A Book review of:The Ascent of Money –A Financial History of the World by Niall Ferguson.

By:Jay Shah,

FMS-B, The M.S.University of Baroda.

About the author:

- Niall Douglas Ferguson is a British citizen.

- He is Professor at: Harvard University,Stanford University, Oxford University,London School of Economics.

- His areas of expertise are internationalhistory and economic history.

- Named among 100 most influential peoplein the world by Time Magazine.

- His other literary works inculde Empire: How Britain Made theModern World and Civilization: The West and the Rest.

- 'Bread, cash, dosh, dough, loot, lucre, moolah, readies, thewherewithal: call it what you like, money matters'

- The book has six chapters: Dreams of Avarice, Of Human Bondage,Blowing Bubbles, The Return of Risk, Safe as Houses and From Empireto Chimerica.

- The Spanish history of Gold & Silver is cited and the contribution ofFrancisco Pizzaro in Spain’s recession is also mentioned.

- Lesson that Money is worth upto that much level upto which theother person is ready to exchange it.

- Mesopotamian financial history is explained with the example ofclay tablets.

- There were 7 modes of payments prevailing in Italy. At that time, theChinese financial system was already modernized.

- He explains the working of Roman financial system and Europeanfinancial system.

- Shylock, the most notorious money lender of Venice.

- Jews could charge interest on their loans while the Christianscouldn’t do such.

- Christian law did not allowed them to charge interest but it was lateron decided by the people not to follow this law.

- Infact Jews were also allowed to lend money to the christians butJew brothers.

- The returns on the money lended in Glasgow were humongous.

- The emergence of Medici family as keyFinancial service providers in Italy.

- Medici were famous for: creative accounting,Commercial bills, multiple currency involvement,Decentralization, inter-locking partnerships.

- It has been depicted that USA has been built on borrowed money.

- The people of Memphis and how easily they declare bankruptcy.

- The federal law of USA allows people to learn from their error. Theconcept of “Today’s bankrupt maybe tomorrow’s billionaire”.

- 363 Rule: You pay 3% of your deposit, collect 6% of the loan and goto golf court by 3pm.

- The emergence of bond market as a result of wars.

- In Italy, the citizens were obliged to lead money to their Govt. oninterest rather than paying taxes to it. Here comes the concept of“Liquid Assets”.

- The dominance of Rothschild is also mentioned. In 19th Century,Nathan Rothschild became the Gold collector for British Armyat commission.

- The deliberate use of cotton bonds or keeping cotton as collateral byAmsterdam.

- Cotton crisis and thus introduction of Sinking Funds.

- Next was the introduction of printed paper during civil war, USA.

- Bond market either makes or breaks govt.

- The success way of Bill Gross, CEO, Pimco.

- Showcasing the example of Argentina for explaining financialmis-management losses.

- Prices of commodities changed 3-4 times in Argentina.

- The fraudulent case of Ken Lay, Enron.

- Discussion on Govt Bonds vs. Private Bonds and thus emergence ofJoint Stock Company.

- Dutch people and their idea of East India Company to createmonopoly in spices from Asia to Europe. World’s 1st MNC.

- The insurance bubble failure during the post-Katrina hurricanein USA.

- Robert Wallace and Alexander Webster came up the Insurance Fundfor the 1st time in the history.

- How premium payments method was developed in Scotland for thewidows and the children.

- Japanese slogans: “All people are soldiers” to“All people must be insured” to“All people should have pensions”.

- The state payments philosophy in Japan.

- Milton Friedman’s Quantity theory of money.Money Supply (M) x (V) Velocity of circulation =

Price level (P) x (Q) Quantity of Expenditure.

- Friedman suggested Chile Govt. to introduce pension system tosolve the problem of inflation. Private Pension Plan system.

- Concept of Hedging funds.

- Concept of Options.

- Concept of Derivatives. (Double edge sword)

- The property bubble and its linkage with political power.

- The Ford Motor company employment problem.

- US Govt Housing Program.

- Red Lining technique to segregate people.

- NINJA Loans concept.

- Concept of securitization.

- Concept of collateral.

- Concept of sub-prime country, ex: Argentina.

- Concept of Micro-finance.

- “Dual country” concept that he calls “Chimerica”.

- “The East Chimericans did the saving. The West Chimericans did thespending.”

- Our increasingly sophisticated finance clearly contains self-destructive tendencies.

- The story is simple yet complex to understand.

- Not much technical financial aspects explained.

- Slow pace of the story and mundane in between.

- More emphasis on the ancient time could have been given.

- Very skillfully explained examples of the past and emergence of concepts.

- Majorly all the financial bubbles are covered.

- Language and the vocabulary used is easy to understand.

Suggestions and opinions:

For suggestions & feedback:

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Thank you!