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Money Changes Everything: How Finance Made Civilization Possible Paperback – August 15, 2017
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"A panoramic historical sweep packed with interesting nuggets. . . . All very enjoyable, and I'd say essential for anyone interested in financial history.", Enlightened Economist
"William Goetzmann's Money Changes Everything is a thorough look at finance and world history, a 5,000-year journey that demonstrates the pivotal role of free market capitalism in building nations and serving human interests.", Washington Free Beacon
"An accessible survey that does a fine job of reallocating past, present, and future.", Kirkus
"Money Changes Everything is a treasure, unequalled in scope, unparalleled in depth of insight. . . . This is a must-read for anyone in finance or who wants to find out what it's about.", Financial Post
"A must-read for anyone interested in the history of finance.", MarketWatch
"Let me say simply that everyone who is curious about the history of finance will be richly rewarded by reading this book."---Linda Jubin, Investing.com,
"A remarkable work of synthesis and scholarship, the book affords a deep perspective to anyone trying to grapple with current problems in the role of finance and financial regulation in a civilized society."---Elie Canetti, Finance & Development
"No one book can capture all there is to know about financial history. But Money Changes Everything comes awfully close to a comprehensive review of financial infrastructure. . . . The intersection of war, nation-building, finance, mathematics, and even art is given exhaustive analysis in this book. . . . Goetzmann's work is a fascinating tour through the history of currency, finance, probability, and risk."---David R. Henderson, Regulation
"Goetzmann weaves his expertise in finance, architecture, archaeology, sinology, and art history into a wonderfully rich tapestry. Goetzmann's enthusiasm for his topic is infectious. . . . Goetzmann has written a wonderfully erudite book in a way which is accessible to a wide audience. This book should be compulsory reading for all finance professionals and anyone with an interest in economics, finance, or history. If you want to understand how money changes everything, then Goeztmann's magnum opus is a must-read."---John D Turner, Economic History Review
- Item Weight : 1.12 pounds
- ISBN-10 : 0691178372
- ISBN-13 : 978-0691178370
- Paperback : 600 pages
- Dimensions : 5.3 x 1.7 x 8 inches
- Publisher : Princeton University Press; Revised edition (August 15, 2017)
- Language: : English
- Best Sellers Rank: #642,072 in Books (See Top 100 in Books)
- Customer Reviews:
Top reviews from the United States
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The book is split into four parts starting with the archaeological record. It is fairly well known that cuneiform was used to record trade and probably invented for that purpose but the author goes through old texts and discusses contracts drafted from the beginning of human history. We see how interest was developed (which interestingly seems to have been formed due to the idea that a flock borrowed would grow overtime). The author analyzes situations where there is contract dispute and how parties accrued interest in their calculations of liability. The author spends some time on Greece as well and discusses the mercantile nature of trade and use of silver in transactions. The author gives the refreshing background of the economic environment of Ancient Greece and its role in trading and mercantile exchange. The author discusses how insurance contracts were originated in this period to help diversify risk and discusses how disputes were dealt with. The author also discusses Roman finance which was very sophisticated due to the extent of the empire. You learn about the beginnings of principal-agent relationships in investing and limited liability vehicles and the beginnings of a capitalist class in the sense that senators had excess savings that were used for investments through LP structures. The author then moves to China which developed concurrently but had a system very distinct from Europe and the Middle East. The minting of a sovereign coin system is discussed as well as the fact that China was the first country to use a paper currency. The author discusses the economic system in China and how its centralized bureaucracy didn't allow for an entrepreneurial economic environment where inventions were rewarded with financial gains.
The author moves on to the middle ages and refocuses on Europe up to the 18th century. One gets an understanding of the financial network that were constructed to facilitate transfer of savings on religious pilgrimages and in particular the formation of protobanks as finance filled a gap of how to send money over large distances. The author then goes to Italy to discuss merchant finance in Venice and as well the development of math to improve financial reasoning. This exercise was taken up by the famous Fibonacci and the author discusses his work on problem solving for financial accounting. The author discusses some interesting examples of early innovations of finance like perpetual bonds as well as various complex conditional forms of insurance. All these products who were developed before a mathematical theory for them was and so its interesting to read about how people took advantage of financial instrument mispricing. The author gets into topics that more has been written about recently and things like the manias that took over markets like the South Sea Bubble and John Law's financial alchemy in France. The accounts are very readable and definitely hold your attention.
The author then moves into the modern realm really starting with Marx and going through Keynes, the Depression and the further codifying of mathematical finance. This is a history of how finance has been embedded in civilization form its beginnings and how finance is inescapable as the complexity of an economy grows. I enjoyed the book for its early history of finance in ancient civilization and the examples discussed about financial mechanisms developed by people to solve particular problems they were facing. The lesson of the use of finance to coordinate actions is a fairly trivial one so its really the history and examples chosen that gives life to the book. It is quite detailed and though parts can be a bit dull I enjoyed the book. The later parts are well written but there are other accounts out that I think are superior but the book achieves its purpose of discussing how finance is embedded in civilization and has been from the very beginning.
The basic point here is that finance is a type of technology which allows a civilization to expand. The needs of an expanding civilization create a need for expanding financial methods which then enable the civilization to keep growing and thus generate new financing methods in a perpetual cycle. The basic definition of finance is that it enables people to move money through time. The most basic financial tool is the loan which was invented in Mesopotamia 5,000 years ago. A loan allows the borrower to receive present income to be paid with future income, while the lender gives up present income to receive future income.
As Western Civilization (broadly defined) went from ancient Mesopotamia to ancient Greece, Rome, the medieval Italian city-states, Holland, Britain and finally America, financial products became more complex. But one constant in the West was that most of the financing was done by private parties. Governments, for example, would borrow private funds by issuing bonds. Meanwhile, China took a different path by always having a strong central government with a vast bureaucracy. There it was more common for the government to lend money to private parties.
Goetzmann believes the West developed a decentralized financial system because it was politically decentralized to begin with. The West suffered two great collapses, the Bronze Age collapse and that of the Roman Empire, while China never suffered a total collapse. The decentralized aspect of the West allowed for more financial experimentation than the centrally controlled culture of China. This made no difference globally until Western explorers began reaching China around the 16th century and then conquering it in the 19th century. China suddenly realized it was not the center of the world and the 2,000 year old imperial system collapsed in 1912.
Chaotic conditions followed in China until about 1978 when China felt confident enough to rejoin the international community and adopt Western technology, free market enterprise, modern financing, and some of the culture that went with those. But China has remained authoritarian politically with a strong central government. Only time will tell how the two different systems will perform in the future.
Top reviews from other countries
I learned a great deal from this book. The author believes that in at least some societies literacy develops to help people manage their accounts and financial transactions. That joint ventures, debt (and the slavery or bondage that goes with a failure to repay debt or can arise from reparations following war) soon evolve as societies start to trade. Financial literacy is well spread in Ancient Greece, where large numbers of ordinary citizens form the jury to hear the kind of complex financial cases that Demosthenes argued. China is notable for the initial invention of paper money and for a financial system in which the state and a state-run bureaucracy plays a leading role. Meanwhile in Europe public debt originates when Venice needs to raise large sums of money in a hurry. And various forms of banking are in evidence in many societies, including the Knights Templar, who are the stopping off points for crusaders. In due course, companies limited by guarantee are formed; then stock markets and stock market bubbles - and regulation. Later innovations are the IMF and the World Bank, both of which we owe to Keynes, and which stop sovereign debt leading to wars and the impounding of the goods of a debtor nation. Meanwhile there are varieties of theories about how best to invest, as risk comes to be better understood.
There's much to learn; and much to think about. But I did find it took me quite a long time to read it.