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At Liberty Street Economics , New York Federal Reserve economist Linda Goldberg provides the most succinct history of international banking we've seen. Here it is: Actually, she has a series of charts and explanations of key changes in banking since the 1800s. The above chart gives the broad overview. Goldberg calls the rise from 1860 to 1914 "the First Age of Globalization," in which increasing connectivity between nations brought about "large-scale capital investments (such as in railways), a deepening of global finance, and expanded prosperity." The start of the First World War brought that all to a halt. Goldberg: World War I marks the onset of the second period—what economists Raghu Rajan and Luigi Zingales call “The Great Reversal of 1914 through 1939.” This period is characterized by financial collapse and the Great Depression. They forcefully argue that this episode shows that globalization is not an immutable economic force, and a backlash against it can be disastrous. Indeed, as the previous chart shows, after restarting briefly, financial integration again collapsed with World War II and recovered slowly thereafter. Recognizing the importance of avoiding the mistakes of the interwar period, the Allies met in Bretton Woods, New Hampshire, in 1944 to create institutions to oversee the repair of the international financial system and to ensure trade and recovery among nations. This effort gave rise to the International Monetary Fund and the World Bank, and in 1947 to the General Agreement on Tariffs and Trade (in Geneva), which evolved into the World Trade Organization. The policy focus of these organizations was institution-building, recovery, and the financing of at least temporary balance-of-payment difficulties that arose at the sovereign level. The last period—the “Second Age of Globalization”—spans roughly 1960 through the end of the twentieth century. The era is characterized by intense financial integration. One of the most frequently used metrics of international financial integration, depicted in the chart below, demonstrates this point. Constructed using data on international assets plus international liabilities relative to GDP, the metric shows a number of periods of accelerating financial integration. How would you define the era from 2000 to 2008, and then the period we are in now? Read How Has the Business of International Banking Changed? here .

Martin Wolf , the Financial Times 's top economics commentator, argues that, essentially, the eurozone proved its worth during the global economic crisis of 2007-2009. Had it not existed, independent currencies surely would have dropped significantly, and might have set off a worse problem across the continent. But now, more trouble looms as the economies of some eurozone countries are " locked into competitive disinflation against Germany, the world’s foremost exporter of very high-quality manufactures." Wolf: In its first decade of existence, the imbalances inside the eurozone (and associated bubbles) finished up by doing massive damage to the credit of the private sectors of the booming economies. But now it is damaging the credit of their public sectors. While risk spreads have fallen in financial markets, those on sovereign debt in the eurozone are an important exception. Spreads over German 10-year bunds have soared from what used to be negligible levels: in the case of Greece, spreads recently reached 274 basis points. The late Charles Kindleberger of MIT argued that an open economy required a hegemon. One of its roles is to be spender and borrower of last resort in a crisis. The hegemon, then, is the country with the best credit. In the eurozone, it is Germany. But Germany is a lender, not a borrower, and is sure to remain so. This being so, weaker borrowers must fulfil the role, with dire results for their credit ratings. Where does that leave peripheral countries today? In structural recession, is the answer. At some point, they have to slash fiscal deficits. Without monetary or exchange rate offsets, that seems sure to worsen the recession already caused by the collapse in their bubble-fuelled private spending. Worse, in the boom years, these countries lost competitiveness within the eurozone. That was also inherent in the system. The interest rates set by the European Central Bank, aimed at balancing supply and demand in the zone, were too low for bubble-fuelled countries. With inflation in sectors producing non-tradeables relatively high, real interest rates were also relatively low in these countries. A loss of external competitiveness and strong domestic demand expanded external deficits. These generated the demand needed by core countries with excess capacity. To add insult to injury, since the core country is highly competitive globally and the eurozone has a robust external position and a sound currency, the euro itself has soared in value. Read The eurozone's next decade will be tough here .