The Ascent of Money: A Financial History of the World (Hardcover)

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Editorial Reviews

From The Washington Post

From The Washington Post's Book World/washingtonpost.com Reviewed by Shelby Coffey III

Big money is intoxicating. During the great bubble of the late 1990s, I escorted one of the newly really rich to be interviewed at CNN, where I headed the financial network. "I just made $400 million today," he boomed, taking the stairs two at a time. The air around him seemed charged with electric good fortune.

Several years later, I saw him again. He was several billion dollars less wealthy. He seemed kind, more thoughtful, a touch fragile. (There are none of us so weak we cannot bear our friends' misfortunes, as the acerbic French epigrammist has it.) The Really Rich man had become merely rich, and his pain seemed palpable. What would it be like, I wondered, to wake up thinking: I just lost $400 million yesterday?

The curses and the blessings, the seductions and the traps of money give Niall Ferguson the most redolent of subjects for The Ascent of Money, his excellent, just-in-time guide to the history of finance and financial crisis. A lively writer (author of Empire and The War of the World), a professor of history at Harvard and a master of anecdote and aphorism, Ferguson says he took Jacob Bronowski's hymn to human invention, "The Ascent of Man," as a model. Just as Bronowski's 1973 BBC documentaries traced the beneficial impact of science and art, Ferguson shows how promises and paper have lifted humans from subsistence farmers in Babylon to Masters of the Universe on Wall Street.

Among his core arguments is that "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." Money, he contends, is essential to human progress; it is "trust inscribed" on paper or metal, and without that trust we would all be poorer.

But now, right now in the dark autumn of 2008, comes the shadow of mistrust. It may fall over us at different times and places . . . somewhere between the relentlessly down-pointing red arrows on CNBC and the increasingly bitter 401(k) jokes of late-night comedians . . . between the latest Congressional testimony from used-to-be financial wizards and the lineup of bailout candidates winging to Washington, hands out. But who among us has not felt the chill?

The financial system, Ferguson writes, "magnifies what we human beings are like . . . our tendency to overreact" to booms and busts, enriching the "lucky and the smart, impoverishing the unlucky and not-so-smart." In this way, money is a mirror, and "it is not the fault of the mirror," he notes, "if it reflects our blemishes as clearly as our beauty."

The pleasure of reading Ferguson's treatment comes partly from the clarity of his explanations of financial concepts but mostly from his pen portraits of the extravagantly gifted and flawed characters who have led money's long rise. He shows us how far we have come since Mesopotamian moneylenders developed rudimentary accounting around 1,000 B.C. and the Medici created elements of modern banking in 14th- and 15th-century Florence. But he also weaves a long series of manias, panics and crashes into his tale. The Medici family's surviving papers, he notes, bear scorch marks from the vengeful reformist Savonarola, who set up a Bonfire of the Vanities to destroy sinful goods and sent the Medici packing in one of the periodic reversals of fortune to hit financial leaders over the centuries.

Ferguson sketches the rollicking career of John Law: Scottish con man, killer, genius, lover and creator, in 1719-20, of one of history's great stock market bubbles. Law effectively took control of the French national debt, substituted paper currency for gold and sold shares in the company that controlled French Louisiana. As the shares rose in price and investors borrowed against them, the volume of paper money doubled in a year, breeding inflation, speculation and the new term "millionaire" before Law's system collapsed. From that day on, Ferguson writes, all bubbles have followed five stages:

1) Displacement, as economic change brings a chance for extraordinary profits; 2) Euphoria, as investors take advantage of the opportunity, 3) Mania, as novices, crowds and swindlers rush in; 4) Distress, as insiders see their prospects for profit declining because of the mania and start selling; and 5) Revulsion, as all stampede for the exits.

Ferguson provides a more flattering portrayal of Nathan Rothschild, patriarch of the banking family and mastermind of empires. Nineteenth-century states needed to issue bonds to finance wars; Rothschild was at the ready. When Wellington defeated Napoleon at Waterloo, Rothschild made huge and risky bets on British bonds and secured his family's dominance of the London market for half a century. When the Rothschilds turned down a plea to back the confederacy's bonds, the fate of the Southern rebellion darkened irreversibly. "Money is the god of our time," declared the German poet Heinrich Heine in 1841, "and Rothschild is his prophet."

From recent times, Ferguson gives deft summaries of the lives of Hernando de Soto, the Peruvian champion of property rights for the poor; Milton Friedman, the apostle of monetarism, who saw the supply of money as the key to the economy; and George Soros, the hedge fund philosopher and financier of liberal causes. I found myself understanding Soros's theory of reflexivity for the first time. (Market prices, Ferguson explains, are "reflections of the ignorance and biases, often irrational, of millions of investors . . . [which] affect market outcomes, which in turn change investors' biases, which again affect market outcomes" -- in short, reflexivity.)

