9 of 11 people found the following review helpful
Book of our times,
This review is from: The Ascent of Money: A Financial History of the World (Hardcover)When every time you switch on the radio, there is another story of financial collapse and the description of the worst recession since the Great Depression of 1929, it is very instructive to see the situation in its historical context.
Not that there is any evidence that the major players in the cause of our current credit crunch learnt from history, although there is evidence that the world financial leaders are not making the same mistakes in trying to get us out of it - they appear to have learned that inept or inflexible monetary policy in the wake of a sharp decline in asset prices can turn recession into depression as per 1929.
Behind each great historical phenomenon there lies a financial secret. Whether the Renaissance's market for art and architect was due to the Medici's applying oriental mathematics to finance, the Dutch prevailing over the Hapsburg Empire due to the creating the first world stock market, the French Revolution precipitated by John Law and the Missippi Bubble or the Unionists success against the Confederates in the American War of independence due to the successful blockade of New Orleons and the collapse in the cotton bond market..
Niall Ferguson claims three insights he gained from writing the book and the reason it is worth trying to understand the development of the financial system:
1. Poverty is not the result of rapacious financiers exploiting the poor - it has more to do with the lack of financial institutions, not their presence. Only when borrowers have access to effective credit networks can they escape loan sharks, only when savers can deposit money in safe banks will it get invested.
2. The more financially integrated the world becomes the greater the opportunity for the financially knowledgeable wherever they are. The world can no longer be divided into the rich developed and the poor less developed.
3. Few things are harder to predict than the timing and magnitude of financial crises.
He takes you through the great revolutions in the ascent of money from its development as a means of exchange.
The first revolution was the creation of credit by banks born in the 13th and 14th century in Northern Italy and developed by the Medici family.
The second was the birth of the bond market again by the Italian city states in the 14th and 15th centuries who needed the money to hire military contractors to fight their wars for them. Later on, the Rothschilds with Nathan's brothers bankers in all the major capitals of Europe in the 1800's personified the opportunity for financial innovation in the bond market.
The third was the development of the joint stock market initially by the Dutchin their creation of the Dutch East indies company in the 1600's.
The fourth - the creation of Insurance companies - Niall Ferguson credits to the Scots in 1744.
It is very much a book of its time with a lot of attention to booms, bubbles and busts over the centuries and effect of hedge funds in the creation of our current woes. In some ways a technical book - I do not pretend to understand all the financial instruments he discusses but at the same time immensely readable. And Important.