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The Ascent of Money
A Financial History of the World
The Ascent of Money is an explanation of how different historical events led to the development of the current financial system.
It aims to show how, despite its proneness to crises and inequality, the financial system and money itself are drivers of human history and progress.
- Anyone who wants to understand the workings of the financial system
- People who want to understand why financial crises happen
- Anyone who wants to know why money is so powerful
Niall Ferguson is one of Britain’s most renowned historians. He has worked for numerous institutions in Britain and the USA, with a focus primarily on international and economic history.
In addition to his academic career, he is also known as a commentator and writer for numerous newspapers and magazines. He has written and presented various television documentary series, including a television adaptation of the Ascent of Money.
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The Ascent of Money
A Financial History of the World
- Read in 18 minutes
- Audio & text available
- Contains 11 key ideas
Synopsis
The Ascent of Money is an explanation of how different historical events led to the development of the current financial system.
It aims to show how, despite its proneness to crises and inequality, the financial system and money itself are drivers of human history and progress.
Key idea 1 of 11
The value of money comes from the trust we as societies place in it, not from its intrinsic worth.
When the Spanish conquistadors swept through Central and South America in the sixteenth century, they were largely motivated by the quest for gold and silver. They thought that the more precious metal they could acquire, the more coins they could mint, and therefore the more money they would have. What happened though was that the increased supply of coinage actually led to its depreciation in value, regardless of what rare metal it was made of.
The conquistadors failed to realize that the power and value of money comes not from its physical worth but from what people are willing to give you for it. An overabundance of money will always lead to inflation.
It doesn’t matter what it is made of, as long as society trusts in its value.
Trust is a crucial element in the value of money. We trust that the money we use will hold its value and that, unlike the Spaniards, our central banks won’t overproduce it. We trust that banks will keep our money safe, and they trust us to pay our loans back. Without this trust, money is not worth the paper it’s printed on.
Today, physical money itself is worthless, as paper and base metal coins hold very little intrinsic value. The vast majority of money in the world doesn’t even physically exist; it is entirely virtual and can be transferred electronically across the world without ever materializing physically.
These worthless tokens are accepted as holders of value because together we trust in them.
The value of money comes from the trust we as societies place in it, not from its intrinsic worth.
Key ideas in this title
- The value of money comes from the trust we as societies place in it, not from its intrinsic worth.
- The system of credit and debit funds the financial system through the creation of money.
- The financial system is a combination of interconnected financial markets and institutions developed over centuries.
- Finance, in particular access to credit, is the most effective way of providing a route out of poverty.
- Societies with a strong financial system will prosper at the expense of those that are financially inefficient.
- The financial system mirrors human nature and is therefore deeply irrational and unequal.
- The stock market tends to develop bubbles, all of which eventually burst.
- Inflation and hyperinflation are often caused by the political mismanagement of a currency.
- Both private insurance and the welfare state are imperfect systems for minimizing financial risk and uncertainty.
- The deregulation of the real estate market shows how political decisions can have dramatic financial repercussions.
- Final summary
