I live in southwest Florida which if you watch the news was just hit by one of the largest and strongest hurricanes in the past decade. Irma wreaked havoc on many of the Caribbean Islands before it turned towards Florida. As such I decided it was safest to evacuate (good thing too as the eye went right over my neighborhood!), so before I evacuated I stopped at the library and picked up a few audiobooks. One of which I listened to was The Ascent of Money – A Financial History of the World by Niall Ferguson. The audiobook looks back historically at where money comes from and then how it has shaped much of the history of the world.
This book was written in 2008 just as the US housing crisis was starting to set in and affect the world economy. It is clear that Ferguson sees this as a recession and crisis, but at the time the full effect on the global economy was unknown which paints a unique backdrop for the book.
Ferguson does a very thorough job in outlining various economic bubbles throughout history and how they lead to revolution. There are instances of greed and schemes by nefarious characters throughout history and the economics of war that motivated many of the great conflicts throughout history. For anyone who is either a history buff or enjoys economics, this is a fantastic rendition of the influence finance has on our lives.
Two key learnings for me are:
- The cyclical nature of finance and the economy. It’s true that as humans we tend to repeat our mistakes and this is especially true of finance. The French Revolution Ferguson posits was due to a bubble that was created because one greedy individual was trusted to run essentially the entire economy of France. In the process making lots of money for himself until ultimately the entire scheme came crashing down. The reason the cyclical nature resonates is that at the time of the writing of this book the great recession was in its early years and the ultimate fate was unclear. Now as I write this in 2017 there are instances of bubbles arising in our current economy between US subprime auto debt, student loan debt, and the run on cryptocurrencies. We are in the midst of our financial event. I do not try to predict if we are still climbing, plateauing, or descending, but I do know a major economic event is drawing near because history says so.
- Economic change is inevitable. We have transitioned greatly as a species from the days of hunter-gathering, the agricultural revolution, industrial revolution, and the technology revolution. As the fundamental conditions of society change, we adapt our economies, politics, and institutions in response. I believe economics is cyclical from point 1 but the manifestation and resulting outcome change. We will have crisis, bubbles, and conflict, yet we will also experience tremendous progress as a species. Recently on social media, I saw a post showing how a prediction at the start of the 20th century for the next decade was completely different than the actual outcome. In 2007 the first iPhone was introduced which forever changed the way we live. Tremendous change is inevitable and we can be confident that as we progress those changes will occur quicker than ever.
Ultimately I enjoyed The Ascent of Money and found it a valuable history lesson as well as presenting a unique perspective on the events throughout history. The outlining of how certain financial institutions came to be and how we have come to the place where we are economically is quite interesting and insightful. It shows that often times some of the most ingrained and normal financial practices (like the 30-year mortgage in the US) came about from unique circumstances. We often outgrow certain practices such as the gold standard and ultimately all of these booms and busts have led us to where we are today. The one thing that is certain is that we are likely to repeat many of the same mistakes and there will be inevitable societal changes. What remains uncertain is what these new financial instruments will manifest, their effects, and the timing of these changes.
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