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With global financial markets experiencing severe turbulence, Harvard historian Ferguson (The Pity of War) presents a timely history of money and finance from the advent of coins to J.P Morgan Chase's takeover of Bear Stearns earlier this year. He describes humanity's major financial innovations such as banks, bonds, joint stock companies, insurance, and property ownership as well as the pitfalls of inflation, recessions, and asset bubbles. Ferguson finishes by discussing the various iterations of globalization over the past 100 years and one of the newest and currently most notorious financial developments: hedge funds. He keeps his story interesting with humor and unexpected twists such as how a fund to provide for the widows of Scottish clergymen laid the foundations for modern insurance theory. Commenting on the safety normally ascribed to investing in property, he observes ironically that the only real security entailed is for lenders who in the event of loan defaults can seize properties. Though not comprehensive in scope, Ferguson's lighthearted but thoughtful stroll through financial history is a welcome and recommended addition for public libraries and undergraduate collections. [See Prepub Alert, LJ7/08.]
—Lawrence Maxted
The story, a fascinating one, covers 4,000 years. Money is the concrete expression of the relationship between lenders and borrowers -- it is the embodiment of debt made tradeable -- and it gave rise to banks, which in turn gave a vast boost to the development of credit. From medieval times to the present, the Darwinian evolution (as Ferguson convincingly characterizes it) of money and markets proceeded at an increasing pace and sophistication. Bonds came first, from the 13th century onward securitizing revenue from interest. The 17th-century Dutch invented equity in corporations in the form of shares carrying limited liability. In the 17th and 18th centuries, economies of scale and an understanding of mathematical probability yielded protection against risk in the form of insurance and pension funds. The 19th century saw the rise of the first derivatives in the form of options and futures. In the20th century individuals were encouraged to redirect their portfolios toward real estate, accepting the need for greatly increased leverage to do so.
Ferguson points out that the economies where all these things happened -- that is, the property-owning democracies with banks, bonds and stock markets, and insurance cover -- have consistently performed better than other economies. Or rather: at least until now. But in the last couple of decades there has been a "Cambrian explosion" of new types of financial services and assets and a seemingly boundless appetite for asset-backed securities, not least mortgages. Perhaps the long roots of this lay in the collapse of the Bretton Woods control of capital movements in the early 1970s, following which the globalization of financial dealings has mushroomed, aided by substantial deregulation in the 1990s and since. The result has been a huge bubble, the pricking of which we are now witnessing.
In fact there have been scores of periodic financial crises in recent history, as Ferguson shows, illustrating the inherent volatility of the financial markets, in which greed and -- when greed has over-gorged itself -- fear are the principal sentiments. One thing Ferguson's book emphatically shows is that the new concept of "behavioral economics" provides a far better description of what happens in the markets than any of the theories previously mooted, including the fancy mathematical models that were supposed to make investment foolproof. These latter depended upon the markets being rational and predictable; history shows that matters are otherwise.
There is a good deal of riveting information here about the buildup to the current crisis, in discussions of the Enron scandal, the way speculators such as George Soros make their money, the unparalleled mushrooming of securitized debt obligations that -- because so many of them are of such poor quality -- has rocked previously secure banks to their foundations around the world. Ferguson describes what went wrong with Long Term Capital Management, the once-so-successful investment company that failed despite the intricacy of its model and spread of its assets. Because, Ferguson points out, its managers knew too little history, they learned the hard way John Maynard Keynes's insight that in times of crisis, "markets can remain irrational longer than you can remain solvent."
Not only is there much that is instructive and illuminating in Ferguson's account, there is much that is absorbing. Until you begin reading you might not imagine how engrossing a book about the history of money and finance can be. The story of money's origins, of the Italian Renaissance cities, of the founding and operation of the first limited liability company in the Netherlands, of the Rothschild banking dynasty's rise in the 19th century, of what caused the Great Depression, of the turn to house-owning debt, of today's massive and perhaps unhealthy symbiosis between borrowing America and lending, cheaply manufacturing China to make "Chimerica" with most of the world's money and population in it, make an altogether gripping tale. --A. C. Grayling
A. C. Grayling is an author, playwright, reviewer, cultural journalist, and professor of philosophy at London University. Among his many books are Towards the Light of Liberty and The Choice of Hercules. His play Grace was recently performed in New York City.
