How New York City Beat London In Finance #Finance

New York City Wall Street the epicenter of American Finance and economic power and one of the most iconic cities in the history of the world it’s home to the headquarters of the

biggest investment banks on earth like JP Morgan and Chase Morgan Stanley and Goldman Sachs the headquarters for the Behemoth of the Asset Management World Black Rock and it’s home to the biggest Stock Exchanges in the world including the NASDAQ and of course

the New York Stock Exchange which commands 42 2.4% of global market Capitalization or worth $ 46.7 trillion as of 2023 but it wasn’t always this powerful and it hasn’t always been the financial Capital of the world it simply holds that

title today before it came London and the first time New York City took top spot was technically after World War II but this wasn’t permanent you’d be just as shocked as I am to find out that surprisingly the influential Global Financial Centers index which to be fair only started in

2007 first had NYC overtaking London as the financial Capital of the world as late as 2018 but it depends on what metrics are used anyways to other analysts New York overtook London long before then what’s for sure though is that since World War II either London or NYC have

occupied the number one spot in global Finance and as they’ve continued to trade places the Big Apple has increasingly separated itself over the years as the clear

number one regardless New York City is certainly in the lead for the foreseeable future so the question is how did New York City overtake the city that was once known as the Capital of the world AKA London well to understand that we have to look at how London did the same thing to

its predecessor Amsterdam in the 17th century there was no question which city was the Global Financial Capital Amsterdam was on top of the world and this period was the peak of the Dutch Colonial Empire often referred to as the Dutch golden age in fact it was Dutch settlers

working for the famous Dutch East India Company who established New Amsterdam on Manhattan’s southern tip ever since business has been the area’s most important activity only when the British took over did the city’s name change to New York the links between these three cities the

last three Global Financial Capitals run even deeper than it appears so let’s see how these transitions happened starting with how London took the crown that it went on to hold for centuries Amsterdam was the First Financial Hub in the world the first stock exch change in

human history was built there in 16002 including the world’s oldest stock the Dutch East India Company a lot of the complex financial instruments that permeate the financial world today derivatives such as options puts calls forward contracts and Futures were all created in

the commodity Stock Exchange just off Dam Square London ended up borrowing and improving on a lot of the groundwork laid by the Dutch Capital eventually developing a market centered system as opposed to the bank centered system of Amsterdam as the Netherlands began

a political and economic decline in the 18th century London became dominant after 1750 especially banking suddenly began to flourish in London it also then rivaled Paris as the world’s Financial Capital for the first half of the 19th century it was only in 1848 when the bank

of France ran into trouble during a revolution which saw the creation of the French second Republic they could no longer exchange paper money for gold causing them to run short on gold which allowed London to emerge as the definitive Financial hub from here until World War I London didn’t

falter at all it honed in on maximizing its financial sector sometimes to the detriment of the UK’s domestic manufacturing needs this was because the city of London which is London’s Central Business District home to the bank of England and the London Stock Exchange was

the driving force behind monetary policy for the entire British Empire it was at the heart of the British economy and focused on financing trade and Manufacturing throughout their empire as opposed to to only the mainland’s economic needs still the formation of Lloyds of London the bank of

England and the London Stock Exchange laid the groundwork for the economic boom of the Industrial Revolution from around 1760 to 1840 it’s after this that a lot of Midland’s Banks and local banks across England merged with larger entities in London and Birmingham

because there was danger for local banks that became too heavily involved in single Industries like Bradford in Wool Alam in cotton and Sheffield in steel and merging helped them diversify

their Loan Portfolio and mitigate those risks so merges began to happen more and more and from about 1885 until the end of world war one so many high-profile merges happened that England and Welsh Banks were suddenly Consolidated and by the end of the merger wave

the market consisted of only five major Banks the onset of joint stock Banks which allowed them to function like corporations with shareholders and stock prices along with the development of limited liability for banks and other shareholders all contributed to the consolidation of small small

entities into a few banking Giants the size of these Banks and their location in the Capital city of the world’s strongest economy meant that they were the Beating Heart of international text-decoration: none;">Finance in this new landscape the opportunity for commercial banking services really expanded because the large Banks had way more Capital to pull together the pound became the Benchmark currency for international transactions in the latter part

of the 19th century too this was for a few reasons Not only was it pegged to Gold but with London being the world’s Capital for Insurance and commodity none;">Markets British Banks expanding overseas and British Capital being the main source of foreign investment around the globe it was inevitable London’s population exploded as well during this period jumping from 1 million in 1801 to 6 million in 1901 this demographic

expansion coincided with the city’s Port becoming the most active in the world triggering an explosion of further economic growth and leaving London as the best choice for The Banks of other industrialized nations to set up shop invest and get short or long-term Credit and

that’s really at the heart of this financial Hub thing like how much does your city attract foreign investment or more precisely how do your banking regulations facilitate foreign investment are you the best spot for Innovation Financial Services Etc don’t forget either that

