The Ascent of Money: A Financial History of the World

The ascent of money has been essential to the ascent of man.

there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.

perennial truths of financial history. Sooner or later every bubble bursts. Sooner or later the bearish sellers outnumber the bullish buyers. Sooner or later greed turns to fear.

money is a matter of belief, even faith: belief in the person paying us; belief in the person issuing the money he uses or the institution that honours his cheques or transfers. Money is not metal. It is trust inscribed. And it does not seem to matter much where it is inscribed: on silver, on clay, on paper, on a liquid crystal display.

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. Only when borrowers have access to efficient credit networks can they escape from the clutches of loan sharks, and only when savers can deposit their money in reliable banks can it be channelled from the idle rich to the industrious poor.

Money, it is conventional to argue, is a medium of exchange, which has the advantage of eliminating inefficiencies of barter; a unit of account, which facilitates valuation and calculation; and a store of value, which allows economic transactions to be conducted over long periods as well as geographical distances. To perform all these functions optimally, money has to be available, affordable, durable, fungible, portable and reliable.

The liabilities of the bank thus became its deposits (on which it paid interest) plus its reserve (on which it could collect no interest); its assets became its loans (on which it could collect interest).

bear in mind when trying to compare housing with other forms of capital asset. The first is depreciation. Stocks do not wear out and require new roofs; houses do. The second is liquidity. As assets, houses are a great deal more expensive to convert into cash than stocks. The third is volatility.

Large numbers of under-capitalized banks were a recipe for financial instability, and panics were a regular feature of American economic life - most spectacularly in the Great Depression, when a major banking crisis was exacerbated rather than mitigated by a monetary authority that had been operational for little more than fifteen years.

I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter,’ he told the Wall Street Journal. ‘But now I want to come back as the bond market. You can intimidate everybody.

Although the court recognizes his right to insist on his bond - to claim his pound of flesh - the law also prohibits him from shedding Antonio’s blood.

It is not the fault of the mirror if it reflects our blemishes as clearly as our beauty.

The subprime butterfly had flapped its wings and triggered a global hurricane.

Ricos y pobres, parece que los estadounidenses ven la bancarrota como un «derecho inalienable», casi en igualdad de condiciones con «la vida, la libertad y la búsqueda de la felicidad».

se podía incluir a Rothschild en la misma categoría de Richelieu y Robespierre como uno de los «tres terroríficos nombres que conjuran la gradual aniquilación de la vieja aristocracia». Richelieu había destruido su poder; Robespierre había decapitado sus restos decadentes, y ahora Rothschild proporcionaba a Europa una nueva élite social

There may be a lesson here for our time, too. The first era of financial globalization took at least a generation to achieve. But it was blown apart in a matter of days. And it would take more than two generations to repair the damage done by the guns of August 1914.

Banknotes (which originated in seventh-century China) are pieces of paper which have next to no intrinsic worth. They are simply promises to pay (hence their original Western designation as ‘promissory notes’),

Если вы хотите знать, почему так мало людей пытаются сделать хоть что-нибудь, приглядитесь повнимательнее, и вам приоткроется хотя бы часть ответа: задавая этот вопрос себе, люди стреляют глазами по сторонам в поисках реакции... и в то же время всячески показывают, что они-то совершенно спокойны и не собираются разделять волнение себе подобных.

the war should be understood as a kind of backlash against globalization, heralded by rising tariffs and immigration restrictions in the decade before 1914, and welcomed most ardently by Europe’s agrarian elites, whose position had been undermined for decades by the decline in agricultural prices and emigration of surplus rural labour to the New World.14

Roughly two fifths of the world’s population is effectively outside the financial system, without access to bank accounts, much less credit.

it’s not owning property that gives you security; it just gives your creditors security. Real security comes from having a steady income,

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In the Philippines, formalizing home ownership was until recently a 168-step process involving fifty-three public and private agencies and taking between thirteen and twenty-five years.

houses are pretty illiquid assets - which means they are hard to sell quickly when you are in a financial jam. House prices are ‘sticky’ on the way down because sellers hate to cut the asking price in a downturn; the result is a glut of unsold properties and people who would otherwise move stuck looking at their For Sale signs. That in turn means that home ownership can tend to reduce labour mobility, thereby slowing down recovery.

the sellers of these ‘structured products’ boasted that securitization was having the effect of allocating risk ‘to those best able to bear it’. Only later did it turn out that risk was being allocated to those least able to understand it.

Стоит ли винить зеркало в том, что оно одинаково четко показывает наши достоинства и недостатки?

then resold their loans in bulk to Wall Street banks. The banks, in turn, bundled the loans into high-yielding residential mortgage-backed securities (RMBS) and sold them on to investors around the world, all eager for a few hundredths of a percentage point more return on their capital. Repackaged as collateralized debt obligations (CDOs), these subprime securities could be transformed from risky loans to flaky borrowers into triple-A rated investment-grade securities.

The risk was spread across the globe from American state pension funds to public health networks in Australia and even to town councils beyond the Arctic Circle. In Norway, for example, the municipalities of Rana, Hemnes, Hattjelldal and Narvik invested some $120 million of their taxpayers’ money in CDOs secured on American subprime mortgages.

non-Western countries had, until quite recently, highly unreliable legal systems and differing accounting rules. If a foreign trading partner decided to default on its debts, there was little that an investor situated on the other side of the world could do. In the first era of globalization, the solution to this problem was brutally simple but effective: to impose European rule.

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