Introduction 1
1 Dreams of Avarice 17
2 Of Human Bondage 65
3 Blowing Bubbles 119
4 The Return of Risk 176
5 Safe as Houses 230
6 From Empire to Chimerica 283
Afterword: The Descent of Money 341
Notes 363
List of Illustrations 399
Index 403
Anonymous
Posted December 6, 2008
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Niall Ferguson has published another sweeping book, this time in his purported field of expertise in financial history, not in political economic history, where he had most famously written 'The War of the World.' For that one must be grateful, since his neo-imperialistic views, sensational support of empires and subjugation, and controversial justifications of Nazism, were just too jarring.
Here he makes an ambitious attempt to tell the whole story of finance. It begins in Mesopotamia and ends in the credit crisis of 2008. The title is a play off the title of Jacob Bronowski's Ascent of Man. Overall it is a considerably worse book than Birth of Plenty by William Bernstein, and even more so when compared to Empire of Wealth, a recent book on economic history. It cannot replace Peter Bernstein's trilogy, including Against the Gods, Gold and Capital Ideas. It lacks the details of Vincent Carruso's Investment Banking in America or other detailed tales of financial history. Yet it lacks synthesis too, certainly when compared to Birth of Plenty or Bernstein's trilogy.It is worth buying though, hence the 4 stars, but only for a quick jog through history, not for an understanding of it.
The book does not delve deep into the details, which is its weakness. It does not give a bird's eye view either, because the vignettes he chooses, the facts he emphasizes, and the stories he stresses are generally the unimportant ones. That flaw is not only true of ancient finance, about which he may not be an expert, but also so of medieval and modern financial history, an area in which he should have better selected the stories he chose to emphasize.
What the author ends up doing is overemphasizing stories about the Rothschilds, who he covered in a bio years ago, or about current events, including ones about the current credit crisis, which seems oddly placed (and likely added at the last minute, once the markets collapsed and the book likely appeared too optimistic). There are at least two references to the compensation of Lloyd Blankfein, CEO of Goldman Sachs, anecdotes which would be out of place in any serious history of finance. Then there are the detailed discussions about some obtuse scandal in Britain but hardly the same space to Enron or Milken or other scandals which have plagued history.
Not only is the selection of stories poorly done but the level of the narrative also fluctuates between sweeping statements unsupported by the facts (a habit of Niall Ferguson) or minute details about this or that, very often irrelevant to boot, leaving the book appear put together in a hurry (which too is a longstanding weakness of the author). There is the mathematical formula of the Black-Sholes, which seems out of place in a short history of finance, and especially so since the author claims he does not even understand what it means. The points made could surely have been driven home without the formula.
Third and worst still is the decision of the author (or his research assistant) to summarize issues into five or six bullet points, a la a McKinsey presentation. This occurs in several places, with paragraph headings (!) and summaries, a style unsuitable for a history book, and truly not even used by newspapers. One does not buy a book to rush through issues in bullet points!
Fourth, the author has tacked onto the end of the book a note about the Descent of Finance. Clearly he does so to tone down the story, to fit the current collapse
7 out of 10 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Amanda_Barry
Posted November 20, 2008
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you are like me, the recent financial crisis has forced you to rethink what money is, how it works, and how global economic trends affect when and how currency moves about. This timely book explains the origin and growth of money, banks, stock markets.
