History of Finance
1. Barter System: Bartering was the direct exchange of goods and services in human civilizations. It became clear that the barter system had its limitations as communities became advanced.
2. Emergence of Money: A variety of payment instruments, including coins and commodity money (such as gold and silver), were developed to replace barter as a means of exchange.
3. Italian Banking: Italian city-states like Florence and Venice saw a boom in banking activity during the Middle Ages and the Renaissance. Bankers performed currency exchanges, loan provisions, and facilitated trading.
4. Introduction of Double-Entry Bookkeeping System: In the later part of the 15th century, an Italian mathematician named Luca Pacioli brought forth the double-entry bookkeeping system. The basis for modern financial accounting continues to be this accounting technique.
5. Creation of Stock Exchanges: The Amsterdam Stock Market is regarded as the first recognised stock market, having been founded in 1602. Following in 1698, the London Stock Exchange formalized the trading of securities.
6. Joint-Stock Companies: The emergence of joint-stock firms facilitated the pooling of funds among investors for ambitious projects, hence playing a role in the expansion of contemporary corporations.
7. Industrial Revolution: With rising productivity and a greater requirement for capital, the Industrial Revolution brought about several important economic changes. Banking institutions were essential in helping to finance the expansion of the financial markets and the industrial sector.
8. Railway Mania: Speculative bubbles, like the one that occurred in the United Kingdom in the 1840s, demonstrated the possibility of financial markets producing both profit and risk.
9. Great Depression: Global finance was significantly impacted by the 1929 stock market crash and the ensuing Great Depression. Financial restrictions, such as the 1933 Glass-Steagall Act and the 1933 U.S. Securities Act, were developed as a result of it.
10. Bretton Woods Agreement: Following World War II, this agreement created the foundation for the global monetary system, giving rise to organizations like the World Bank and the International Monetary Fund (IMF).
11. Deregulation: Many nations adopted financial deregulation beginning in the late 20th century, which encouraged innovation but also fostered financial crises.
12. Globalization: The expansion of financial markets was made possible by developments in communication and technology. Global transactions could now happen in real-time.
13. Financial Crises: The early 2000s saw the dot-com bubble burst and the global financial crisis in 2007–2008 were among the major financial crises of the early 21st century. These events prompted legislation and reforms.