1.
Stock market bubble
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A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink, bubbles occur not only in real-world markets, with their inherent uncertainty and noise, but also in highly predictable experimental markets. Other theoretical explanations of stock market bubbles have suggested that they are rational, intrinsic, two famous early stock market bubbles were the Mississippi Scheme in France and the South Sea bubble in England. Both bubbles came to an end in 1720, bankrupting thousands of unfortunate investors. Those stories, and many others, are recounted in Charles Mackays 1841 popular account, Extraordinary Popular Delusions, the 1920s saw the widespread introduction of an amazing range of technological innovations including radio, automobiles, aviation and the deployment of electrical power grids. The 1990s was the decade when Internet and e-commerce technologies emerged, stock market bubbles frequently produce hot markets in initial public offerings, since investment bankers and their clients see opportunities to float new stock issues at inflated prices. These hot IPO markets misallocate investment funds to areas dictated by speculative trends, emotional and cognitive biases seem to be the causes of bubbles, but often, when the phenomenon appears, pundits try to find a rationale, so as not to be against the crowd. Thus, sometimes, people will dismiss concerns about overpriced markets by citing a new economy where the old stock valuation rules may no longer apply and this type of thinking helps to further propagate the bubble whereby everyone is investing with the intent of finding a greater fool. Still, some cite the wisdom of crowds and say that price movements really do reflect rational expectations of fundamental returns. Large traders become powerful enough to rock the boat, generating stock market bubbles, the bubble in closed-end country funds in the late 1980s is instructive here, as are the bubbles that occur in experimental asset markets. According to the hypothesis, this doesnt happen, and so any data is wrong. For closed-end country funds, observers can compare the prices to the net asset value per share. For experimental asset markets, observers can compare the prices to the expected returns from holding the stock. In both instances, closed-end country funds and experimental markets, stock prices clearly diverge from fundamental values. Nobel laureate Dr. Vernon Smith has illustrated the closed-end country fund phenomenon with a chart showing prices, at its peak, the Spain Fund traded near $35, nearly triple its Net Asset Value of about $12 per share. It only took a few months for the premiums in closed-end country funds to back to the more typical discounts at which closed-end funds trade. Those who had them at premiums had run out of greater fools. For a while, though, the supply of greater fools had been outstanding, a rising price on any share will attract the attention of investors
2.
United Kingdom
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The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country in western Europe. Lying off the north-western coast of the European mainland, the United Kingdom includes the island of Great Britain, Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state—the Republic of Ireland. The Irish Sea lies between Great Britain and Ireland, with an area of 242,500 square kilometres, the United Kingdom is the 78th-largest sovereign state in the world and the 11th-largest in Europe. It is also the 21st-most populous country, with an estimated 65.1 million inhabitants, together, this makes it the fourth-most densely populated country in the European Union. The United Kingdom is a monarchy with a parliamentary system of governance. The monarch is Queen Elizabeth II, who has reigned since 6 February 1952, other major urban areas in the United Kingdom include the regions of Birmingham, Leeds, Glasgow, Liverpool and Manchester. The United Kingdom consists of four countries—England, Scotland, Wales, the last three have devolved administrations, each with varying powers, based in their capitals, Edinburgh, Cardiff and Belfast, respectively. The relationships among the countries of the UK have changed over time, Wales was annexed by the Kingdom of England under the Laws in Wales Acts 1535 and 1542. A treaty between England and Scotland resulted in 1707 in a unified Kingdom of Great Britain, which merged in 1801 with the Kingdom of Ireland to form the United Kingdom of Great Britain and Ireland. Five-sixths of Ireland seceded from the UK in 1922, leaving the present formulation of the United Kingdom of Great Britain, there are fourteen British Overseas Territories. These are the remnants of the British Empire which, at its height in the 1920s, British influence can be observed in the language, culture and legal systems of many of its former colonies. The United Kingdom is a country and has the worlds fifth-largest economy by nominal GDP. The UK is considered to have an economy and is categorised as very high in the Human Development Index. It was the worlds first industrialised country and the worlds foremost power during the 19th, the UK remains a great power with considerable economic, cultural, military, scientific and political influence internationally. It is a nuclear weapons state and its military expenditure ranks fourth or fifth in the world. The UK has been a permanent member of the United Nations Security Council since its first session in 1946 and it has been a leading member state of the EU and its predecessor, the European Economic Community, since 1973. However, on 23 June 2016, a referendum on the UKs membership of the EU resulted in a decision to leave. The Acts of Union 1800 united the Kingdom of Great Britain, Scotland, Wales and Northern Ireland have devolved self-government
3.
