If the state losses credibility it only gets worse If it takes longer for the

If the state losses credibility it only gets worse if

This preview shows page 2 - 4 out of 5 pages.

exactly how much the people spent on the state and how much the state is giving back. If the state losses credibility, it only gets worse. If it takes longer for the state to pay buyers back, the yield becomes much higher which could send the state into bankruptcy. Northern Italy was where the bond system began. The city states sold bonds to rich citizens (sometimes forced). The state would use the money to pay for war efforts. However, this put them in debt because they force sold too much at high return, since they were forced. Other countries used bonds to help with war efforts; some failed and others didn’t. Once at war it is un – predictable where your financial status will go. War caused economies to rapidly increase their supply of money, which also increased inflation. In today's economy, low inflation is better because of all the moving parts world - wide. Chapter 3 is called "Blowing Bubbles." A great innovation to the business world was the joint stock LLC. This allowed individuals to pool resources without putting their liability at risk. This was made in attempt to end the liability issue that governments were going through when issuing bonds. This is why the stock market is so much more important in the USA and much more popular than the bond system through each state. John Law was the first to create a stock
Image of page 2
market bubble. He learned stock market ins and outs, and attempted to merge the idea of an expanding company and the bank of England. Law tried this idea on France in 1716 after their war time. They needed a financial reboot. He created a private bank that distributed notes payable in gold for a 20 year period after they were sold. The injection of capital saved the French economy and centralized the debt so they could pay it off easier. He spread this idea overseas and became a major shareholder in Dutch and English trading companies, who collected revenue from tobacco trades. With popularity growing, Law printed more money and brought in more shareholders, which created an economic bubble, while supporting the French economy. England tried to do a similar bubble, but the company never fully took control of the
Image of page 3
Image of page 4

You've reached the end of your free preview.

Want to read all 5 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture