on November 15, 2008
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.
on May 17, 2009
Niall Ferguson's THE ASCENT OF MONEY, as its subtitle promises, is a broad overview of financial history, from the dawn of the first form of currency in Ancient Mesopotamia to the proliferation of complex residential asset-backed securities early in the twenty-first century. In six chapters, Ferguson traces the genesis and evolution of the pillars of modern finance: currency, bonds, corporate stock, insurance, and real estate. A final chapter focuses on the US and China's symbiotic debtor-creditor relationship, and an afterword discusses the current global recession and includes a somewhat strained evolutionary analogy comparing financial development to natural selection.
The objective here is to illuminate the modern economic system by surveying its historical origins, and to a large extent, Ferguson succeeds. The book is targeted to a lay audience and such readers are certain to walk away from a reading with an enhanced understanding of modern economics. The author generally takes the time to explain even elementary concepts in an effective manner, but there are also several maddening instances throughout where he casually references somewhat arcane metrics and complex ideas (e.g., VaR) without any explanation as to their meaning and significance. In this respect, Ferguson can be at times simultaneously too basic for the advanced reader and too complex for the novice.
Never dry reading, the narrative flows freely over its 358 pages, with perhaps the most interesting and edifying chapters being those on the bond, equity, and real estate markets. I especially enjoyed Ferguson's exploration of the five stages of "bubble" (displacement, euphoria, mania, distress, and revulsion).
Ultimately, though, the book will be of most benefit to those with a casual interest in economics, as it is entirely descriptive and not prescriptive. Ferguson never really offers anything resembling a thesis, nor does he reveal his own views except for the most fleeting of moments when singing the virtues of late-19th/early-20th century imperialism. He is focused exclusively on reporting, not analyzing. As such, THE ASCENT OF MONEY, though well-written, does not transcend its status as a historical chronicle and will be of trivial value to those seeking a sophisticated economic treatise.
on November 14, 2008
Historian Niall Ferguson teaches economic history at Harvard so he certainly has credentials for a book like this. While his historical knowledge is impressive his financial claims can seem a bit cavalier and broad-sweeping.
Ferguson celebrates financiers as the source of modern wealth and prosperity. He backs up his claim by a historical examination of the last 500 years. This includes the Italians in the late Middle Ages, as well as the Dutch in the 17th century and Britain's empire success which he partially attributes to the establishment of the Bank of England in 1694.
After setting the historical context Ferguson becomes a pundit on the current global situation. Commenting on those who speculate in the financial markets today Ferguson writes, "When people have a run of luck, they very quickly impute this to their own brilliance. Once you start interpreting your good fortune as your skill, you're very quickly a master of the universe who can never fall. That, of course, is precisely when you fall." He likens financiers to gamblers, which may not be a completely fair connection. Of course there is risk involved in investing, but the primary concern in the financial world is how to limit that risk, react wisely, and be patient.
As Ferguson considers the financial crises his assessment is neither overly positive nor calamitous. "Before this crisis," Ferguson says, "there were people who thought there would never be another recession--that kind of crazy, myopic, unhistorical belief. That was followed in the last month or so by wild panic, as if it's the end of the world."
Ferguson states the obvious when he declares we will all be affected by the current financial mess, and that it will take a while for the market to correct itself.
In short, if you like history more than finance, this is going to be an enjoyable book for you. However, if it's the other way around the details might be suffocating.
on December 5, 2008
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.
on December 20, 2008
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.
on August 28, 2009
Angry about the bankers going bust? Ferguson starts from this premise to educate the reader into the history behind how international finance got to its current position. Beginning with loan tablets in ancient Mesopotamia, Ferguson traces the origins of government lending, the stock market, the bond market, the mysteries of quants, and a fascinating final chapter on how China and America have up to now been in a symbiotic relationsip with Chinese goods funding American avarice, but this may not be for much longer.
Ferguson's books have been getting bigger and more ambitious the more famous as he has become. With this comes a necessary amount of reductive argument, lurching from Glasgow loan sharks, to Potosi silver mines, to the reckless Scotsman John Law who set up a French state bank in the 18th Century which ended up ruining its investors. This is probably because, like all Ferguson's recent books, it is a TV tie in.
Ferguson is also very much in favour of globalisation and international finance. He plugs the book in the introduction as a teaching tool for those who are sceptical or shaky of the systems that drive money around the world. Wise up, or be a loser is his essential message. This book was finished just before the great bank collapse, and as a result doesn't have much to say on the current crisis.
This kind of chest thumping history is clearly very lucrative for Ferguson, but after his brilliant early books on the Rothschilds and the First World War, one can't help thinking with his mid career media don posing, he has acted a bit like the hedge fund managers such as Ken Griffin he idolises in this book who gained great wealth at the expense of something more solid, decent and lasting.
on December 30, 2008
In these hard times, we really could use an up-to-date, thoughtful reappraisal of the history of finance and the role it has played in advancing and periodically severely retarding economic and political development around the world.