Act of Parliament
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Acts of Parliament, also called primary legislation, are statutes passed by a parliament. Act of the Oireachtas is an equivalent term used in the Republic of Ireland where the legislature is known by its Irish name. It is also comparable to an Act of Congress in the United States, a draft Act of Parliament is known as a bill. In territories with a Westminster system, most bills that have any possibility of becoming law are introduced into parliament by the government. This will usually happen following the publication of a paper, setting out the issues. A bill may also be introduced into parliament without formal government backing, in territories with a multicameral parliament, most bills may be first introduced in any chamber. However, certain types of legislation are required, either by convention or by law. For example, bills imposing a tax, or involving public expenditure, are introduced into the House of Commons in the United Kingdom, Canadas House of Commons, conversely, bills proposed by the Law Commission and consolidation bills traditionally start in the House of Lords. Once introduced, a bill must go through a number of stages before it can become law, in theory, this allows the bills provisions to be debated in detail, and for amendments to the original bill to also be introduced, debated, and agreed to. In bicameral parliaments, a bill that has been approved by the chamber into which it was introduced then sends the bill to the other chamber, broadly speaking, each chamber must separately agree to the same version of the bill. Finally, the bill receives assent, in most territories this is merely a formality. In some countries, such as in Spain and Portugal, the term for a bill differs depending on whether it is initiated by the government, again, the second reading of a Government bill is usually approved. A defeat for a Government bill on this reading signifies a major loss, if the bill is read a second time, it is then considered in detail Consideration in detail, This usually takes place on the floor of the House. Generally, committees sit on the floor of the House and consider the bill in detail, third reading, A debate on the final text of the bill, as amended. Very rarely do debates occur during this stage, passage, The bill is then sent to the other House, which may amend it. If the other House amends the bill, the bill and amendments are posted back to the original House for a further stage, the State of Queenslands Parliament is unicameral and skips this and the rest of the stages. Consideration of Senate/Representatives amendments, The House in which the bill originated considers the amendments made in the other House and it may agree to them, amend them, propose other amendments in lieu, or reject them. However, the Senate may not amend money bills, though it can request the House to make amendments, a bill may pass backwards and forwards several times at this stage, as each House amends or rejects changes proposed by the other
4.
Liverpool and Manchester Railway
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The Liverpool and Manchester Railway was a railway opened on 15 September 1830 between the Lancashire towns of Liverpool and Manchester in the United Kingdom. Jervis of the Delaware and Hudson Railway some years later wrote, as opening the epoch of railways which has revolutionised the social and commercial intercourse of the civilized world. Trains were hauled by steam locomotives between the two towns, though private wagons and carriages were allowed. Cable haulage of trains was down the steeply-graded 1. 26-mile Wapping Tunnel to Liverpool Docks from Edge Hill junction. The railway was built to provide faster transport of raw materials, finished goods. The Liverpool and Manchester Railway was the first public transport system on land which did not use animal traction power. Up to then, the rail systems for public use had been, Horse-drawn plateways, such as the Lake Lock Railroad, Surrey Iron Railway. Railways that used a mix of steam and horse-drawn traffic, such as the Stockton and Darlington Railway, or a mix of cable and horse haulage, often described as the Grand British Experimental Railway the success or failure of which would decide plans for all future railways. The L&MR was intended to achieve cheap transport of raw materials, finished goods, huge tonnages of textile raw material were imported through Liverpool and carried to the textile mills near the Pennines where water and then steam power enabled the production of the finished cloth. There was support for the railway from the towns at either end, the original promoters are usually acknowledged to be Joseph Sandars, a rich Liverpool corn merchant, and John Kennedy, then owner of the largest spinning mill in Manchester. They were influenced to do this by William James, now something of a forgotten figure, James was a land surveyor who had made a fortune in property speculation. He advocated a national network of railways, based upon what he had seen of the development of colliery lines, the Liverpool and Manchester Railway Company was founded on 24 May 1823. It was established by Henry Booth, who became its secretary and treasurer, along with merchants from Liverpool. Charles Lawrence was the Chairman, Lister Ellis, Robert Gladstone, John Moss, a bill presented in 1825 to Parliament was rejected, but it passed in May the following year. In Liverpool 172 people took 1,979 shares, in London 96 took 844, the Marquess of Stafford had 1,000, giving 308 shareholders with 4,233 shares. The initial survey for the line was carried out by William James and, Robert Stephenson departed for South America and William James became bankrupt. Consequently, in 1824 George Stephenson was appointed engineer in their place, by this time, he was taking on too much. As Robert was absent, George left checking the survey to subordinates, upon presentation to Parliament in 1825 it was shown to be inaccurate
5.
