The Ascent Of Money by Niall Ferguson is an introduction to modern finance and the rise of money lending, presenting a favorable view of their effects upon the world.
…financial innovation has been an indispensable factor in man’s advance from wretched subsistence to the giddy heights of material prosperity that so many people know today.
…poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence. Only when borrowers have access to efficient credit networks can they escape from the clutches of loan sharks, and only when savers can deposit their money in reliable banks can it be channeled from the idle rich to the industrious poor.
…approximately $1 of every $14 paid to employees in the United States now goes to people working in finance. Finance is even more important in Britain, where it accounted for 9.4% of GDP in 2006.
The book gives an interesting history of some of the world’s most famous bankers and the power they accumulated, particularly the Medicis and Rothchilds, who brought value by facilitating trade and commerce while reducing transaction prices. It also described the role of European bankers during the American Civil War.
Though others had tried before them, the Medici were the first bankers to make the transition from financial success to hereditary status and power They achieved this by learning a crucial lesson: in finance small is seldom beautiful. By making their bank bigger and more diversified than any previous financial institution, they found a way of spreading their risk.
One of the biggest financial innovations was fractional reserve banking, pioneered by the Swedes. Other European countries improved finance while the Spaniards, still obsessed with silver and gold in their American colonies, kept defaulting time and time again, not understanding that the true nature of money lay in debt and not mineral reserves. One of the more interesting parts of the book was its description of the bond market and its powerful stranglehold on world governments.
…the bond market is powerful partly because it passes a daily judgement on the credibility of every government’s fiscal and monetary policies. But its real power lies in its ability to punish a government with higher borrowing costs. Even an upward move of half a percentage point can hurt a government that is running a deficit, adding higher debt service to its already high expenditures.
…countries that defaulted on their debts risk economic sanctions, the imposition of foreign control over their finances and even, in at least five cases, military intervention.
While the book paints a rosy view of finance, it also highlights cases where the abuse of it through hook and crook caused problems for entire economies, particularly through price inflation. A recent example of that was Goldman Sachs’ commodity manipulation that caused the price of common foodstuffs to rise. On the other hand, ignoring finance and having inflexible monetary policy can turn recessions into depressions. He suggests that Helicopter Ben Bernanke actually did the right thing in showering Wall Street with money to prevent a depression. He also thinks Alan Greenspan is a great man for admitting he shouldn’t have kept interest rates so low.
Economies that combined all these institutional innovations—banks, bond markets, stock markets, insurance and property-owning democracy—performed better over the long run than those that did not, because financial intermediation generally permits a more efficient allocation of resources then, say, feudalism or central planning. For this reason, it is not wholly surprising that the Western financial model tended to spread around the world, first in the guise of imperialism, and then in the guise of globalization.
You’ll also read about:
- The abysmal effects of Britain’s weflare system on their economy
- Argentina’s failed destiny to become an economic superpower due to bad economic decisions and poor leadership
- How the “risk free” LTCM fund imploded and almost took the world economy with it
My problem with the book is that his explanations were too light. He glossed over tough concepts like sovereign bonds and other financial instruments without providing much in the way of examples, unlike a writer such as Matt Taibbi who explains the most complex concept in a way that laymen can understand. I felt like I had to read this book in front of Google so that I could look up things he mentioned only in passing.
The book also seemed hurried with its historical research, especially towards the end when it become a jumbled mess. Overall it’s an okay book but I don’t recommend it for the neophyte.
…it’s not owning property that gives you security; it just gives your creditors security. Real security comes from having a steady income.
Read More: “The Ascent Of Money” on Amazon
I haven’t read the book, but Naail has PBS series with the same title. It’s interesting viewing, albeit not exceptionally deep on many issues. It was good enough to mandate my teenagers watch it without having their eyes totally glaze over.
Now that they have at least some background in how money works, past and present, I can bring up more complex topics and refer back to the concepts they learned from the show.
I’m sure the recent history is a bit scant, as so much as has occurred in the last hundred years compared to the thousand before it. And, I’m sure Naail is just as concerned about the financial challenges facing us as almost anyone else. I’ve quoted him as saying the real US unfunded liability is a staggering $238 Trillion, nearly 3 times any numbers I had heard before. However, I’m certain his publisher and producers can’t or won’t put out a gratuitously alarmist work. The objective of the Tv series, and I assume the book, are to educate rather than alarm.