Unfortunately this is not it.
Prof. Ferguson, who divides his time between Harvard and Oxford, has become the "James Michener" of world history. He writes effusively on everything from "Britain's contributions to civilization" and "warfare in the 20th century" to "the Rothschilds." Having dipped into several of his long-winded tomes, I can honestly say that the game has seldom been worth the candle.
And now this. Here a documentary project for Channel 13 evidently drove this "Ascent" book project, with predictable consequences -- jump cuts from subject to subject that leave readers almost sea-sick; topic choices that seem to have been made for video potential and notoriety, not objective importance; "mile wide, inch deep" scholarship that yields a very large pile of half-truths and incomplete thoughts.
I did like his chapter on housing finance, though it raised many more questions than it answered, and seemed to suggest that ignorant residential borrowers had more to do with the current debacle than, say, trillions in derivatives issued by Wall Street banks and insured by outfits like AIG.
Clearly the faults are not for want of ability. Where Prof. Ferguson actually gets up out of the armchair and does some first-hand research, as in his treatment of the Rothschilds, we get a few moments of serious, original scholarship.
Beyond that, and a few colorful tales, the book amounts to coffee table nostrums for readers who want to be reassured that the "wall is not coming down" on our Capitalist Empire.
Among Prof. Ferguson's comforting conclusions: (1) finance capitalism really is the best of all possible worlds, at least in the long run; (2) hedge funds and global banks really are wonderful new instruments for "guarding against risk"; (3) "financial innovation" really is "indispensable" -- despite all the innovation in REGULATION that this wizardry seems to constantly requires; and (4) "poverty" is NEVER "caused by" financial innovation -- a conclusion that Ferguson repeats over and over, never with any evidence. (This one may come as a surprise to the 2 billion citizens of low-income countries outside China and India whose incomes utterly failed to grow from the late 1970s to 2000 because of "Third World sub-prime loans."
The book also contains any number of factual errors. The dollar has strengthened, not declined, during current financial crisis. China and other Asian countries have hardly "decoupled;" quite the reverse. Chile's 17-year flirtation with fascism under the corrupt, bloodthirsty Pinochet regime was a horribly costly mistake, not some interesting little experiment with privatized pension funds. China's economic backwardness in the 19th was not due to a shortage of financial institutions (which are not an "uncaused cause" of anything) but to -- as Ferguson, contra ipsum, seems to acknowledge -- the impact of Western imperialism on China's weak state; Ken Griffin's Citadel hedge fund is hardly a work of genius, but a monumental failure; etc. etc. etc.
In short, this is a dumbed down, pollyanish, made-for-TV "hasty pudding" of a book. Its success - like the mortgage debacle itself - is based largely on hype and the "impeccable reputation" of its principle "securitizer."
We need to remember two golden rules of book selection -- (1) always be suspicious whenever a film project leads to a book, rather than the reverse; and (2) always be suspicious of any book whose title is printed in a smaller font than that of the author's own name.
on July 23, 2011
I had 3 major problems with the Ascent of Money.
1) Mr. Ferguson made many broad contested conclusions without providing evidence or analysis. For example, when talking about imperial Spain (1500s Spain), Mr Ferguson said the Spanish monarchy's tyrannical, oppressive nature suffocated the economy, which decreased the government's potential tax base and therefore power, and that if only the Cortes (local legistlatures) were allowed to breathe free, Spain would've ruled the world. However, the book, Imperial Spain: 1469-1716, spent about 100 pages demonstrating how the Cortes pursuing their self-interests resulted in an economically weaker Spain and weaker monarchy. Imperial Spain: 1469-1716's explanation was much more convincing, especially since it used primary sources, than Ascent of Money's.
2) In the final chapters, Mr Ferguson devoted most of the word count to his opinion and few words to evidence and analysis as he discussed the 1980s financial events (1987 flash crash, Savings and Loan debacle, some illegal trading) and the 2008 crisis. Those chapters were more anti-Wall Street tirades than scholarly analysis of cause-and-effect relationships between variables. His explanation was also mono-causal (one thing caused the entire financial meltdown), and I haven't found mono-causal explanations to be better than multi-causal ones.
3) In general, I can recommend 3 other books that a) taught me more than Ascent of Money and b) were more analyatical/rigorous/scholarly than Ascent of Money. They are This Time Is Different: Eight Centuries of Financial Folly,Devil Take the Hindmost: A History of Financial Speculation, and Imperial Spain: 1469-1716
I'm not sure when Niall Ferguson finds time to sleep...
