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The Ascent of Money: A Financial History of the World (original 2008; edition 2009)

by Niall Ferguson

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1,873383,692 (3.68)31
Member:gslykhuis
Title:The Ascent of Money: A Financial History of the World
Authors:Niall Ferguson
Info:Penguin (Non-Classics) (2009), Edition: 1ST, Paperback, 448 pages
Collections:Your library
Rating:****
Tags:General History

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The Ascent of Money: A Financial History of the World by Niall Ferguson (2008)

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Showing 1-5 of 36 (next | show all)
The author has enjoyed privileged access, as a well-schooled Harvard professor, to the finest peer-reviewed thinking drawn from historical records and economic data. He apparently uses very little of it.

In this work, he chose to present an overview of financial practices, from the first forms of currency in Ancient Mesopotamia to the massive volumes of unregulated asset-backed securities trading conducted in the 1920's and 2000's. He touches only slightly on the high-tech financial manipulations of the enormous private banks using international markets, and the impact of technological “steroids”, by the private traders of the twenty-first century.

In six chapters, Ferguson describes an evolution of finance – currency, credit, bonds, corporate stock, insurance, and real estate. He compares financial development to biological “natural selection”. While this is a helpful model, he uses it descriptively, and fails to provide prescriptive references or validation. For example, he fails to show us how the increasing “organization of specialized parts” model helps us understand how speculators removed $40 trillion from the U.S. Economy in 2008. It does, but he doesn’t.

Irritatingly, Ferguson only appears to illuminate economic systems. He refuses to answer even the obvious Questions which burden even a lay audience today. What role can our Representatives in Congress play? Should tax payers bail out the private banks which manipulate “bubbles” or should Government stop funding the enormous profits of private banks and provide its own lending as a public service?

Ferguson takes the time to explain various elementary financial concepts – known to virtually all consumers who have opened a bank account. He sticks to the “history” of the institutions without understanding the tools they use – the econometrics, the stochastics, the “rating” games and “financial product” sleight of hand.

The history of the bond, equity, and real estate markets, across time and continents, is of course invaluable. Professor Ferguson describes the primitive and repeated mania which is behind many of the disasters of history. He places bank speculation at the heart of many of them. Financial “bubbles”are driven by speculation, greed, and the willingness of gamblers to take risks with money. There is an odd disconnect, however, within his procrustean “five stages” of financial bubbles: displacement, euphoria, mania, distress, and revulsion.

To his credit, Ferguson at least spares us from excesses of “opinion”. He reports the events and sequences. The area of some exception is when Professor Ferguson describes European financiers as the source of modern wealth and prosperity. Banks clearly played formative roles in Italy in the late Middle Ages, and among the Dutch in the 17th century. John Law’s publicly-funded private bank – making vast investments in infrastructure using paper money to replace metal currency – enabled King Louis XV to bring the economy of France back from the ruin of Louis XIV. The growth of Great Britain's empire is at least partially attributed to the investments made by the Bank of England in 1694. The rise of a middle class is attributed to the efforts by Government to open up and protect markets and increase trading volumes.

However, Professor Ferguson fails to even point us toward the answers to hard research questions. Does this work help answer The Questions our circumstances bring to the table?

Clearly the financial “bubbles” documented in the book are for the most part deliberately created by plutocrats and bankers. Governments for the most part provide the data, and to a various and indeterminate extent are used by the bankers to exacerbate their manipulations. For example, look at John Law’s impact on France in the 1600s. The recovery of the world from the economic exhaustion in WWI and WWII, and the use of Keynesian theory. The fact that in the entire global history, there are no examples of a laissez-faire economy. Why is there no data available online from the 1929 Depression and its causes? Why are we not learning more from history and using the tools now available to analyze these events? ( )
  keylawk | Dec 2, 2013 |
I'm not completely financially illiterate, but economic theory has the power to both mystify and bore me more than most other topics. This book helped to explain the ways in which financial markets developed in an interesting enough way to keep my attention. ( )
  AJBraithwaite | Mar 31, 2013 |
The book is titled The Ascent of Money, but it's not about the ascent of money. It's about the path of money, with the assumption that from the origin of the book's historical perspective, money has been the bedrock of civilization. There's no ascendancy, because there is nothing for it to compete with, in the author's telling. What the book really is is a straight history of the above-board financial markets, and to that extent it's a useful and largely enjoyable read, covering the move from barter to coin, and from coin to virtual funds, and from virtual funds to algorithmic trading. The author does a wonderful job of jumping across vast time periods to draw comparisons (showing how even if technology changes, human nature does not). He does a terrible job of telling jokes, which comes across as a sort of nervous habit (mostly alliteration, puns, and pop-culture references), one that someone close to him should point out to him.