I’d recommend anything Naail puts out as at least trustworthy and solid. Just know that there’s more, much more, to finance and economics and that what’s he’s presenting to the general public.
And I still manage to butcher the spelling of his name. Sheesh.
Brilliant Author.. read his other books on the British Empire, American World Domination, Why the West was a success and the World War
I have a like-dislike opinion of Roosh, but I admire the quality and quantity of books he reads. Great example for a younger guy like myself, added this book to my queue and am looking forward to reading it.
A great complement to this would probably be Hernando de Soto’s “The Mystery of Capital.” He very clearly describes the inter-relationship between property rights and prosperity, exploring how Europe, and to a larger extent the US, gradually developed systems that allowed for average people to prosper.
He also explores how and why poor nations stay that way, and what they could do about it (which isn’t that hard) without zillions wasted in foreign aid. It’s enlightening but also frustrating to see how many lives are wasted because corrupt elites rig the system to retain their own power.
An incredible book, short and informative. He’s a little naive in the last chapter, but other than that, fantastic.
You say very correct things…de Soto/Ferguson 2016
This benign treatment of finance glosses over some of the more sinister aspects of financial power. In theory large financial institutions are vehicles of market liquidity which create access to freer credit markets, but notice that every Western power is running heavy deficits year after year. This is because in a democracy people want two things: more services and less taxes, and the politician who is best able to satisfy those two contradictory demands (in the short term) is the one most willing to put his country into debt. Since piling on more debt will always be more politically popular than sound finance, bankers hold incredible leverage over all democracies and basically run those countries.
There is always more debt in the system than money, so capital slowly climbs upwards into the hands of the senior capital pools (the property-holders at the top of the debt food chain) until the debts are called, the debt-enabled illusion of wealth disappears, austerity is instituted, and the last productive power of a nation is spent on debt service until the economy is bled dry. Default or die.
For many countries that is ultimately inconsequential, as they can always procure more of a currency that they ultimately control. The real issue is productivity, not debt or money. A great example is the Weimar Republic, which printed money to pay (among other things) striking workers in french occupied territory – it doesn’t get more unproductive than that.
Do you really read this amont of books.
I find your dedication to reading inspiring.
Financial institutions growing and growing and reaching into all aspects of our lives sounds wonderful. Until they can`t pay their bills every 10 years or so and need a bailout from the public.
The banks and central banks are the sole reason why prices continue to climb every year. In 10 or 20 years people will look back and see that we are living through a depression and they realize all that free money the banks got did nothing put continue to increase food, gas, living and insurance costs.
If food stamps weren’t on debit cards and everyone had to line up like they did the 30’s it would be very evident to all americans what exactly is going on. 1 in 7 americans is on food stamps. I don’t call that a recession or a recover. That is a depression that continues to worsen.
Thanks for posting these reviews. This is a complex subject and I can’t possibly read every book on it, so when someone like yourself posts a review and analysis it’s very helpful to me.
What a crock of shit. There is nothing great about the finance industry. Not a damn thing. They produce nothing but misery and greed. Finance is the reason so many people are homeless or in foreclosure. Greed from worshiping the almighty bottom line is the reason people can’t really get ahead anymore. Go ahead and flame me, I don’t fucking care. Your whole lifestyle is a lie, a house of cards. You’ll end up against a wall facing a mob and what will “game” get you then? Nothing more than a bullet.
Looks like it got to cold in the occupy camp. Who knew that heating tents cost money?
@ Hugh, If you’re talking to me… you can fuck off back to the mall you came from with your Gucci bag and Crocs and guyliner. Faggot.
If you weren’t talking to me… my deepest apologies. I humbily ask your forgiveness.
Actually, either way you can fuck off back to your local iStore and drool over the latest piece-of-shit iphone and ipad. Judgemental prick.
The Occupy Idiots are just as bad. Money is not the problem, it is the relentless pursuit of needless junk and needless greed brought on by morons like you that is the problem.
Thanks for censoring my previous comment, Roosh. :/
At least now I know where to draw the line with you.