Ferguson shows us that the typical Wall Street logic of looking back the twenty or thirty years only the most experienced investors lived through is not enough to improve our current position. Ferguson says the only way to solve our financial crisis is to put the origin of money and financial strain in its proper historical context. It is far too late to be discussing expensive houses and cheap credit. We need to look way way back to understand the wreckage of banks, brokers and hedge funds that litters the markets. He shows us that looking back is the way to know what to do next. Otherwise, it'll be another new bubble down the road that leaves us scratching our heads after it pops.
Read Ferguson's book and you'll better understand the possibilities for disaster inherent in the loose credit and securitization of bad debt from which so much money was made before the crisis unfolded. His grasp of history vindicates his profession and brings an understated beauty to money.
The other book I read this week that I also recommend very strongly is The Emotional Intelligence Quick Book. Let's just say it makes it a little easier for me to watch the market, and in a little better mood around my husband when I come home from work :)
4 out of 6 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.wellpreparedrare
Posted September 21, 2010
There are the few who strive for perfection. Niall transcends the treshold of normalcy by going above and beyond any expectation us lay-people could conjure. With interviews of Soros, Griffin, Volker and many more, and a host of acknowledgements to boot a wildly marvelous display of information prescient to the dilemma of numismatics, this text is absolutely necessary for anyone who enjoys being a student of facts. I can only say that I wish he hadn't edited, so I could learn more.
0 out of 1 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.JSIII
Posted August 5, 2010
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An "In the beginning..." to present day tour of the evolution of the exchange medium we call money. The story also expands to cover banking and the insurance industry to round out the perspective. Ferguson has the gift of engaging narrative that compels you to take this historical journey with him. You will have fun but will also learn about world events and culture as they were and are affected by banking and finance. You will not look at national and international events the same way again once you understand the nexus between these events and money.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted February 13, 2010
Ferguson provides a thorough analysis of the history of money, including banks, stocks, bonds, insurance, and real estate. He provides the context for understanding current financial challenges for the US and world economy.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.cnnllsn
Posted December 20, 2009
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I am a fan of non-fiction, but I do like a good story. This book will take you on the story of money and how it has developed from precious metal to paper to an idea. Following money like it were a person, you learn something about how important it has been and still is, what it is supposed to do can what it can do.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Helen-Hafen
Posted September 5, 2009
I think this book is good reading for macroeconomics and accounting.
I can't put it down.
I will not pretend to be an expert economist. I only suggest anyone who wishes to understand economics read this book. Had I read this book before taking so many a painful classes, I would have been better off. After reading this book, you can easily understand supply and demand as well as the creation and management of credit.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Niall Ferguson is exceptional in researching and informing the readers of how economics, trade, banking, insurance, and investments transferred our world. This book contains a lot of literature that a lot of history dismisses. Interesting and thought-provoking Mr. Ferguson does not disappoint. I strongly urge to re-read and understand the vocabulary.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.LThoresen
Posted May 11, 2009
Niall Ferguson writes an engrossing account of the invention and development of financial industries, banking systems and economic ideologies that have shaped world events, politics, business practices and influenced social evolution since the earliest civilized societies of Mesopotamia to the global village of today. The author masterfully engages an inherently complicated subject, examining its myriad interdependencies with thoughtfulness and clarity. To his credit, he does not forcibly refract history through the prism of current events. If the subject itself otherwise might interest a narrow audience, a world gripped in financial calumny could hardly inspire more rapt, widespread attention. Quite apart from its timely theme, Ferguson's pure deftness and knowledge of his subject merits close attention. On the one hand, he animates the subject of financial history in a narrative style that is engaging and informative for a lay reader, while on the other he documents the historical record methodically and meticulously. Ferguson emphasizes that human nature, unpredictable and unquantifiable, has played an important role in producing the brilliant economic successes, as well as financial excesses and crushing failures from the distant through recent past. He excavates the historical overburden of millennia to offer insightful perspective on how we arrived where we are today and, filtered through the lens of past history and human behavior, makes a few glimmering observations about the terra incognita that lays before us.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.I picked up The Ascent of Money on a whim, not knowing who Niall Ferguson is or what other books he's written I figured a history lesson on financial systems could make for an interesting read. Overall, it was interesting.