The absence of under-the-counter financial markets and their influence on, their substantial part of, the global economy seems like a significant blind spot. There are occasional asides to the Mafia, narco states, and the like, and of course when Ponzi schemes come to light they are acknowledged. But that's it. As such, it's sort of like this: if The Ascent of Money were a study of a city, it would only take stock (so to speak) of the goings on within buildings and institutions, and not of street life. In other words, it's not a full picture. It's like a Chamber of Commerce picture. (One other seeming blind spot: if I'm not mistaken, the author seems to have a disinclination toward companies that are not publicly traded.)

Also: I cannot recall reading a non-fiction book recently with less of a thesis. There is no overarching theme, no consciously enacted perspective, just the steady march of economic history proceeding like a fleshed-out timeline. I'd say most fiction I read has more of a thesis, more of a sense of perspective on the world, than this book does.

To be clear, there is a concluding section in which the correlations between biological evolution and monetary-system change is compared. But in effect what has happened is that after dropping occasional references to such a metaphor throughout the book, he then tries to tie it all together. In other words, the equation to produce this book was: write a history of (largely western) economics at a (largely) macro level, and then add a final chapter proposing a model, supported only by parenthetical references in the majority of the book. A comparison is not a thesis, especially when the comparison feels added on. Furthermore, the evolution metaphor is seriously sloppy. For a widely traveled professor at Harvard, he has created a loose-at-best metaphor with a floating subject that changes according to the need of his rhetoric, on a moment by moment, sentence by sentence basis: Has money ascended, like man is said to have? Has the nature of business? Has the market? If, as the author states, complex technological innovations haven't actually supplanted earlier modes like barter and loan sharks, then how can the comparison to mankind be made? Are we humans surrounded by our own competing ancestors? And if in fact this is about an ecological comparison, and not a one-on-one to mankind, then why not just say so? Because comparisons to man allow for the idea of the free market having a rational hive-mind sentience? Because The Ascent of Man sounds like a better logline than The Ecology of Money? It's altogether unclear. If after this much effort a book's thesis cannot be plainly stated, then it does not have one. What it has is a paper wrapper.

And as a side note, I may be mistaken, but the book seems to clarify when an economist is left-leaning but not when right-leaning. And the fact that George Soros and several other figures in finance are Jewish is pointed out, but no other religion is listed with any particular frequency when other major figures are mentioned.

One final thing: There is an anecdote about the film Mary Poppins early in the book that I highly recommend reading. I can't do it justice, but in brief: the author was invited to speak at a business event, and since the tone of his talk was somewhat negative about the economic short term and midterm, several of the attendees (all successful business-people) complained afterword, essentially taking issue with the presence of a non-businessperson, especially one deemed not enough of an optimistic booster). One of these complaints stated that they should have ditched him and just shown the movie Mary Poppins. The author then takes the opportunity to point out the extent to which Mary Poppins' plot rests on the instability of British banks.
2 vote Disquiet | Mar 30, 2013 |
Interesting enough but as I read/listened through I felt the lack of a theoretical/interpretational framework. Narrative history fair enough but all too easily edges into "one damn thing after another". The framework all comes along in a lump at the end with numerous concepts pretty much in list form and rather indigestible. some of his "pop history" analogies and phrasing can be annoying or trivialisiing, eg "Chimerica". Choice of topics also sometimes favours the sensational: eg, John Law is a colourful enough rogue but surely only a symptom of the absolutist distortions of the bourbon monarchy. What comes across strongly is how finance has become eve more complex to the point of incomprehensibility at least to this reader. i can just about keep up as far as consols and the Rothschilds, but once we get to the late 19th C and beyond it becomes bewildering. I wonder how much this is a weakness in the writing and how much a matter of reality. LTCM for example, as a bunch of Nobel economists went spectacularly down the toilet; did they understand how it all worked? or was their mistake to think they understood it? Soros, by this account, seems to have some grasp, not only of how to beat the market, but how it actually works: the effects of expectation upon expectation. What is not really examined is how, despite fluctuations, crashes and con men, the real economy does overall move forward. In the long run, we're not all dead; most of us are at least slightly better off.
Ferguson does paint the dismal science in bright, if occasionally gaudy, colours, and tells good stories. He comes across as more intelligent and reasonable than one might expect from some of his political positions ( )
  vguy | Jan 2, 2013 |
Fun and scary at the same time. There are short stories from the history of finance scattered throughout, like the Medici, John Law and the Mississippi Company, and the Rothschilds. But much of the book is about the twentieth century, and much is necessarily a lesson in how finance works. I'm a little ignorant of finance and found it hard to follow in places. The discussion of inflation, which forms a large part of the book, is good. But the discussion of risk, once it goes beyond straightforward insurance, soon gets difficult to follow, mainly because it doesn't try to explain or hold your hand. I would not have followed much of the discussion on the global financial crisis if I had not read John Lanchester's "Whoops" recently.

