capital to influence political processes in their host country to manage political risk. Second, the financial measures that multinational banks could take to mitigate political risk during revolutions also are a new addition to the repertoire of financial risk management techniques of banks more generally that financial historians have begun to study.

While this article has showcased the financial measures that multinational banks in non-European emerging markets could take to mitigate political risk, it needs to be pointed out that the long-term political development of China after the 1911 Revolution also shows that there existed important limitations to the ability of multinational banks to manage political risk and influence the larger political developments in their host countries.”

State Capacity and Military Conflict

Why This is Relevant:

Most readers intuitively understand that armies with larger financial backing generally win. The West’s current sanctions strategy against Russia today is predicated on that notion. However, has this always been the case? This article assesses how the importance of state capacity and finances to military conflict has evolved over time.


“Powerful, centralized states controlling a large share of national income only begin to appear in Europe after 1500. We build a model that explains their emergence in response to the increasing importance of money for military success. When fiscal resources are not crucial for winning wars, the threat of external conflict stifles state building. As finance becomes critical, internally cohesive states invest in state capacity while divided states rationally drop out of the competition, causing divergence. We emphasize the role of the “Military Revolution”, a sequence of technological innovations that transformed armed conflict. Using data from 374 battles, we investigate empirically both the importance of money for military success and patterns of state building in early modern Europe. The evidence is consistent with the predictions of our model.”

Visualizing History:

Notable Quote:

“The ‘military revolution’ – a set of interrelated technological and organizational changes between the 16th and 17th century – made wars more costly and protracted. Using a dataset of 374 battles, we measure the extent to which fiscal resources translated into battlefield success. Over time, the odds of the fiscally stronger power winning increased dramatically. Therefore, the military revolution created strong incentives to invest in state building.”


“Unusual, Unstable, Complicated, Unreliable and Temporary” Reinterpreting the Ebb and Flow of Globalization

Why This is Relevant:

The impact of war on globalization is an old concern. War generally leads to nationalism – both economic and militarily – that restricts and/or weaponizes trade. This paper focuses on the historical “ebb and flow” of globalization, particularly following wars.


“In 1919, John Maynard Keynes wrote his famous tract, The Economic Consequences of the Peace. In that work he anticipated the collapse of the first era of globalization that began in the mid nineteenth century. He admonished the short-sighted assumption that these years of relative peace and prosperity for many was a permanent norm, interrupted only briefly by the Great War. The diplomatic failures, lapses in leadership and promotion of narrow interests and vision outlined by Keynes underpinned his prediction of a backlash of economic nationalism, trade protectionism and recession. The paper revisits the turning points in the evolution of the global economic system since 1919 by focusing primarily on the evolution of the international monetary system and policy cooperation/coordination.

We identify four disruptions and examine how each prompted change in the underlying ideology about how the international monetary system should be organized: World War I, Bretton Woods, the Managed Float, and the 2007-2008 global financial crisis. Each turning point was characterized by different forms and institutions of cooperation, how rules (either explicit or implicit) were designed and implemented, and the crucial importance of the historical context.”

Visualizing History:

Notable Quote:

“The fourth turning point in the international system is still incomplete, but following from Keynes, history reminds us that nostalgia for an earlier period needs to be tempered by a realistic understanding of how ‘unstable, temporary, complex and unreliable’ were the golden ages of international economic cooperation.”



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