Look out, we got a badass over here.
A few other good reads regarding monetary history:
“The Creature from Jekyll Island”
“Debt: The First 5000 Years”
“Hot Money and the Politics of Debt”
“Currency Wars”
Some good movies to find on YouTube:
“The Money Masters”
“The Secret of Oz”
“Money as Debt”
What about TALEB? He poses like a real badass and has come up with some disruptive [oh, I hate that term] ideas. Have you read ‘im?
Just ordered “The Black Swan” yesterday. Looking forward to reading it. My buddy read “Antifragile”. He said it was outstanding.
Taleb is obnoxious but only because he’s smarter than almost every other finance writer. Highly recommended.
Excellent author. I’ve read his three main books: Fooled by Randomness, The Black Swan, and Antifragile. It’s funny because I’ve used his Dynamic Hedging which is a textbook for options traders. However, the ideas he lays out in Antifragile are in many ways derived straight from Dynamic Hedging–they are just generalized.
Dynamic Hedging is quite a mouthful though compared to his other works.
I watched the miniseries based on the book a few years ago. Thought it was dope.
The near future financial super markets;
China, Africa, India.
In that order.
(sorry fellow Indians, but yeah we’ll emerge last for the cultural reasons I outlined in the comments section of Bojangle’s article about Desi parental control freakness)
Africa.
LOL
Yep, Africa. The most resource rich continent on the planet. Research emerging global markets. And….. MARK. MY. WORD.
Three years and counting. Still marking.
“Emerging market” is an aspirational term, not a description.
But… it’s run by Africans so your point is void. 😉
Seriously, resources don’t mean shit without brains controlling them. Look how the American Indians traded: Tobacco for land. Yeah, resources automatically mean wealth. LOL.
Noob and Dillon are correct…it’s called the resource (oil) curse. Without non-corrupt institutions (good government) resources will be sold off cheaply by rulers looking to line their pockets. It’s not the West, or the patriarchy doing it…it’s corrupt feckless leaders who give a damn about the people they lead.
Even more fucked up is that if an African official doesn’t steal via corruption, the people don’t vote for them because they feel they must be stupid. (Ref. my roommate from Sierra Leon)
Resources don’t exploit themselves. The African countries will probably never develop. Just look at South Africa, large amount of resources and a white-designed social system and they’re STILL in the gutter. An advanced economy requires intelligent and peaceful people, neither of which Africa has in great supply. The average IQ there is about 70. I know you like to whine about how oppressed you are in India but at least your not dying of aids.
As much as these asshole politicians talk about helping the poor and elderly, nothing is hurting them more than these artificial low interest rates…
Seniors get zero interest
Poor people get killed with inflation
Its helping rich people refinance, and putting the market into bubble territory again..
Never read so much naivite in one page. Dont believe the blue pill neoliberal capitalist propaganda. They want you to accept their bullshit and seems you’re eating it like sweet candies.
-What will you do if your “steady income” is inflated away by hyperinflation?
-What will you do once you discover you are sick?
-What will you do when you are 65yo and you need a resting home?
Inflation also applies to wages and income.
But never as fast as prices rise. Real wages only increase in times of little, zero, or even negative inflation.
Now the libtards care about inflation?
If you want to read more books on the issue; I’d suggest Manias, Panics, and Crashes. I’d also recommend reading some Hyman Minsky; I think he’s got the best description of capitalism I’ve ever seen. Nouriel Roubini’s Crisis Economics is very good as well along with Lords of Finance by Liaquat Ahamed.
Roosh — good to see you reading economics. Niall Ferguson is a bit of a joke researcher, though.
I think the book was made only after and based on the television documentary series with the same name made by him.
I didn’t read the book, but the documentary is awesome. One of the best I ever saw. And one of its virtues was that it actually explained complex things like bonds and options in a very easy and understadable way. So I guess the documentary is actually much better than the book.
I found the documentary to be more digestible and interesting than the book. Here it is in full: http://www.youtube.com/watch?v=4Xx_5PuLIzc
And there is one more episode, the 6th, which is not included in the above link:
Ferguson has bragged that he gets his grad assistants to help with research and write the easier parts of his books. Could explain the jumbled ending.