Fresh from a series of lively, accessible histories focusing on geopolitics -- the concept of empires, warfare, etcetera -- Ferguson, far from taking a well-earned rest, has tackled the toughest topic of all: the history of the global financial system. The author of other books on finance-related topics (The Cash Nexus: Money and Power in the Modern World, 1700-2000and The House of Rothschild, the World's Banker 1849-1999), the author may seem to have returned to his roots. In fact, as his book makes clear, understanding how money and finance works can explain a lot about human nature and thus about our social and political institutions. Understand what money is, how it is made, invested and transfered, and you understand issues like equality, political instability and economic progress. After all, as he recounts, great fortunes were made by those willing to take risky financial bets on the eve of the battle of Waterloo. When final word of Napoleon's defeat arrived, the seeds of the Rothschild's vast fortune were sown, and the apparently nerveless Nathan Rothschild rode his stake in British government bonds higher and higher.
Ferguson has a knack for making this material accessible, whether it's the nature of what earliest civilizations considered to be "money" to the religious dilemmas that hovered around the concept of usury. (The popes in Rome denounced interest as usury.)
Of course, in the current environment, the most compelling part of the book will be the chapters Ferguson devotes to financial bubbles and in particular to the ongoing mayhem in our global financial system. Today's Rothschilds, those who have let their bets ride and rolled the dice over and over again, have finally lost out, and Ferguson gives what some are likely to view as an overly-simplistic analysis of the causes of this. (But this simplicity is likely to be very welcome to all those on Main Street who still view Wall Street as, in Ben Bernanke's words, an "abstraction".)
The most solid part of this analysis is, not surprisingly, the historical component. Thankfully, Ferguson avoids falling into the trap of giving readers yet another look at the great tulip bubble. Instead, he launches into an analysis of what kinds of risks speculators have taken throughout history, and the various ways they have come to grief.
The final part of Ferguson's argument is perhaps the weakest, although perhaps that is only because of the book's timing -- smack in the midst of financial chaos that he couldn't have imagined when he delivered the final manuscript. His look at behavioral finance is intriguing and welcome; his analysis of the behavior of today's "money movers", such as hedge funds is too simplistic. I'll look forward to reading an updated edition at a later date.
Most provocative of all are Ferguson's final conclusions about the role of China in the global financial system. For now, at least, the concept of decoupling -- much talked of before 2008 -- seems to have fallen by the wayside; in the current bloodbath, everyone is suffering in some way. "What price a subprime superpower?" he enquires, in the context of emerging global rivals. This, too, is a story that may be better told in a few years' time, since many of the most important issues can today be framed only as questions.
This is not a book for hardcore Wall Street folks or even those with a reasonable knowledge of the way financial markets have evolved (securitization, credit derivatives, hedge funds, etc.), unless they also have a strong interest in history. There are many other, better and more detailed books to satisfy them. This work, in contrast, gives any reader a firm base of knowledge as to how and why financial systems evolved. Perhaps it may even give them comfort that as we have survived periods of extreme financial crisis, so we will -- somehow -- survive this one.
For anyone interested into delving into one particular era touched on by Niall Ferguson, I'd highly recommend the following: Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence (Enterprise) (Enterprise)
The Ascent of Money: A Financial History of the World by Niall Ferguson in one of the most timely books of the year. Appearing as it does in one of the largest and far reaching financial debacles of the modern world, one has to wonder if the timing is just coincidence or whether the financial gods are just having a quiet laugh.
As an aside, if you remember anything from your Money and Banking course you may have taken in college, then some of this material will be familiar. What is new, and certainly worth the cost of the book, are the interesting historical connections that Ferguson manages to create between the topic of money and events that have played out throughout much of recorded history. To call these connections interesting or eye-opening is a gross understatement. For the historian, regardless of whether you are a professional or amateur, the information provided by Ferguson is nothing more than astounding.
The word credit has its root in the Latin word "credo" or "belief". The very act of taking money in payment for some delivered product or service is an act of faith. The faith part comes in believing that the "money" received can, in- turn, be used to buy some other product or service. It doesn't matter what we use for money. Money could be anything we place value on from colored stones, sea shells, precious metals, gems, or simply financial credits. It helps if the "money" is easily carried which makes precious metals (gold and silver) such a convenient commodity and why we don't carry around bales of cotton or kegs of wine (but they have worked in ages past). Of course, financial credits, little electronic binary 1's and 0's, are best of all, but, as with all other forms of money, require faith. All of this is truly astounding when you look at commerce world-wide and realize the underpinnings are so simple.
Ferguson's The Ascent of Money reminds me so much of Fernand Braudel's Civilization and Capitalism: 15th - 18th Century, especially volumes 1 (Structures of Everyday Life) and 2 (Wheels of Commerce). Like Braudel, Ferguson's words are enlightening and surprisingly useful in today's world. Simply understanding how the world functions is worthwhile knowledge and Ferguson helps provide that knowledge. Lets face it, trading stock today isn't all that different than trading stock in 17th century London or Copenhagen at its most fundamental point. The Ascent of Money is written for the lay reader. You don't need to be a financial genius to enjoy this book. Well researched with terrific notes.
I highly recommend The Ascent of Money by Niall Ferguson even if you don't have much more than the cost of the book. It'll be money well spent.