where it has a guaranteed long-run return even if that return is very low , is still a very powerful driver that will not go away . And especially so if we go out of advanced economies and look at the dynamics in China , or in emerging markets where people still have this strong , strong motive to regard Western fixed income and the safe assets of the world as their preferred store of value . And they would almost do anything to just hedge away the risk of being expropriated from their own governments .

Pak : I feel like one of the lessons from your research to the average investor is really about how financial [ actors and ] institutions do or don ’ t learn from history , and also what it says about society , and about advanced economies themselves . What does it say about advanced economies or about how markets work and about how history can tell us something about those institutions ? Where are you going now with your research ? What do you feel like still needs to be done ?

Schmelzing : I think I only scratched the surface so far . There ’ s a ton to be done still . Generations of people could potentially spend their whole lifetimes in archives and find new data and great new sources . And there ’ s just so much that a single person can even study and incorporate ; it ’ s a tiny fraction of what is out there . I ’ m currently working on the book project for Yale University Press , and I ’ m trying to go through as many traditional primary sources as humanly possible to incorporate these kinds of facts and data points and whatever I can find , to reconstruct economy-wide returns . But even with the help of my research assistants , who help with the more obscure languages and medieval handwriting , the historian remains limited by the “ known unknowns ” and the “ unknown unknowns .” We know some archives burned down over the years ( Nuremberg during World War II , for instance ), but perhaps unknown material existed in the 14th or 15th century where we do not even know that it was subsequently destroyed . The point is you need

to make qualitative judgments in the end and find the right representative sources .

I think one of the most interesting qualitative historical questions that currently occupies me is we have this big structural break in the early 16th century . I go back to the 14th century , but between the 14th and the early 16th century , we do not yet have a trend of global real rates . It ’ s a kind of random walk that we see . It ’ s actually slightly trending upwards in these 200 years . And then in the late 15th , early 16th century , we have this big inflection point and from then onwards , global rates decline consistently . So , I want to understand better what exactly is happening in these crucial years between the mid-15th and early-16th century because this is when the entire international financial system kind of turns around by 180 degrees . And some things happening there still define our current international financial system . Something that ’ s happened between those 40 – 50 years , in that period , still determines the current trend of global real rates .

HOW MUCH DO YOU KNOW ABOUT FINANCIAL HISTORY ?

1 . What company showed appetite for innovation in the packaged-food industry when it went public on the Nasdaq in May 2019 ?

2 . What famous financial analyst used the term “ high yield ” as early as 1919 ?

3 . What 2002 financial legislation enjoyed bipartisan support , with votes of 423 to 3 in the House and 99 to 0 in the Senate ?

4 . What German foreign minister was assassinated for taking the public stance that the Versailles Treaty payments should be made until Germany could get the Allies to modify them ?

5 . Who perpetrated one of the largest financial frauds of the 2010s with her blood-testing company , Theranos ?

6 . Who signed Sarbanes-Oxley into law ?

7 . What economist initially underestimated the rate of depreciation of the German mark in his famous 1920 book , but updated his views in a September 1922 editorial ?

8 . During what century did consolidated sovereign debt come into existence ?

9 . What became the largest IPO worldwide when it surpassed the 2014 Alibaba IPO in December 2019 ?

10 . When is Harriet Tubman scheduled to replace Andrew Jackson on the design of the $ 20 bill ?

1 . Beyond Meat 2 . John Moody 3 . The Sarbanes-Oxley Laws 4 . Dr . Walter Rathenau 5 . Elizabeth Holmes 6 . President George W . Bush 7 . John Maynard Keynes 8 . Late 13th century 9 . Saudi Aramco 10 . 2030

40 FINANCIAL HISTORY | Summer 2022 | www . MoAF . org