Niall Ferguson’s latest book, “The Ascent of Money: A Financial History of the World,” went to press in May 2008, but it shrewdly anticipates many aspects of the current financial crisis, which has toppled banks, precipitated gigantic government bailouts and upended global markets.
“Are we on the brink of a ‘great dying’ in the financial world,” Ferguson asks, “one of those mass extinctions of species that have occurred periodically, like the end-Cambrian extinction that killed off 90 percent of Earth’s species, or the Cretaceous-Tertiary catastrophe that wiped out the dinosaurs? It is a scenario that many biologists have reason to fear, as man-made climate change wreaks havoc with natural habitats around the globe.
But a great dying of financial institutions is also a scenario that we should worry about, as another man-made disaster works its way slowly and painfully through the global financial system.”
In the course of this useful volume, Ferguson looks at the roots of the current economic meltdown, examining how, in a globalized world that uses increasingly complex financial instruments, defaults on subprime mortgages in American cities like Detroit and Memphis could unleash a fiscal tsunami that spans the planet.
Ferguson discusses such cycles of euphoria and panic within a larger historical context: he traces the evolution of credit, debt and the idea of risk management over several centuries, and as he did in an earlier book, “The Cash Nexus,” he examines the potent links between politics and economics.Ferguson explains why money went from coinage to paper and the advantages and disadvantages of the gold standard.
He argues that aging societies (like those facing a large baby-boom generation entering retirement years) have “a huge and growing need for fixed income securities, and for low inflation to ensure that the interest they pay retains its purchasing power.” And he looks at how exotic financial innovations (like collateralized debt obligations) and wide support for adjustable rate and subprime mortgages pushed the snowball of the current financial crisis. WYD Team |
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