London’s Geographic position in the GMT time zone means that they’re able to allow their bankers and Traders to perfectly service both Asian and North American clients during business hours as well as European ones this is huge being able to act as the bridge between the two speaking of

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traveling than trying this out all right anyways this is all how London stayed on top for so long but that was until the Breton Woods agreement in 1944 which brought about the creation of the international monetary fund the World Bank and most importantly made the US dollar the world’s

Reserve currency with all other currencies pegged to the value of the dollar this really just solidified not only New York City but the United States overall as the dominant superpower of the time with the world’s largest economy by far but even then it’s actually debatable if we can

pinpoint this as the start of New York City basically becoming the definitive Financial Capital of the world some analysts say it came even earlier back when they funded France and the UK during World War I even after it definitely became de facto number one after World War II

London still had times where they surged back to the top spot the first notable albeit quick time was when the euro dollar Markets developed in the 1950s and London took a lion share of it

and the other was in the 1980s see not only did English common law mean that the bank of England could allow lightly regulated offshore Markets to flourish which attracted hundreds of foreign

Banks to set up branches in London but in the 1980s London’s financial Markets were deregulated causing what was known as The Big Bang this deregulation came on the back of a 1979

decision to allow the purchase and use of foreign currencies without any restriction something that had not been the case due to World War II policies these sweeping changes including the switch to electronic trading and an avalanche of foreign companies moving to London reinstated the city as the

world’s Financial Capital deep into the 20th century the average daily turnover of the London Stock Exchange had risen from £500 million in 1986 to more than $2 billion in 1995 but this did eventually come to an end and NYC climbed its way back to the number

one spot with tactics that aren’t all that different from London’s but the process of becoming the number one Financial Capital has actually been a long time in the making and again not unlike London New York cities rise to the top of the banking and

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance industry coincided with the rise of its commercial trade sector if we look back at the history of New York itself and why the Dutch chose to even go there in the first place

there were some obvious signs of its potential Dutch Merchants saw it as a perfect location due to its ports or the now Manhattan Port it was at the mouth of the Hudson River the natural shape of the harbor was optimal and the relatively shallow Waters of the make it difficult for large waves to

form it was also more convenient than Philadelphia or Boston’s ports and the Hudson wasn’t prone to freezing like the Delaware River when construction of the Erie Canal was completed in 1825 the Hudson River and the Great Lakes were connected and that helped the city become

America’s most important trading Hub by the mid 1800s the canal handled more goods and people than all the other American ports combined helping New York City replace Philadelphia as the financial Capital of the country along the way their Geographic graphical location on the

northeastern coast of the US is a big reason for the success just like London’s population boom 19th century NYC proved to be the immigration Hub of the US with its population rising to double the size of Philadelphia by 1860 with over 800,000 people the new immigrants fit right into the

growing manufacturing and Commercial industry so a lot of factors have to come together geographical location a population increase both for labor Supply and productivity and of course Financial Innovation the city’s role as a financial Hub really exploded in the late 19th century when it

became a center for trading stocks and Bonds from 1890 to 1930 NYC had a similar experience to Paris during the Bal poo when it distinguished itself as the cultural Capital of Europe and experienced a golden age of influence especially in the Arts Not only was New

York City the center of American Finance and trade but it asserted its dominance as the center for media entertainment pop culture and high culture all of this attracted investment in various

Industries by 1920 more than 25% of the 300 largest corporations were headquarted here and despite the Great Depression and the 1929 Wall Street Crash coming at the end of this period

which was obviously a catastrophic error for Finance it was in this era that the US transitioned from a Debtor Nation to a Creditor Nation

from a nation that was being invested into to a nation that was doing the investing basically they had a positive balance of payments for once instead of being in Debt which which helped trigger rapid economic growth this transition was mainly due to the Loans

floated on behalf of the French and British governments during and after World War I the lending was necessary for European countries whose economies were devastated by the war a similar scenario happened again after World War II with the Marshall Plan of course by the time the war came to pass

