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A good introduction to global finance for the curious but uninitiated reader,
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This review is from: The Ascent of Money: A Financial History of the World (Hardcover)
Controversial counterfactual historian Niall Fergusson here turns his considerable talent for lucid explanation of complex historical developments to the evolution of credit and debt and the growth of what we call `money' in all its forms. In six clear chapters, he does a mainly excellent job of laying out the evolution of ever more complex economic systems through the three thousand years since the ancient Mesopotamians used clay tablets to record debt and credit over decades of commodity transactions, to the hedge funds and derivatives which have featured so prominently in the recent global financial crisis.
On the way he explains the origin of the modern banking system in the `ghettos' of Venice in the 1300s, the adoption and later the abandonment of silver and gold to underpin national currencies, the first truly global currency (the Spanish `piece of eight'), the origin of the first stock exchange (in Amsterdam) in the 1600s, the innovation of scientifically calculated actuarial insurance tables by the Scottish Widows insurance company in the 1700s and the modern obsession with property as a store of wealth and as collateral for credit loans. He discusses the concept of the welfare state, the government bond market and the reasons for occasional total financial collapses, as in Germany in the 1920s and Argentina several times in the past 150 years most recently in 1989.
The causes of booms and busts, bubbles and crashes are analysed with knowledge and insight. The author demonstrates in his best-seller `Empire' and more thoroughly here his thesis that poverty in the `developing world' is caused by the absence of stable financial institutions because such jurisdictions are outside the global economic system rather than the more naïve and simplistic narrative of `exploitation' by international institutions (business, the world bank etc.). At a more local level the same principles operate with the same results: loan sharking grows where there is lack of access to normal credit and this is the main cause for the perpetuation of the poverty trap.
A final chapter deals with the rise of `the wonderful dual country of Chimerica' the interdependent symbiotic relationship between the USA and China which accounts for one tenth of the world's land surface, a quarter of its population, one third of all global economic output and half of all economic growth over the past ten years. He explores how this important relationship is coming to dominate the global economy.
Ferguson is a champion of the globalization of capital markets and makes a strong case for the liberal economics of Milton Friedman. He has a habit of distilling down complex and bewildering subjects to their basic elements and explaining the underlying processes clearly and with great insight. Recommended reading for anyone who wants a more than basic introduction to the history of the global economy and how it works but does not have the time nor inclination to do all the reading necessary for a degree in economics and finance. He knows his stuff, and is a lively and interesting writer.