But it does shine in places, and he puts out some strong and controversial ideas towards the end - even if it is a popular book and he's being sensationalist, it's always good to see historians challenging themselves by trying to predict the future.

I think the main things I got out of the book were interesting stories from the more distant past, like John Law, the Mississippi Company, the invention of the joint-stock company, and the Rothschilds. I think I was lost in the second half partly because of the lack of a strong argument. ( )
  seabear | Jan 1, 2013 |
Showing 1-5 of 36 (next | show all)
...The rise of ancient Babylon was intimately tied to the evolution of credit and debt; without banks and the bond markets, the splendours of the Italian Renaissance would never have materialised; corporate finance was the foundation of the Dutch and later British empires; the ultra-sophisticated Wall Street financial engineering which has now come crashing down is intractably linked with America's global primacy. And now, of course, the new-found geopolitical power of many emerging economies, such as China, comes from their embrace of modern finance and creation of huge sovereign wealth funds.

Especially fascinating is Ferguson's discussion of the rush of intellectual innovation, beginning in the 1660s, that created the theoretical basis for life insurance, one of the most important financial inventions of all time...
 
...According to Ferguson, much of the current crisis stems from this increasingly uneasy symbiosis. It turns out “there was a catch. The more China was willing to lend to the United States, the more Americans were willing to borrow.” This cascade of easy money, he argues, “was the underlying cause of the surge in bank lending, bond issuance and new derivative contracts that Planet Finance witnessed after 2000. . . . And Chimerica — or the Asian ‘savings glut,’ as Ben Bernanke called it — was the underlying reason why the U.S. mortgage market was so awash with cash in 2006 that you could get a 100 percent mortgage with no income, no job or assets.” Going forward, the system seems likely to be increasingly unstable, as Treasury Secretary Henry Paulson suggested recently when he warned that unless fundamental changes are made, “the pressure from global imbalances will simply build up again until it finds another outlet.”
 
...Ferguson's biography of finance, told with verve and insight, throws more light on our predicament than perhaps even he realises. The Ascent of Money charts the rise of money from clay tokens passed around the villages of Mesopotamia 5,000 years ago to flickering numbers on a foreign exchange screen; yet it also reminds us that money represents a relationship of trust.

Ferguson argues persuasively that the development of money has gone hand in hand with the development of modern societies, by quickening transactions, loans and investment. He gives a selection of case studies, showing how money underpinned the colonisation of South America, Roosevelt's New Deal and the rise of China. Money doesn't make the world go round, but "it does make staggering quantities of people, goods and services go around the world"...
added by amorabunda | editThe Telegraph (Nov 6, 2008)
 
Niall Ferguson has written a brilliant book exploring the historic nexus between money, diplomacy, warfare and globalisation. It's called The House of Rothschild: The World's Banker 1849-1998. His new work, The Ascent of Money, written 10 years later, is an altogether different beast.

From its opening sentence - 'Bread, cash, dosh, dough, loot, lucre, moolah, readies, the wherewithal: call it what you like, money matters' - you know this is a TV tie-in...
 
...There are a score of fascinating details. One example is how John Law managed to persuade the French to appoint him controller general of finances (sort of governor of the Bank of England and Chancellor of the Exchequer combined) and allow him to engineer the French financial bubble in 1720-21 that did far greater damage to French savings than the South Sea Bubble did to British finances at the same time. He describes how grand families, such as the Grevilles, were ruined by spendthrift heirs, while other new dynasties, notably the Rothschilds, were founded on a mixture of thrift, information and acumen.

Perhaps the most helpful aspect of the book is Ferguson's ability to link the past with the present – particularly helpful right now. For example, he draws a parallel between international investment during the last great burst of globalisation from 1870 to 1914 and the massive international capital flows of the present global era...
 

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Bread, cash, dosh, dough, loot, lucre, moolah, readies, the wherewithal,: call it what you like, money matters -- Introduction
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Niall Ferguson follows the money to tell the human story behind the evolution of finance, from its origins in ancient Mesopotamia to the latest upheavals. To Christians, love of it is the root of all evil. To generals, it's the sinews of war. To revolutionaries, it's the chains of labor. But historian Ferguson shows that finance is in fact the foundation of human progress. What's more, he reveals financial history as the essential backstory behind all history. Through Ferguson's expert lens, for example, the civilization of the Renaissance looks very different: a boom in the market for art and architecture made possible when Italian bankers adopted Arabic mathematics. The rise of the Dutch republic is reinterpreted as the triumph of the world's first modern bond market over insolvent Habsburg absolutism. Yet the central lesson of financial history is that, sooner or later, every bubble bursts.--From publisher description.… (more)

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