Money is an integral part of our society. Money attracts and repels at the same time. It determines the results of war and helps in the creation of the masterpieces of art. It is rather strange, but most people know practically nothing about money. Niall Ferguson, the famous financial historian, tries to fill this vacuum with his book The Ascent of Money: a Financial History of the World. In this work, which has been written at the height of the economic crisis, Ferguson provides the review of the worlds financial history from the earliest times until the present day, at the same time trying to explain the reasons for the existing crises by historical examples. The author intelligibly discourses the most complicated financial processes, explains the meaning of financial concepts and definitions, disposes of the most profound mistakes. In modern society, more and more people are getting involved in the worlds financial system, and understanding the basic rules of its functioning is very important.
It may be noticed that the style, in which the book is written, has something in common with the telecast script. Indeed “The Ascent of Money” was written as an adaptation for television documentary series.
On the examples of the ancient cultures, Ferguson shows us how strong the power of money is. Money was the basis for ancient empires’ formation and the driving force for their development. The most important historical events are viewed by the author in the context of money influence. Describing various aspects of commodity-money relations, illustrating mutual dependence of money, economics, and defective capacity of the country, Ferguson gives us historical examples of the importance of money. For instance, the defeat of Napoleon at Waterloo, according to Fergusons opinion, was Rothschilds merit rather than Wellingtons, because it was Rothschild who put up money for the British army. The power of the British Empire in opposition with Spain was achieved by means of the superiority of the English banking system. French Revolution, according to Ferguson, was made by Scotsman John Law, who had been allocated by the French monarchy in charge of finance. The defeat of Germany in World War I is explained by the absence of access to the international bond market.
All the mentioned examples, and the fact that the book was published in the year of the world financial crisis sound to some extent disturbing. The 2008 crisis is considered to be the most serious since the Great Depression. The conclusions made by Ferguson are rather frightening. It is a fact, that the USA is virtually the debtor of the whole world. As of 2008, the national debt of the USA counted almost 9985 billion US dollars and it was well known that it had a tendency for growth.
Describing this situation, Ferguson compares the USA with a part of a dual system, which he calls Chimerica. One part of this system makes products, while the other just consume them. For instance, American consumers buy much more goods than they need in such a way allowing Chinese producers to accumulate a huge amount of dollars. This currency in its turn is invested in Wall Street papers and funds, supplying in such a way Americans with the financing they need to consume.
At first sight, this circulating system seems to be a large profit for the USA but is just an inconsiderable opinion. According to Ferguson, the main reason for the existing crisis is this very complexity. The more money China is ready to lend, the more money Americans are ready to borrow. In this way of achieving easy money is hidden the invisible and dangerous catch. The flow of money in its turn causes the bank landing enlargement and the unreasonably large bond issuance. This system seems to be rather unstable, because the huge amount of non-collateral money may cause the stock market crash.
Now the functioning of the financial system of the USA is highly dependent upon the global world processes. Though Ferguson doesnt say it, it is implied that the Chinese have an advantage in this dual system, called Chimerica. While Americans are just consumer goods and do not have a possibility not to borrow, China has an opportunity of recycling the surplus of currency into their own economics.
One of the possible ways out in such a situation for the USA is to pay more attention to the inner problems, such as social security, Medicare, and especially the fiscal policy, rather than to foreign affairs. Even in his earlier works, Ferguson warned of Americas dependence on Chinese capital.
It must be admitted, that in his researches Ferguson pays too much attention to the Anglo-Saxon financial system, pointing out its importance as compared to the rest of the world. The authors also do not dente the existing problems of the financial market. The main reasons for poverty he considers the lack of financial institutions, but not the failures of the financiers.
Describing a vivid picture of the financial history, Ferguson emphasizes a number of reasons causing instability of the financial system, such as angst, human behavior, and evolutionary economics.
At the same time, Ferguson pays too much attention to the problems of American national debt. He associates with it practically all the inner financial problems, such as the absence of control of the mortgage market.
Ferguson comes to the conclusion that the contemporary financial system contains self-destructive tendencies. Ferguson wonders whether the modern financial and economic situation is the result of a biological revolution. He also does not detest criticism of the financial international organs and their Washington Consensus. He does not recognize the fault of IMF in the Asian financial crisis of 1990 as well as its role in the current crisis.
All the processes of a technical industrial and cultural revolution, the processes of innovation, as well as scientific researches Ferguson attributes to money. Researching the history of money from ancient times until the present day, he tries to prove that money is the only driving force of humanity. This book will be interesting not only for the special group of experts but also for a general reader.