I have just finished reading the best financial book ever and I have read most of them. It is The Ascent of Money: a Financial History of the World by Harvard professor Niall Ferguson. It gives you a great explanation of how the broad sweep of history delivered us to the doorstep of today’s crisis.
Ferguson starts with an ancient accounting system written on clay tablets in Mesopotamia 5,000 years ago, and then takes us through the economic dominance of Greece and Rome.
We learn about a medieval Italian diplomat named Fibonacci, who imported advanced mathematical concepts from the Middle East, which we still trade around today. He plots the rise of the great banking dynasties, such as the Medici’s and the Rothschild’s (Jacob was my neighbor in London).
It is also a pot boiling narrative of the great financial scandals, starting with the Mississippi bubble, which wrecked the government of France, the South Sea bubble, where Sir Isaac Newton lost his shirt, to the Ponzi schemes of the 20th century.
The story tells us how the financial center of the world has migrated from Babylon to Cairo, Rome, Venice, Amsterdam, London, and eventually ending up in a hedge fund dominated New York.
Ferguson is particularly astute in explaining in layman’s terms the borrowing binge and the exotic, super leveraged derivatives that lead to the current crash.
The author finishes with an explanation of how American overconsumption is financed by Chinese saving and why this can’t last. If you are looking for a single tome which ties it all together, this is it.
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