Judging from the text, Ferguson finished writing The Ascent of Money in mid-2008, after the sub-prime mortgage crisis had hit but before September's credit freeze and the subsequent plunge in stock prices. As I turned his pages about the soaring trade in complex derivatives, I wanted to cry out to Wall Street: Don't go down that road, the bridge is out!

The shadow world of derivatives, credit-default swaps, the sales of U.S. bonds to China -- all seem to bring brilliant results, until they get too big. Indeed, "Too Big to Fail" is the catchphrase of this autumn. But the follow-up question is: How do we know that whatever institution is wearing that label doesn't harbor a hidden cesspool of putrid assets? When should we withdraw our "inscribed trust?"

In a provocative afterword, Ferguson wrestles with "creative destruction," the benefits of allowing companies to fail and investments to sour. He doesn't come to a definite conclusion, but he notes that viewing the financial world from an evolutionary perspective argues for weeding out what the political scientist Joseph Schumpeter called "the hopelessly unadapted" -- and quickly. "The experience of Japan in the 1990s," Ferguson comments, "stands as a warning to legislators and regulators that an entire banking sector can become a kind of economic dead hand if institutions are propped up despite underperformance, and bad debts are not written off."

Ferguson is making the rounds with his new book, saying last week on MSNBC that the United States should follow up the G-20 Economic Summit with a "G-2" meeting with just the Chinese. The professor also winningly confesses that even he is confused about the thrust of Treasury Secretary Henry Paulson's $700 billion rescue fund. Ferguson has, nonetheless, written an admirably illuminating book that will take its place beside such modern classics as John Train's The Money Masters, Peter L. Bernstein's Against the Gods, and Adam Smith's Supermoney.

Fear, greed and folly -- according to a Wall Street maxim, you always have them in the market. If only you knew in which order they come, then you could make some money. But past results, as investment companies sternly warn, are no guarantee of future returns, not in 2008. Money descends, too.

Copyright 2008, The Washington Post. All Rights Reserved.

From Bookmarks Magazine

Niall Ferguson makes a strong, compelling case for the development of money and banking as a catalyst for the advancement of civilization. Yet while some critics praised his clear, comprehensible writing, punctuated with anecdotes and historical details, others were nonplussed by his explanations and narrative detours. Several critics also bemoaned the book's choppy and uneven structure—an echo of the episodic, six-part television series it was meant to accompany. So it seems the UK critics liked the book less because they had seen the show. Though perhaps best suited to readers with a fundamental understanding of financial terms and theories, Ferguson's latest work provides valuable insight into the inner workings of the global economy, past and present. For interested readers, it demonstrates how our current fiscal meltdown fits into the bigger historical picture and laments humanity's perennial inability to learn from this history.
Copyright 2009 Bookmarks Publishing LLC

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Product Details

• Hardcover: 432 pages
• Publisher: Penguin Press HC, The; 1 edition (November 13, 2008)
• Language: English
• ISBN-10: 1594201927
• ISBN-13: 978-1594201929
• Product Dimensions: 8.9 x 6.1 x 1.5 inches
• Shipping Weight: 1.5 pounds (View shipping rates and policies)
• Average Customer Review: 3.8 out of 5 stars  See all reviews (122 customer reviews)
• Amazon.com Sales Rank: #1,332 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

170 of 200 people found the following review helpful:

4.0 out of 5 stars The Financial Subplot, November 15, 2008

By	Izaak VanGaalen (San Francisco, CA USA) - See all my reviews (TOP 500 REVIEWER)    (REAL NAME)

Niall Ferguson has written an easily accessible and very entertaining history of finance, ranging from the clay tokens of Mesopotamia 5,000 years ago to the hedge funds of today. The title of this book has apparently been modelled on Jacob Bronowski's "The Ascent of Man," and like that book it will be made into a television series. Being a television celebrity is not something that wins the admiration of one's peers in the history profession, to say the least. But those little rebukes are relatively mild compared to the scorn he received for his political views in Empire: The Rise and Demise of the British World Order and the Lessons for Global Power and Colossus: The Rise and Fall of the American Empire. In those works he argued that empire was beneficial not only to the mother country but the dominated countries as well. In this work he chronicles not only the history of money but also makes a case for liberalized finance.

Ferguson examines the financial subplot behind some of the major historical powers such as the role of money in ancient Mesopotamia, the denarius in Roman society, and gold and silver in the civilization of the Incas. He is very good in his descriptions of financial families like the Medicis and the Rothchilds, and how they became banking dynasties. Another memorable episode was the rise of Amsterdam as the world's financial center and the center's subsequent shift to London.

