QE through the prism of the Barings Crisis in 1890: Central Banks and the International Money Markets

<strong>Centre for Economic Studies and Planning School of Social Sciences</strong> <strong>CESP Seminar Series 2015</strong> <strong>Ramaa Vasudevan</strong> on <strong>"QE through the prism of the Barings Crisis in 1890: Central Banks and the International Money Markets"</strong> <strong>Abstract:</strong> In this paper we view the Federal Reserve actions in the current crisis through the prism of the response of the Bank of England to the Barings crisis in 1890. The Bank of England response to the impending collapse of the Barings bank in 1890 involved not just a Bank brokered loan guarantee but also a change in the rules and manner of intervention in the market for bill discounting that constituted a significant element of the unregulated money market of the time. Quantitative easing in the current context also marks the attempt by the Federal Reserve to tame the shadow banking system by intervening directly in these markets. We draw some lessons about the nature and limitations of central bank response from this historical analogy. <strong>On Tue Sep 8, 2015</strong>