Home > life > Book Review: The Ascent Of Money (by Niall Ferguson)

Book Review: The Ascent Of Money (by Niall Ferguson)

The epic clusterfuck of 2008 has since encouraged in me a desire to learn the arcana of the financial world. Collateralized debt obligations? I can tell you all about it. Chinese savings glut? Got you covered. Something to throw in the faces of relatives who still spout nonsense about “YOU SHOULD BUY PROPERTY IF YOU DON’T WANT TO DIE POOR”?¬†Oh yeah. Check.

But most of the news articles and books have focused on the here and now. If you want to cast a wider net, be sure to pick up Niall Ferguson’s “The Ascent Of Money: A Financial History”. While poorly named (especially since it was published in early 2008, a few months before Lehman), the book walks the reader through the earliest conceptualizations of money – whether on physical tablets or on silver and gold coinage. It covers European expeditions to South America such as Francisco Pizarro’s conquest of the Inca empire.

Ferguson then speedily moves on to medieval Europe, the birthplace of so many of the financial innovations we take for granted today. Which brings me to an interesting digression – in Silicon Valley, we’re so warped in our own sense of self that if it doesn’t involve something built with Twitter Annotations or geolocation data, it doesn’t “feel” like innovation. But its safe to say that the modern economy exists because financial innovations such as banking, joint stock companies, promissory notes and bonds/securities came into being.

But I digress. In the book, we visit early 13th century Europe – when Fibonacci (of the eponymous sequence fame to computer scientists) published his pathbreaking Liber Abaci which introduced Europe to Arab (Indian, really) numerals and did away with the disastrous Roman numeral system and reduced friction in trading and currency conversion. Yup, I thought it was fascinating too.

We then discuss the introduction of banking (derived from the Italian “banco” or bench where business was conducted) and the Medici banking dynasty of the Renaissance – yes, the rich hedge fund guys were arts patrons and douchebags hundreds of years ago too. Some things never change.

Bonds and public debt – also invented in Italy, much to my surprise – follow the discussion on banks. Did you know that bonds were first invented to finance wars? I especially loved the quote in the book: “War Is The Father Of All Things” even though its not quite accurate and a deliberate exaggeration. The chapter on bonds is hellish fun.

At a fast clip, we arrive at the origins of the stock market, first invented by the Dutch as they sought to pool together finances for The Dutch East India Company (you can thank us Indians for our important indirect contribution on this one at any point now) – conquest is risky business, after all, especially when you’re sailing thousands of miles and when there’s no call centers (get it?) to complain if shit goes wrong. It made sense to pool finances and buy “shares” of a company. It made further sense to create a secondary market to create liquidity since it took several years for the initial “shareholders” to recover their investments in the trading company.

We then take a more modern turn and cover the measurement of risk, and more specifically, insurance. Did you know that insurance policies as we know them today were invented by a pair of Scottish priests?! WTF?! And that the British (Ferguson is a Brit) take out more insurance than anyone else? This is a great fact-filled chapter.

Then, we cover real estate – that most misunderstood of asset classes – and the political invisible hand pushing Western consumers towards purchase of property with every imaginable bribe possible. Nothing gives me more joy than reading a lucid argument against property being a “sure thing”, especially since my relatives love nothing more than to lecture me about how “real estate is how you make money in America” with a condescending know-it-all look. An illiquid, one-way bet on a market is risky just like most other bets – as a lot of people found out to their detriment after signing ridiculous no-doc loans.

Finally, CHINA. I won’t say too much about this chapter except that its mostly covered in the press and that you won’t derive as much value from it as the previous chapters. But a fun gallop nonetheless.

All in all, this is a cool book for all business and history buffs. Read it!

Categories: life
  1. pele22
    September 6, 2010 at 9:49 am

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  2. Abhay
    May 8, 2011 at 8:11 pm

    That’s a neat book review, Saumil. BitBubble is excellent as well!

    commenter secret code: TT

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