Ferguson gives a terrific overview of the history of finance, roughly from the 17th century through to today, and presents the various achievements of different regions in a mostly chronological order, only breaking chronology a few times to connect events which he does superbly. The beginning of the book presented much new information to me that I found to be very intriguing; I have always viewed the history of finances and money as something that would be confusing to me and difficult to sort out, but here in The Ascent of Money Ferguson has done the research and made a cohesive textbook worthy lesson of financial history.
What bothers me about this book is the commentary, sometimes cloaked in ambiguity, which is sprinkled throughout the book and especially in the later chapters. Ferguson does a good job showing the disasters that loose credit and fiat money can cause in an economic system but fails to apply his own lesson while analyzing the great depression, S&L crisis, or our current economic crises. He seems to gloss over fractional reserve banking as merely part of the evolution and "the ascent of money" thus neglecting its fraudulent nature.
The strangest thing to me is that throughout the book's lessons there seemed to be some very easy diagnoses to the various disasters discussed that Ferguson almost missed completely- that is the cause was various governments meddling in the supply and control of money. Some of the time Ferguson did make this observation, although scantily analyzing it, but seems to think that when war broke and one financial system usurped another that was the end of the story- even though another economic disaster came after that for similar reasons. There is hardly any discussion on gold, and none on how a commodity based monetary system could have loosed the stranglehold oppressive regimes had on their subjects or prevented or minimized the economic damage.
It's very possible that I let my own bias interfere with my enjoyment of this book. As I said, the history lesson was great and much needed for me; but the commentary made the book quite frustrating toward the end. My own bias may have further been exacerbated by Ferguson's own bias- that is, of all the economists and schools of thought sited throughout The Ascent of Money there is a very noticeable lack of a certain set of economists. Nowhere in the book are the names Murray Rothbard, Ludwig von Mises, Henry Hazlitt, and F.A. Hayek introduced, nor is the Austrian school of economics even uttered. By citing Keynes/Krugman numerously or Friedman some, Ferguson gives a very one sided analysis outside of his own- and his entire exclusion of the Austrian school economists, of whom Hayek won the Nobel Prize for his contribution of business cycle theory, leaves one to question how much more interesting or important this book could have been.
If you're looking for a book to help you understand the current crises we face, and who to blame, do not look here- this is just a good history lesson and not a whole lot more- you should read Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse by Tom Woods. I recommend reading Power and Market:
Niall Ferguson offers a comprehensive collection of anecdotes and observations about the development of finance. He begins with a brief discussion of pre-money societies. Then, he carries you through the birth of banking in Renaissance Italy, the 18th-century Mississippi and South Sea bubbles, the role of Nathan Mayer Rothschild in the Napoleonic Wars, and the 20th-century transition from the Bretton Woods model to free-market derivatives and currency trading. getAbstract finds Ferguson's book eminently readable, entertaining and informative. One caveat: the author's approach is more that of a journalist than a historian, so he does not advance much of a comprehensive theory to explain the events he discusses, even the ones that are still occurring, notably, the financial crisis that began in 2008. This tasty financial history thoroughly covers who, what, when, where and how, a feast of facts with not quite enough "why" for dessert.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted February 9, 2009
It is sometimes hard to absorb what the author says as a layperson. However, you can get an insight about economy and financial institutions.
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Overview
A richly original look at the origins of money and how it makes the world go ?roundNiall Ferguson follows the money to tell the human story behind the evolution of our financial system, from its genesis in ancient Mesopotamia to the latest upheavals on what he calls Planet Finance. What?s more, Ferguson reveals financial history as the essential backstory behind all history, arguing that the evolution of credit and debt was as important as any technological innovation in the rise of civilization. As Ferguson traces the crisis from ancient Egypt?s Memphis to today?s Chongqing, he ...