Niall Ferguson is not your typical economic commentator. He’s not an economist, or journalist, or even a guy with an MBA. He’s a historian; a historian with a largely business oriented interest and research, but a historian nonetheless.
In 2008 he wrote a book called The Ascent of Money. I read it almost as soon as it hit the shelves, but am only now getting around to reviewing it.
Here’s the basic premise of the book. It’s not a book about currency, but basically a history of borrowing money. When did we start loaning money to each other? Why did we do this? What are the advantages? Disadvantages?
These are questions he will answer. To give you a tasted of the context of the book, I’m going to just cite some of the things I learned from it.
Modern finance was born in Italy. Because so much commerce took place there in the 15th century, the need arose for people with ideas or the guts to sail to the other side of the world to use someone else’s money to do it. Initially, Christians could not participate in the loaning of money. The Bible forbids what is called “usury,” or charging interest. The Jewish population interpreted this differently to mean they could not charge interest to family. This is one of the beginnings of the association of Jewish people with money. A Christian by the name of Giovanni de’ Medici exploited a workaround. They would advance money to a merchant and charge a fee. If they merchant needed the money for a longer period of time, the fee was greater. Bingo-bango, interest. It’s the closest thing to mankind’s first accounting trick as we’ll ever get. Eventually, Christians got over the usury thing and banking exploded.
Did you know that explorers of the new world were looking for gold? Of course you did. Well the Spanish found some in South America, they found a lot. They would mine this gold (and silver) and send it back home which made Spain a very wealthy country. Anytime they needed more money they would just mine more gold and ship it home to be spent. This is not far from “printing” money the way we do today. Eventually, there was so much gold in the market that it became less valuable (depreciating value of the dollar) and the Spaniards spent themselves into financial ruin.
Scotland ministers invented insurance funds in the early 1700s. They didn’t like what would happen to widows and orphans of their fellow ministers when the ministers would die. They started a fund where the ministers paid premiums and those premiums were invested for profits. Profits were paid out to those paying premiums when someone died. The key to the success of this first insurance fund was the mathematical precision needed to calculate how much money would need to be paid out every year. As a testament to this first insurance fund’s success, it still exists today as Scottish Widows.
I could go on and on about little snippets of information I’ve learned from this book. But this is enough to whet your appetite. Now for a more critical view of this book based on my feelings.
I hate long books. This book is way too long for the information it contains. It’s perfectly written for his colleagues at Harvard, NYU, and Oxford. Not being one of his colleagues, there were many times where I literally fell asleep reading this book. The content is fantastic, but he goes into way too much detail.
Second, this book is not a financial history of the world as the subtitle claims. It is in fact a cherry-picking of interesting events that were shaped by finance in western cultures only. For example, after France helped the colonies defeat the British in the Revolutionary War, they found that they were out of money setting for the events that eventually lead to the French Revolution. Irony is entertaining. However a financial history of the world this is not.
Finally, half the book feels more like a defense of capitalism and finance than anything else. I wish I could cite sources there, but it’s just a feeling.
So are my criticisms of the book enough to say you shouldn’t read it? Nope. However you still shouldn’t read it. Why? Because he made a 4-part documentary that is entertaining, thought provoking, and not boring. If you like the documentary, then read the book. The Ascent Of Money does make it onto my list of favorite books ever, but only because I read it before the documentary came out.
Below I’ve linked to all 4 one-hour videos. Enjoy.
 By The Weakonomist |
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Mining gold in South America “is not far” from printing money today? I have some friends at the Mises Institute that might disagree with you a bit on that one.