The Origin of Financial Species
The Ascent of Money: A Financial History of The World by Niall Ferguson
In the end, the path of financial markets can never be as smooth as we might like. Pg 174
As a historian writing on economic matters, Niall Ferguson assumes the reader knows something about economics and it is his job is to give historical and editorial perspective. Therefore, the novice to financial markets may not understand some of his analysis. (I would suggest they read chapter 12 in Cocktail Party Economics as a good backgrounder) However, he is such a beautiful writer that the reader can easily ignore the occasional theoretical sentence. The endorsements call his writing fluid, engaging, energetic and he a master storyteller.
His book is filled with:
1) Word pictures (for example on page 273 he writes, “The subprime butterfly had flapped its wings and triggered a global hurricane”)
2) Complicated plots and political intrigue (in every chapter – so the political junkie can eat their heart out)
3) Comparisons between financial events of the recent and distant past which demonstrate that history can and does repeat itself (On page 329 he writes about economists Merton and Scholes, principals in the now defunct Long Term Capital Management and who specialized in very mathematical calculations to deal with risk. He says, “To put it bluntly, the Nobel prize winners had known plenty of mathematics but not enough history.”)
4) Character development in a breezy, ironic style (Ferguson’s specialty is the Rothschild family)
5) A moral to the story: “As we have seen repeatedly, the really big crises come just seldom enough to be beyond the living memory of today’s bank executives, fund managers and traders…That fact alone provides a powerful justification for the study of financial history.” Page 340
This is not a quick read at 362 pages but it is an entertaining one.
Ferguson is an academic who manages to not completely prostitute himself in order to sell a book to the masses. He has 35 pages of endnotes and references but even then, the claim that the book is the financial history of the world is a bit of a stretch. The book takes an evolutionary view of financial markets and I found the origins of the key financial instruments that I take for granted (i.e. money, bank accounts, bonds, stocks, derivatives) the very best part. Usually, the main characters involved in these beginnings were extravagant men with unbelievable moxie. One cannot help but be in fascinated.
If the intellectual pursuit of reading isn’t your thing, then you can always watch the PBS special. Niall Ferguson in action seems to fit right in with many of the characters mentioned in his book.
Tags: Evie Adomait, financial history, Financial Markets, Niall Ferguson, The ascent of money