the most striking feature of that system is how little it has changed in the space of a decade, despite the ‘great dying’ of so many banks, hedge funds and other entities, and the promulgation of thousands of pages of new financial regulation on both sides of the Atlantic. Banks are certainly better capitalized than they were ten years ago. In

The decision of the Nixon administration to sever the final link with the gold standard (by ending gold convertibility of the dollar) sounded the death knell for Bretton Woods in 1971.

Their source of profits lay in maximizing the difference between the costs of their liabilities and the earnings on their assets, without reducing reserves to such an extent that the bank became vulnerable to a run – a crisis of confidence in a bank’s ability to satisfy depositors, which leads to escalating withdrawals and ultimately bankruptcy:

a) cashless intra-bank and interbank transactions b) fractional reserve banking and c) central bank monopolies on note issue, the very nature of money evolved in a profoundly important way.

What the conquistadors failed to understand is that money is a matter of belief, even faith: belief in the person paying us; belief in the person issuing the money he uses or the institution that honours his cheques or transfers.

M0 (also known as the monetary base or high-powered money), which is equal to the total liabilities of the central bank, that is, cash plus the reserves of private sector banks on deposit at the central bank; and M1 (also known as narrow money), which is equal to cash in circulation plus demand or ‘sight’ deposits.

key components of the financial system: the bond market, the stock market, the insurance market, the real estate market and the extraordinary globalization of all these markets

the ascent of money has been essential to the ascent of man. Far from being the work of mere leeches intent on sucking the life’s blood out of indebted families or gambling with the savings of widows and orphans, financial innovation has been an indispensable factor in man’s advance from wretched subsistence to the giddy heights of material

The financial crisis that struck the Western world in the summer of 2007 provided a timely reminder of one of the perennial truths of financial history. Sooner or later every bubble bursts. Sooner or later the bearish sellers outnumber the bullish buyers. Sooner or later greed turns to fear.