Thursday, May 5, 2011

The Ascent of Money

The Ascent of Money, A Financial History of the World, by Niall Ferguson, Penguin Books, 2008 is a truly fascinating  read that turns the intrigue of history into a fast paced thriller.  It really is a who dunnit detective novel for the 2007 recession as well and answer the question why governments want us to buy houses and the Chinese in contrast to the South Americans insisted you build factories in their country rather than loan them the money to do it themselves.
Niall Ferguson could well be a Hollywood script writer the way this supposedl y 'dry' subject reads.  I'm 340 pages into it with the remaining 23 pages to read.  The last chapter is called the "Descent of Money".  I'm not sure I'm ready to read that yet. I'm going to savour it as I've raced through other sections of this extraordinary plot of economics and politics.
I have learned about the family wealth of brother Rothschild and Baring, the building of companies and interest, the insurance and sharing of risk, banks and their growth and diversificaton. I've learned of war and Bretton Woods, the depression and more recently the recessions.  At times it really does seem that the world banks, money and stocks and funds are just different black jack tables in the casino of the world.  Yet here and there I understand the concepts of leverage and wealth creation by careful management.  In the recent recessions millions were lost in days and though there were bail outs the very wealthy took huge cuts themselves.(See my own sad song written for those poor souls, called "I'm a millionaire but I used to be a billionaire' after the Economist disclosed dozens of billionaires were demoted in the financial crisis that put others out of houses into tents).  I learned too that in most of the US you may lose your house but they can't get any of your other assets so buying a house with zero down makes for sweet cheap rent for years until the interest rises and the smart tenant (or money) moves on. Then there's Soros and Buffet and now China and the Cninese American "Chimerica'.

Niall Ferguson is Professor of History at Harvard and Fellow at Oxford and Fellow at Stanford.  Most of all he's a brilliant story teller.  And the Ascent of Money is a tremendous story.  So where is the Hollywood movie with Brad Pitt and Jack Nicholson and Charley Chan.  It's clear from reading it today that in China with it's 350,000 new millionaires there would be such a movie made immediately or at very least an HBO special like the Tudors or Borgias.  Americans are still reading the sports pages while the Chinese have long realized the real 'contest' is in the business section.  Beijing is winning the war in the marketplace and China is now the bank of America.

How to explain 2007, the beginning of the worst financial crisis since the depression of the 30's.  Here are answers.  Here is what is beyond partisan politics. Here is meaning of life in the world of 'banksterism' .  It's not about white hat cowboys and black hat cowboys.  Both Clinton  and Bush declared that their bankers had misinformed them.  In the world of economics with avarice and insurance in competition and tsunamis and Russian government crashes there are butterfly wings all over  globalization.  The arrogance of the nobel prize winning Black-Scholes model and the whimsy of the Quantum Fund begin to make sense when hedge funds and derivatives are explained. It's really more fashion than anything else and the Devil Wears Prada. I had to read that derivative part again and again hardly believing such silliness in asset management could exist as such a disconnect from reality.  This is the financial world of 'deconstructionism'.  This is Humpty Dumpty in Los Vegas.  It's entertainment at the highest level as well.

Thanks to Niall Ferguson I can understand the 'sound bites' and propaganda, conspiracy theories and fear mongering that the media has thrown out.  There's method in the madness but even that's a bit neurotic.. Investments really do go up on sunny days.  And yes, I will be able to manage my own paltry sums of cash better  thanks to Niall Ferguson.  This is essential reading at it's finest.

No comments: