Monday, September 5

The Ascent of Money

I read the book  The Ascent of Money:  A Financial History of the World  by Harvard historian Niall Ferguson  as part of my summer reading and I also watched the documentaries.  It’s interesting to see the rise and fall of different countries based solely on whether someone could get a loan.

From its opening sentence,
 “Bread, cash, dosh, dough, loot, lucre, moolah, readies, the wherewithal: call it what you like, money matters.To Christians, love of it is the root of all evil. To generals, it's the sinews of war. To revolutionaries, it's the chains of labor.”…
  To its final text,

 “There are those who talk about the death of capitalism or the end of free markets, as if the state were somehow an alternative to financial markets. The historical reality, as should by now be clear, is that states and financial markets have always existed  in a symbiotic relationship. Indeed, without the exigencies of public finance, much of the financial innovation that produced  central banks, the bond market and the stock market would never have ocurred. I remain more than ever convinced  that, until we fully understand the origin of financial species, we shall never understand the fundamental truth about money : that , far from being´a monster that must be put  back in it´s place (as Merkel recently said) , financial markets are like the mirror of mankind, revealing every hour of every working day the way we value ourselves and the resources of the world around us.
It´s not the fault of the mirror if it reflects our blemishes as clearly as our beauty.”.
Professor Niall Ferguson traces the evolution of money, showing  that finance is in fact the foundation of human progress  and suggests that financial history is the fundamental background to all history. “From Mesopotamia right down to day, the ascent of money has been an indispensable part of the ascent of Man,” he says, adding: “Without the invention of credit, the entire economic history of our world would have been impossible.”
Money, such a simple word, is at the very core of our relations. It must rank as oneof the great inventions of our species, alongside the division of labour and the wheel.
So we march with money through time. From the Roman denarius, still circulating in Europe in the early Middle Ages, through the development of the loan sharks in northern Italy into the first real bankers; from the rise of Amsterdam as the world's financial capital and the gradual shift of its techniques to London; from the Rothschilds, who did not, as is popularly supposed, make a great coup out of using carrier pigeons to learn the result of the battle of Waterloo before anyone else, but rather from a huge subsequent gamble on the price of government securities; to the first great age of market capitalism during the 19th century; and to the booms and busts of the modern world.
What I find especially interesting about The Ascent of Money is the way in which it ties together bits of history that are largely unrelated in my mind and Ferguson's ability to link the past with the present – particularly helpful right now. For example, he draws a parallel between international investment during the last great burst of globalisation from 1870 to 1914 and the massive international capital flows of the present global era. The difference was that during the 19th century it was mostly a case of the developed world, Britain, France and other European nations, financing infrastructure in developing countries, now it is a still-developing country, China, financing consumption in the US. The author coined the term  "Chimerica", which he describes as "the wonderful dual country ... which accounts for just over a 10th of the world's land surface, a quarter of its population, a third of its economic output and more than half of global economic growth in the past eight years".
I found this section of  “Chimerica” especially fascinating. I was surprised to see the power of saving money which is demonstrated by the recent descent in US economic power and position in relation to China. It is also surprising that China is becoming the “World Bank” in such a short period of time.
This is one  of my favorite documentaries. I've developed a greater understanding of the development of “money” and the emergence of global finance. A must watch for everybody.

Enjoy Episode 6 of The Ascent of Money documentary.