For many years, various prophets preached the evil of money and the glory of society, which exists without the need for it. Until now, no society has succeeded in such a utopian activity; in fact, most of those who declare this goal seem to be able to extract money only from the working class, and not from the elite. In human society, we need some form of barter to provide what we need for life, and what we want to enjoy. The early monetary systems were fairly simple, sometimes a measure of grain in exchange for some clothes; and they seemed to work. So how do we end up in modern, complex financial systems?
I never thought about the history of money and finances, but when Ascended Money recommended by Niall Ferguson, I decided to take a look.
Like me, most people probably don’t think too much about how banks and financial institutions evolved. They just are and always seem to be. How did the banking system develop, how did the idea of stocks and bonds begin, or how did complex financial markets emerge today? Like all things, these markets have an interesting and informative history. Ferguson explains that, for example, the bond market is a child of war. Having accumulated debts on immunity (and creating the term "mountain of debt") in the Tuscan wars of the 14th and 15th centuries, Florence desperately needed a source of funding. They decided to impose a demand on their citizens, “having borrowed” their money with the promise to repay with interest. The city authorities bypassed the early church ban on interest accrual, making these “loans” mandatory. The position of the system allowed citizens to buy and sell these loans or bonds to each other. And the market was born.
With equal clarity, Ferguson discusses stock and commodity markets and historically views the real estate market, which is so much in the news today. He even ventures on topics that for many of us are a bit esoteric, such as arbitration and derivatives.
I found the most valuable contribution to the Afterword. Summarizing the reasons why human thinking is not always consistent with the economic realities of the markets, Ferguson leads ten human movements that can lead to difficulties in making the right financial decisions. His list goes beyond the boundaries of markets and can be applied to all aspects of human life.
As an amateur history student, I am always looking for something a little different and not at ease. Niall Ferguson provided just such a job. “The Ascent of Money” I found it interesting to read and, of course, an educational book on a subject that many of us took for granted.