The Ascent of Money - A Review
Through the years, various prophets have preached the evils of money and the glory of a society which exists without the need for it. So far, no society has succeeded in such a Utopian endeavor; in fact most who claim that goal seem only to be able to remove money from the working class, not from the elite. In a human society, we need some form of barter to secure the things we require to live, and the things we want to enjoy. Early monetary systems were pretty simple, sometimes a measure of grain in exchange for some cloth; and they seemed to work. So how did we end up with today's complex financial systems?
I've never really considered the history of money and finance, but when The Ascent of Money , by Niall Ferguson was recommended, I decided to take a look.
Like me, most people probably do not give a lot of thought to how banks and financial institutions developed. They just are, and seem to have always been. How did the banking system evolve, what started the idea of stocks and bonds, or how today's complex financial markets came to be? Like all things though, these markets have a history that is both interesting and informative. Ferguson explains that the bond market, for instance, is a child of war. Having accumulated immunity debt (and creating the term "mountain of debt") in the Tuscan wars of the 14th and 15th century, Florence was desperate for a source of funding. They decided to levy a requirement on their citizens by "borrowing" money from them with a promise to repay with interest. City officials worked their way around the early church's prohibition against charging interest by making these "loans" mandatory. A provision of the system allowed citizens to buy and sell these loans, or bonds, to each other. And a market was born.
With equal clarity, Ferguson discusses the stock and commodities markets, and takes a historic look at the real estate market that is so much in the news today. He even ventures into subjects that are a little esoteric to many of us like arbitrage and derivatives.
I found the most valuable contributions of his in the Afterword. Summing up the reasons why human thought does not always square with the economic realities of the markets, Ferguson lists ten human movements which can lead to difficulty in making good financial decisions. His list sees to transcend the markets and can be applied to all aspects of human life.
As something of an amateur student of history, I'm always looking for something a little different and off the beaten path. Niall Ferguson has provided just such a work. I found "The Ascent of Money" to be an interesting read and certainly an instructional book on a subject that many of us have just taken for granted.