Making the world go round

Did you know the legendary ‘Hebrew talisman’, supposed to be the secret behind the Rothschild fortune, is actually the bond market? Or that life insurance was conceived of by two clergymen in 1748? Robert Wallace and Alexander Webster weren’t motivated monetarily, but were mathematically inclined—their corpus calculation of £58,348 for 17 years was off the mark by just £1. Most of us are the exact opposite: mathematically weak, yet monetarily motivated. While it might not ensure financial innovation, it is precisely this kind of mind that Niall Ferguson is targeting with The Ascent of Money.

The famous economic historian transcends geographic bounds at breathtaking speed, moving from the moneyless Inca society plundered by gold-hungry Spaniards to today’s moneyobsessed Americans. In between lie numerous stories— of the Medici marriage of financial and political supremacy, of Argentina’s hyperinflation, Chile’s tryst with near bankruptcy and more.

Ferguson pauses once in a while, at points when history threw up geniuses that changed its course. Some, like Nathan Rothschild, bet on Napoleon’s loss at Waterloo showcasing the brilliance of bonds, while others like John Law orchestrated the first stock market bubble in 1719-20. These aren’t just good-to-know facts. Ferguson makes history relevant by drawing timeless financial lessons. So when he narrates how excessive debt led the second duke of Buckingham, who owned more property than Queen Victoria, to auction it, he highlights what Americans must wish they had been taught before: property is the creditor’s security, not the debtor’s.

The current financial crisis is the perfect denouement to Ferguson’s compilation. He contemplates it in the unique perspective of Chinmerica: the China-America matrix, where one country relentlessly saved and the other spent, one sold and the other bought.

How will the crisis end? Ferguson doesn’t say and it really isn’t his job. He makes only one prediction: it is not the end of financial innovation. The peak in money’s ascent is yet to come, if it ever does.