History is also filled with financial disasters of which we are well aware today. Ferguson tells the story of John Law and how he became France's head of finance. He engineered a financial bubble that took them several generations to overcome. Making matters worse, it occurred at the same time as the British South Sea Bubble.

Also instructive is the history of the first great globalization (1870-1914). (For this period also read Jeffrey Frieden's Global Capitalism: Its Fall and Rise in the Twentieth Century.) The world had become so economically interdependent that the pundits believed the possibility of war between great powers had been eliminated. This sentiment was famously expressed in "The Great Illusion" by Norman Angell.

Although this book was written before the current economic crisis, the last chapter is very prescient. "From Empire to Chimerica" tells of the symbiotic relationship between China and America. The combined country "accounts 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". This relationship, in which China saves and America spends, and in which China's savings is used to enable America to spend even more, is clearly unsustainable. Ferguson sees this savings glut as the cause of the current subprime crisis. That, in my humble opinion, was one of the causes; there were many bad actors involved in this catastrophe, citizen-borrowers included.

Although it is not obvious to everyone in the midst of a crisis, Ferguson correctly points out that financial engineering is one of the great forces behind human progress. The history of finance is a process of creative destruction. Financial risk-taking is necessary for economic expansion and human development, and Ferguson does a good job in making the case. Too bad it reads like a script made for the History Channel.

354 of 430 people found the following review helpful:

2.0 out of 5 stars Erudite hodgepodge, December 5, 2008

By	Balint Kacsoh (Macon, GA USA) - See all my reviews (REAL NAME)

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When I saw the interview with Niall Ferguson on CNN, I thought that I would get an insightful book that would enable me to understand and navigate the current economic crisis. After all, Ferguson is a Harvard professor (thus he is superbly credentialed), and the interview suggested that he had the foresight of the coming events.

Yet the book turned out to be an utter disappointment. On the surface, the book seems to have a good structure. The chapters logically follow a sequence: the history of money, credit, bonds, stocks, insurance, real estate, globalization, hedge funds, computer models of investing, and behavioral finance. The text is easy to read and crafty. However, the chapters fall short on several accounts. The chapters present selected events in the history of their respective subject rather than a broad overview. I did not expect a comprehensive history, but the selection was minimalist, often skewed, and the events were more often than not presented in a disjointed manner. There was some semblance of logic tying them together, but one had to know way more than the average reader to see the connection. If the reader had that kind of knowledge, the book did not offer much. Without the knowledge, the book's logic was lacking and, indeed, contained gaps and jumps.

Even before I reached the end of the book, I developed the feeling that the Author's pretty shameless primary goal was to write a book that can sell many copies, and make money. It is a quickly assembled patchwork that, in spite of the polished writing, is mostly useless fluff. There are much better books on the subject that will explain the concept of money and the current economic crisis. (Just an example: Robert Prechter's Conquer The Crash, published in 2002.) Since the interview on CNN, I heard additional interviews with Niall Ferguson (e.g., on NPR). The timing of the publication and the marketing efforts are way superior to the qualities of the book.

If you can borrow this book from someone, you will only waste some time by reading it, but at least you will save your money. This book is certainly not worth having on your shelf - in the long run it will only collect dust, and you will not open it again. Probably you would be better off not reading it at all (there are better alternatives). The knowledge you will gain is most likely not proportionate with the time invested (wasted) in the reading. The two stars I gave might be a little too generous, especially considering that one expects a much better book from a Harvard professor. However, I have to give credit for the style and a modicum of usefulness.

56 of 65 people found the following review helpful:

3.0 out of 5 stars TV tie-in, not a history book, December 20, 2008

By	G. Murray (Tokyo) - See all my reviews (REAL NAME)

When I was given this book, my heart leapt because I know Niall Ferguson is a robustly contrarian, sharp, articulate and well-informed historian, but it sank immediately that I saw that the book, like many of his recent works, was again based on a television series. Ferguson is a man of genuine talent; it is a shame he chosen to prostitute that talent. No doubt "The Ascent of Money" made for a TV show of far more than average quality, but the book is necessarily scrappy and somewhat shallow. It seems to evolve according to the picturesqueness of certain locations (the televisual imperative), rather than the logic of the argument. I would like to see the television link flagged much more prominently on the cover so one is made aware in advance that this is not a serious work of history, but a potboiler designed to raise funds so that Ferguson can boost his earning power to the levels of equally (or less) brainy college contemporaries who went into finance or the law. Frankly, I was disappointed. I hope Ferguson will get back to being a proper historian soon.