53 pages • 1 hour read
Niall FergusonThe Ascent of Money: A Financial History of the World
Nonfiction | Book | Adult | Published in 2007A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
The Influence of Financial Markets on the Poor
Ferguson deals with this theme in several sections, in terms of both individuals and countries. When he writes, in Chapter 1, about a poor neighborhood in his hometown of Glasgow being exploited by a loan shark, he touches on the former. His later passage, in Chapter 5, about microfinance deals with the latter. In both cases, his theme is that financial markets are a force for good much more than a cause of poverty. As he writes in the Introduction, “poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence” (13).
The Uncertainty of the Future
Simply put, the future will always be uncertain, and that fact injects the element of risk into financial dealings. Despite our best efforts to marshal mathematics, actuarial science, technology, and so on, we can never calculate the probability of something with utter certainty. The best example of this is the case of Long-Term Capital Management described in Chapter 6. Thus, the timing and extent of financial crises can never be accurately predicted.
Markets Mirror Human Behavior
Time and again Ferguson returns to this theme, which has two facets. The first is that because human behavior is not always rational and is subject to biases, financial markets will likewise not always act logically. People ultimately make decisions in the market, and “money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of
our emotional volatility” (13). The second facet is that markets cannot really be seen subjectively as either good or bad. In fact, they exhibit aspects of both, just as humans do. Although some might see financial markets in a negative light, in fact they demonstrate “every hour of every working day the way we value ourselves and the resources of the world around us” (358).
Bubbles Will Always Burst Sooner or Later
Although this may seem obvious, history has shown that people tend to forget it, perhaps hoping that “this time will be different.” As Ferguson writes in the Afterword, “money's ascent has not been, and can never be, a smooth one. On the contrary, financial history is a roller-coaster ride of ups and downs, bubbles and busts, manias and panics, shocks and crashes” (342).
People Have Short Memories When It Comes to the Market
Following from the previous theme, one reason people are surprised when a bubble bursts is that they tend not to remember, or learn from, the last crisis. Ferguson shows how this happened in both the years before World War I and in the 1990s and 2000s with regard to “Black Monday” in 1987. He notes, “As we have seen repeatedly, the really big crises come just seldom enough to be beyond the living memory of today's bank executives, fund managers and traders” (340).
