The Ascent of Money: A Financial History of the World

The Ascent of Money: A Financial History of the World is a 2008 nonfiction book by historian Niall Ferguson. As its title implies, the book covers the rise of money and financial systems (in the West) throughout history. Ferguson argues that some aspect of finance lies behind all great events in history and that financial innovation has been as important to progress as scientific and technological innovation.

Chapter 1 discusses the nature of money and the rise of banking and credit. Ferguson relates the history of the Spanish conquistadors and their defeat of the Incan Empire in the 16th century, resulting in Spain’s access to vast quantities of gold and silver for use as money. He then turns to the rise of credit in the 13th century and of banking in the following century, both in the city-states of northern Italy. Important innovations to the banking system made in northern Europe (the Netherlands, Sweden, and England) are discussed next. Ferguson ends the chapter with the evolution of banking in the UK and the US during the 19th and early 20th centuries.

Chapter 2 gives an overview of the rise and development of bonds; Chapter 3 does the same for stocks. Like credit, bonds began in northern Italy, where they were first used by governments to fund wars. Ferguson highlights the important role bonds played in the defeat of Napoleon Bonaparte of France and the defeat of the Confederacy during the US Civil War. To end Chapter 2, he discusses their role in post-World War I Germany and in the economic crisis in Argentina in the late 20th century. Chapter 3 begins with a definition of stock market bubbles before describing the creation of the first joint-stock company in the Netherlands in order to fund risky trading expeditions by sea during the 17th century. Ferguson explains how a Scot named John Law brought the idea to France in the early-18th century and, for a time, had great success with his Mississippi Company. However, it created the first stock bubble, which had great implications for French history when it burst. Chapter 3 ends with a review of the some of the worst stock bubbles in the 20th century: the Stock Market Crash of 1929, “Black Monday” in 1987, and the dot-com bubble and Enron scandal around the turn of the 21st century.

In Chapter 4, Ferguson traces the history of both private and public schemes to protect people against future risk. He starts with the role insurance played in the aftermath of Hurricane Katrina in 2005, and then backs up to provide the history of modern insurance, which was begun in Scotland by two ministers who wanted to provide for the families of fellow ministers who had died. From there, Ferguson addresses what can be thought of as public insurance: the state welfare system. He discusses its rise in Japan and its dismantling in Chile. The chapter concludes with an overview of hedge funds.

The property market is the final topic on the various elements of the financial system. Chapter 5 summarizes how the property market went from being an aristocratic privilege to the dominant form of investment for the middle classes in many Western countries. The rise of home ownership in the US came during the Great Depression, with Franklin Roosevelt’s New Deal. Ferguson explains how the same system led to the savings-and-loan crisis in the 1980s, when the regulatory environment changed. He ends the chapter by discussing first the subprime mortgage crisis of the early 2000s and then microfinance.

Chapter 6 is about globalization: its rise during the 19th century, retrenchment in the mid-20th century, and return at the end of the 20th century. Today’s level of globalization is higher than ever, especially with the relationship between the US and China, and Ferguson makes some parallels with the period preceding World War I. In the Afterword, Ferguson compares finance to evolution and ends by addressing the financial crisis enveloping much of the world at the time the book was written.