London and the British Empire were in Decline and the US position being so far away from the battlefield really made it a safe hot spot for investment this put the US in a position where they became the clear hegemon in the west economically and militarily and this allowed them to begin reshaping

the world in their image which involved promoting democratization and economic interdependence particularly in Europe but internationally too the theory generally went like this if the world was made up of liberal democracies Not only would there be less reason for war since democracies in theory

shouldn’t go to war because they value human rights but this would also allow states to focus on Prosperity instead of security which means less trade barriers more economic interdependence and integrated economies that all make war too risky to pursue in this Pursuit the US ended up molding

the global economy in a way that maximized their power with like I said before the Britain Woods agreement the new set of rules and regulations for an international monetary system put America and its Financial Capital NYC at an unmatched level at the time us enemies like the

Soviet Union were skeptical of this new system that emanated from Wall Street the role of the institutions introduced at Breton Woods continue to receive this criticism from countries of the global South The View that the IMF and World Bank are simply an extension of us imperialism may be a bit

cynical because they have done plenty of good in the world of International Development however the Debt that developing nations have to those institutions after taking out Loans is a deao Debt to the US which puts a lot of pressure on them to obey

or go along with US policies domestically and in terms of their foreign policy that’s actually a big reason why brics is expanding so rapidly today because it offers an alternative to these organizations which are tied to us power and influence so yeah Breton Woods was really the beginning of

us hegemony as we know it today the new dollar status put New York at the center of international Finance and from here things really took off Wall Street and its Financial

Services industry became the strongest in the world NYC based banks are still the largest and richest in the world today offering the most for businesses seeking financing and the cycle keeps feeding into itself the more Innovative and successful companies that come the more the financial services

industry grows and so on over time this process has allowed NYC to separate itself as of 2024 New York City has been home to 41 Fortune 500 companies including the biggest banks on earth that is first place by a Long Way Houston is a distant second in the US with only 21 most of which are

concentrated in different Industries like energy petroleum and gas for comparison in 2023 London fell out of the top five cities in the world with Fortune 500 corporations headquarters it

has only nine of them headquartered there down from 13 in 2022 innovation in a variety of Industries helped Propel nyc’s Financial dominance in the second half of the 20th century

New York City not only had the biggest stock Markets and Banks but it was a hub of innovation in telecommunications technology Investment Banking and much more it continues

to be a leader in attracting business helping it maintain top spot amongst Global competitors for example fintech is a core industry for luring entrepreneurs to New York City because it offers resources and expertise other cities can’t the city is home to several incubators that specialize in

fintech and they provide funding and mentorship to startups in the early to mid-growth stages on top of this NYC is also a global leader in financial regulation since it’s home to the US Securities and Exchange Commission which regulates Securities Market

href="https://cashnews.co/markets" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Markets in the US besides expanding lucrative Industries like technology and

banking NYC is also a leading city for global Talent flows just like London attracted immigrants from all over the world in the 19th century NYC has done the same in the modern era only now instead of Traders and Merchants it’s stem graduates that are the desired arrivals and when I say stem

I more so mean in the fintech type of way which attracts lots of quantitative analysts or as they’re commonly referred to in Finance quants these highly skilled

mathematicians are the engine behind risk analysis and strategic decision-making in the world of Finance and it’s not like there’s an infinite supply of competent

quantitative analysts out there they’re massively sought-after in the Finance industry NYC benefits from being a Hotpot for such skilled workers due to the image of the

iconic City along with the obviously High salaries also because a lot of the stem talent in the US is foreign born the city is the beneficiary of the brain drain process in not only developing countries but also wealthy ones where people are looking to make more money or take risks when talented

and educated individuals leave their Homeland it restricts their Nation from developing STEM related Industries and therefore from developing their economy the country suffers as a result

from this loss of talent just like other leading Financial OR tech centers NYC is the one that reaps the rewards of this immigration being a leading city for global Talent flows especially in the text-decoration: none;">Finance sector is another reason for New York City’s sustained dominance with the flow of Global Talent investment and Innovation China its way into New York City like a river of gold the city its businesses and their offshoots keep getting richer in a

world of free market Capitalism the resources eventually begin to pull at the top in the hands of a select View and in the current system of international none;">Finance unless something unforeseen were to massively upset the current trajectory New York City sits at the top of that system acre more wealth influence and power every year and solidifying its position as the financial Capital of the world who knows what will

will come next and again thank you to Surf shark for sponsoring this CashNews.co don’t forget to try it for 4 months free using my link in the description below see you in the next one