The Ascent of Money: A Financial History of the World
by Niall Ferguson
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Book Summary Information
Author: Niall FergusonBrand: PBS
Edition: Paperback
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2009-10-27
ISBN: 9861735844
Number of pages: 448
Publisher: Penguin (Non-Classics)
Book Reviews of The Ascent of Money: A Financial History of the World
Book Review: Great historical summary, yet slightly opinionated
Summary: 4 Stars
Niall Ferguson's "The Ascent of Money: A Financial History of the World" provides one with the framework necessary to develop a sound understanding of money and capital markets. The release of the book in early 2008 was particularly timely, as the global financial crisis was gaining momentum.
Ferguson takes the reader though nearly 4000 years of relevant financial history. Each chapter is dedicated to the development of various financial tools and instruments, including: fiat money, credit, bonds, equity, insurance and real estate. He then proceeds to describe the meaning behind modern day buzz words, such as hedge funds, globalization, and computer investment models.
Again, the author's background in history leads one to believe that knowledge of financial history is necessary in order to avoid a financial crisis. Ferguson reaffirms this point by stating: "[t]o put it bluntly, the Nobel Prize winners had known plenty of mathematics, but not enough history."
To build on this, one can conclude that the efficient markets hypothesis did indeed fail to explain what history has shown in the past, simply put: all bubbles burst. The markets and rational investors failed to correct the markets and price the assets at their true value. It is eye opening to see the similarities between the Dutch Tulip crisis, the Great Depression, the fall of Dot Coms, and the present housing bubble.
In the chapter regarding globalization, Ferguson stresses the importance of Chinese-American relations (Chimerica) on the world. These two countries are singled out, because they "account for just over a 10th of the world's land surface, a quarter of its population, and a third of its economic output, and more than half of the global economic growth of the last eight years." He partially attributes the current financial crisis to the balance of trade between China and America (where the prior saves while the latter spends).
While Ferguson does a wonderful job creating a survey of relevant events that helped shape the modern financial system, at times the emphasis placed on the role of finance in history seems to be overinflated and one-sided. For example, Ferguson took a significantly different approach identifying the turning point in the American Civil War. According to the author, the capture of New Orleans was far more crucial to the success of the Union than the fall of Vicksburg a year later. His argument is based on the assumption that the south was no longer able to deliver its primary export, cotton, to pay for its collateralized debt obligations in Europe. Europeans perceived Confederate bonds to be risky investments, and refused to buy them without collateralization; therefore, fall of New Orleans led to the failure to deliver cotton, and in turn resulted in a default. Since no further financing was possible, the Confederacy suffered from hyperinflation and virtually went bankrupt. There is no doubt that this has been a very important factor in the Union's victory, yet the author completely ignores a number of other crucial events; such as Union's capture of Forts Henry and Donelson in 1862, or the fall of Atlanta in 1865. It is also very well possible that it was the specific people in power who resulted in such turn of events. Perhaps the superior leadership abilities of General Grant and President Lincoln were the reason for Union's success, and if they were not yet alive the events would have taken a different turn. One could even go as far as to say that leadership abilities are the primary factor, as without them New Orleans would have stood free, with exports flowing freely and feeding Confederate treasury.
This book serves as a reminder that key components of the modern financial system were not invented in New York in the last decade. Instead, they take from their roots deep within thousands of years of history, and work to shape the system today. While understanding mathematics is important, the numbers are worthless without understanding of the historical background.
Summary of The Ascent of Money: A Financial History of the World
A richly original look at the origins of money and how it makes the world go ?round
Niall 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 offers bold and compelling new insights into the rise? and fall?of not just money but Western power as well.
Niall 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 offers bold and compelling new insights into the rise? and fall?of not just money but Western power as well.
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