Opening of the Liverpool and Manchester Railway
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The opening of the Liverpool and Manchester Railway took place on 15 September 1830. Work on the L&M had begun in the 1820s, to connect the industrial city of Manchester with the nearest deep water port at the Port of Liverpool,35 miles away. The opening day was a public event. Arthur Wellesley, Duke of Wellington, the Prime Minister, rode on one of the eight trains, as did many other dignitaries. Huge crowds lined the track at Liverpool to watch the trains depart for Manchester, the trains left Liverpool on time and without any technical problems. The Duke of Wellingtons special train ran on one track, around 13 miles out of Liverpool the first of many problems occurred, when one of the trains derailed and the following train collided with it. With no reported injuries or damage, the locomotive was lifted back onto the track. At Parkside railway station, near the midpoint of the line, although the railway staff advised passengers to remain on the trains while this took place, around 50 of the dignitaries on board alighted when the Duke of Wellingtons special train stopped. One of those who got off was William Huskisson, former minister and Member of Parliament for Liverpool. Hoping to be reconciled with Wellington, he approached the Dukes railway carriage, distracted by the Duke, he did not notice an approaching locomotive on the adjacent track, Rocket. On realising it was approaching he panicked and tried to clamber into the Dukes carriage and he fell onto the tracks in front of the train, suffering serious leg injuries and dying later that night. The Duke of Wellington felt that the remainder of the events should be cancelled following the accident at Parkside. However, a crowd had gathered in Manchester to see the trains arrive. Wellington was persuaded to continue to Manchester, by the time the trains reached the outskirts of Manchester the crowd had become hostile and was spilling onto the tracks. With local authorities unable to clear the tracks, the trains were obliged to drive at low speed into the crowd, using their own momentum to push people out of the way. Eventually they arrived at Liverpool Road railway station in Manchester to be met by a hostile crowd, Wellington refused to get off the train, and ordered that the trains return to Liverpool. Mechanical failures and an inability to turn the locomotives meant that most of the trains were unable to leave Manchester, while the Duke of Wellingtons train left successfully, only three of the remaining seven locomotives were usable. The L&M became extremely successful, and within a month of its plans were put forward to connect Liverpool
6.
Interest rate
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An interest rate, is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed. The total interest on an amount lent or borrowed depends on the sum, the interest rate, the compounding frequency. It is defined as the proportion of an amount loaned which a lender charges as interest to the borrower and it is the rate a bank or other lender charges to borrow its money, or the rate a bank pays its savers for keeping money in an account. Annual interest rate is the rate over a period of one year, other interest rates apply over different periods, such as a month or a day, but they are usually annualised. A company borrows capital from a bank to buy assets for its business, in return, the bank charges the company interest. Base rate usually refers to the rate offered on overnight deposits by the central bank or other monetary authority. Annual percentage rate and effective annual rate or annual equivalent rate are used to help consumers compare products with different payment structures on a common basis, a discount rate is applied to calculate present value. Interest rate targets are a tool of monetary policy and are taken into account when dealing with variables like investment, inflation. The central banks of countries tend to reduce interest rates when they wish to increase investment. In the past two centuries, interest rates have been variously set either by national governments or central banks, during an attempt to tackle spiraling hyperinflation in 2007, the Central Bank of Zimbabwe increased interest rates for borrowing to 800%. Possibly before modern capital markets, there have been some accounts that savings deposits could achieve a return of at least 25%. Political short-term gain, Lowering interest rates can give the economy a short-run boost, under normal conditions, most economists think a cut in interest rates will only give a short term gain in economic activity that will soon be offset by inflation. The quick boost can influence elections, Most economists advocate independent central banks to limit the influence of politics on interest rates. Deferred consumption, When money is loaned the lender delays spending the money on consumption goods, since according to time preference theory people prefer goods now to goods later, in a free market there will be a positive interest rate. Inflationary expectations, Most economies generally exhibit inflation, meaning a given amount of money buys fewer goods in the future than it will now, the borrower needs to compensate the lender for this. Alternative investments, The lender has a choice between using his money in different investments, if he chooses one, he forgoes the returns from all the others. Different investments effectively compete for funds, risks of investment, There is always a risk that the borrower will go bankrupt, abscond, die, or otherwise default on the loan. This means that a lender generally charges a premium to ensure that, across his investments
7.
