Finance
by Niall Ferguson
What made money so powerful?
Niall Ferguson argues that behind most big turns in history sits a financial story. He follows money from clay tablets in ancient Mesopotamia to the American mortgage crash of 2007, by way of banks, bonds, shares, insurance and houses. Along the way he asks why finance keeps soaring and crashing.
Hear a sample · read by Laura
Money doesn't have to be gold or silver. It has to be something people believe others will accept. Spain missed this. It shipped home mountains of silver from the Americas and got rising prices, while its crown defaulted on its debts again and again.
The Church banned lending at interest, so the Medici of 15th-century Florence found another way. They dealt in bills of exchange, promises to pay in another city and currency, and built their charge into the exchange rate. Ferguson shows banking growing out of clever workarounds like this.
Governments at war borrow by selling bonds, so bond prices end up tracking who looks likely to win. Britain, trusted to pay, could borrow cheaply to fight Napoleon. The Confederacy tried borrowing against its cotton during the American Civil War, and its bonds sank as the market lost faith.
Ferguson's word, coined with the economist Moritz Schularick, for China and America acting as one economy. China saved and lent. America borrowed and spent. The arrangement held down American interest rates and fed the borrowing boom that ended in the crash of 2007 and 2008.
Credit
Ferguson argues that credit and debt drove many of history's big turning points, from ancient loans to modern banks.
Banks
The Medici grew rich in Renaissance Florence by turning moneylending into proper banking.
Bonds
Governments able to borrow cheaply through bonds could pay for long wars, which helped Britain beat Napoleon.
Bubbles
John Law's scheme in France showed how fast shares and paper money can soar and then collapse.
Insurance
Two Scottish ministers set up a fund to protect their widows, and modern insurance grew from ideas like theirs.
A story from the book
John Law, a Scottish gambler who fled Britain after killing a man in a duel, talked France's regent into letting him run a bank and the Mississippi Company. Shares soared as Law printed money to feed the buying. In 1720 it all collapsed, and Law fled France.
Hot take · true or myth?
Two Scottish ministers helped invent modern insurance.
True. Robert Wallace and Alexander Webster used careful maths to work out what a fund for ministers' widows needed to collect. Ferguson treats their fund as a model for modern insurance and pensions.
One thing to try
Take a banknote out of your wallet and read the small print. A Bank of England note promises to pay the bearer, on demand, the sum on its face. Then ask what stands behind that promise. For Ferguson, it's people's trust in the Bank.
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. The Ascent of Money comes with a Hot Take round to make it stick.
Get the whole book on KnotdOpen in the appWhat made money so powerful? Niall Ferguson argues that behind most big turns in history sits a financial story. He follows money from clay tablets in ancient Mesopotamia to the American mortgage crash of 2007, by way of banks, bonds, shares, insurance and houses. Along the way he asks why finance keeps soaring and crashing.
Money is trust; The Medici's paper trick; Bond markets judge nations; Chimerica.
Take a banknote out of your wallet and read the small print. A Bank of England note promises to pay the bearer, on demand, the sum on its face. Then ask what stands behind that promise. For Ferguson, it's people's trust in the Bank.
Yes. Knotd has the key ideas from The Ascent of Money in a few minutes, in plain words, plus a Hot Take round to test them. It's one of 250+ non-fiction books in the app.
