OK, I'm still behind, but I made it through this week's book. As I was saying in my last post, if I can knock out two books this week, I'll be caught up. I need to read "The Blithedale Romance" for school, so that will likely be the next book. I haven't decided what the other one will be yet.
The Ascent of Money - Niall Ferguson
The "Ascent of Money", is a world history of financial innovation. It attempts to correlate financial events to the historical time periods in which they developed, and outline how the current state of world affairs was related to the particular financial development. Ferguson's writing style is clear, and he explains complex financial instruments in language that the layman can easily grasp, and explains how these innovations affected and were affected by global events.
Ferguson's financial history ranges from the use of stone tablets to record transactions in ancient Mesopotamia, up through the most recent housing market bubble and the credit crunch. Along the way he discusses the way the bond market developed as a means for countries to fund their war efforts, and how inflation - especially hyper-inflation - can destroy the value of these instruments, as well as the economies of countries reliant upon them. Ferguson traces the corporation from it's Dutch origins and explains how a convicted murderer from Scotland used market manipulation to gain control of virtually the entire French economy during the reign of Louis XIV. He explains insurance and it's relation to the welfare state, and explains hedge funds and derivatives. The real estate market is examined, explaining not only the causes of the current boom and bust, but also the S&L crisis of the eighties. Ferguson also discusses globablization and the rise of China from the Opium Wars to modern day.
I found this book quite interesting, partly due to the fact that I spent eight years developing software to model securitization transactions, one of the financial innovations discussed, and one of the key contributing factors to the housing bubble. I recommend it to anybody who wants to gain a better idea of how modern financial concepts developed. PBS aired a multi-part special based on the book, which you can watch online. There are four one-hour episodes, so it wouldn't be much of a shortcut to this material, but I think it might be interesting if you were interested in the material but didn't feel like reading the book. I haven't watched it yet (I plan to), but I spoke with a friend of mine who did, and he said it was very good. Here's a link to the first episode:
http://www.pbs.org/wnet/ascentofmoney/featured/the-ascent-of-money-episode-1-from-bullion-to-bubbles/44/
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