Bank of England
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The Bank of England, formally the Governor and Company of the Bank of England, is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world, after the Sveriges Riksbank, and it was established to act as the English Governments banker and is still one of the bankers for the Government of the United Kingdom. The Bank was privately owned by stockholders from its foundation in 1694 until it was nationalised in 1946, in 1998, it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the government, with independence in setting monetary policy. The Banks Monetary Policy Committee has a responsibility for managing monetary policy. The Banks Financial Policy Committee held its first meeting in June 2011 as a macro prudential regulator to oversee regulation of the UKs financial sector, the Banks headquarters have been in Londons main financial district, the City of London, on Threadneedle Street, since 1734. It is sometimes known by the metonym The Old Lady of Threadneedle Street or The Old Lady, the busy road junction outside is known as Bank junction. Until 2016, the bank provided banking services as a popular privilege for employees. Englands crushing defeat by France, the dominant naval power, in naval engagements culminating in the 1690 Battle of Beachy Head, England had no choice but to build a powerful navy. No public funds were available, and the credit of William IIIs government was so low in London that it was impossible for it to borrow the £1,200,000 that the government wanted. To induce subscription to the loan, the subscribers were to be incorporated by the name of the Governor, the Bank was given exclusive possession of the governments balances, and was the only limited-liability corporation allowed to issue bank notes. The lenders would give the government cash and issue notes against the government bonds, the £1. 2m was raised in 12 days, half of this was used to rebuild the navy. This helped the new Kingdom of Great Britain – England and Scotland were formally united in 1707 – to become powerful, the power of the navy made Britain the dominant world power in the late 18th and early 19th centuries. The establishment of the bank was devised by Charles Montagu, 1st Earl of Halifax, the plan of 1691, which had been proposed by William Paterson three years before, had not then been acted upon. The Royal Charter was granted on 27 July through the passage of the Tonnage Act 1694, the first governor was Sir John Houblon, who is depicted in the £50 note issued in 1994. The charter was renewed in 1742,1764, and 1781, the Bank moved to its current location in Threadneedle Street in 1734, and thereafter slowly acquired neighbouring land to create the edifice seen today. When the idea and reality of the National Debt came about during the 18th century, the 1844 Bank Charter Act tied the issue of notes to the gold reserves and gave the Bank sole rights with regard to the issue of banknotes. Private banks that had previously had that right retained it, provided that their headquarters were outside London, a few English banks continued to issue their own notes until the last of them was taken over in the 1930s. Scottish and Northern Irish private banks still have that right, the bank acted as lender of last resort for the first time in the panic of 1866
8.
Industrial Revolution
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The Industrial Revolution was the transition to new manufacturing processes in the period from about 1760 to sometime between 1820 and 1840. The Industrial Revolution began in Great Britain and most of the important technological innovations were British, aided by these legal and cultural foundations, an entrepreneurial spirit and consumer revolution drove industrialisation in Britain, which would be emulated in countries around the world. A change in marrying patterns to getting married later made able to accumulate more human capital during their youth. The Industrial Revolution marks a turning point in history, almost every aspect of daily life was influenced in some way. In particular, average income and population began to exhibit unprecedented sustained growth, mechanised textile production spread from Great Britain to continental Europe in the early 19th century, with important centres of textiles, iron and coal emerging in Belgium, and later in France. Since then industrialisation has spread throughout much of the world, the precise start and end of the Industrial Revolution is still debated among historians, as is the pace of economic and social changes. Economic historians are in agreement that the onset of the Industrial Revolution is the most important event in the history of humanity since the domestication of animals and plants. The term Industrial Revolution applied to change was becoming more common by the late 1830s. Friedrich Engels in The Condition of the Working Class in England in 1844 spoke of an industrial revolution, however, although Engels wrote in the 1840s, his book was not translated into English until the late 1800s, and his expression did not enter everyday language until then. Credit for popularising the term may be given to Arnold Toynbee, some historians, such as John Clapham and Nicholas Crafts, have argued that the economic and social changes occurred gradually and the term revolution is a misnomer. This is still a subject of debate among some historians, the commencement of the Industrial Revolution is closely linked to a small number of innovations, beginning in the second half of the 18th century. By the 1830s the following gains had been made in important technologies, Textiles – mechanised cotton spinning powered by steam or water greatly increased the output of a worker, the power loom increased the output of a worker by a factor of over 40. The cotton gin increased productivity of removing seed from cotton by a factor of 50, large gains in productivity also occurred in spinning and weaving of wool and linen, but they were not as great as in cotton. Steam power – the efficiency of steam engines increased so that they used between one-fifth and one-tenth as much fuel, the adaptation of stationary steam engines to rotary motion made them suitable for industrial uses. The high pressure engine had a power to weight ratio. Steam power underwent an expansion after 1800. Iron making – the substitution of coke for charcoal greatly lowered the fuel cost for pig iron, using coke also allowed larger blast furnaces, resulting in economies of scale. The cast iron blowing cylinder was first used in 1760 and it was later improved by making it double acting, which allowed higher furnace temperatures
