The next step in the story of the ascent of money was the rise of the joint-stock limited-liability company. But the ability of the company to transform our lives would depend on another innovation – the stock market. Niall Ferguson, The Ascent of Money e3: Blowing Bubbles
Stock markets really can be like soap bubbles – we never quiet know when they’re going to burst. ibid.
Ponzi scheme – after the legendary Italian-American con-man Charles Ponzi: to pay out the generous returns its promised to the first lot of suckers, a Ponzi scheme needed to take in more money from the next lot of suckers. ibid.
The Mississippi bubble of 1719 was the first stock market bubble in history. ibid.
Enron: It pioneered many of the dubious business practices that continue to plague us today. ibid.
Welcome to the world of money. Bread. Cash. Dosh. Dough. Loot. Lucre. Moolah. Readies. The Wherewithal. Call it what you like – money can make us or break us. Niall Ferguson, The Ascent of Money e1: Dreams of Avarice, Channel 4 2008
How on earth could a little local difficulty with subprime mortgages in the United States unleash an economic tsunami big enough to obliterate some of Wall Street’s most illustrious names, to force nationalisations of banks on both sides of the Atlantic and to bring the entire world economy to the very brink of recession if not downright depression? ibid.
The Ascent of Money has been an indispensable part of the Ascent of Man. ibid.
The US stock of money is now $8,7 trillion. ibid.
This hedge-fund paid George Soros a cool $2.4 billion. ibid.
Money is only worth what other people will give in exchange for it. ibid.
Money is about trust. ibid.
Our entire civilisation is based on the lending and borrowing of money. ibid.
The Hindu or Arabic numerals made all kinds of calculation easier. ibid.
For the first time money lending had evolved into banking. ibid.
The big mystery is why the world’s most successful capitalist economy is based on a foundation of more or less painless economic failure. ibid.
From 1996 to 2006 there were between one and two million bankruptcy cases a year in the United States. ibid.
In today’s world real power lies in the hands of an elite group of anonymous men in open-plan offices. The men who control the world’s bond market … Bonds are the magical link between the world of high finance and the world of political power. Niall Ferguson, The Ascent of Money e2: Human Bondage
After the rise of banks the birth of the bond market was the next big revolution in the history of finance. It created a whole new way for governments to borrow money. ibid.
There are bonds out there worth around $85 trillion. ibid.
Between around 1810 and 1836 the five sons of Meyer Amschel Rothschild rose from the obscurity of the Frankfurt ghetto to attain a position of unequalled power in international finance. ibid.
The South’s idea was to use cotton as collateral to back its bonds. ibid.
By June 1989 inflation in Argentina had reached a monthly rate of 100%. ibid.
The next step in the story of the Ascent of Money was the rise of the joint-stock limited-liability company. But the ability of the company to transform our lives would depend on another innovation – the stock market. Niall Ferguson, The Ascent of Money e3: Blowing Bubbles
Stock markets really can be like soap bubbles – we never quite know when they’re going to burst. ibid.
Ponzi scheme – after the legendary Italian-American con-man Charles Ponzi: to pay out the generous returns it’s promised to the first lot of suckers, a Ponzi scheme needed to take in more money from the next lot of suckers. ibid.
The Mississippi bubble of 1719 was the first stock market bubble in history. ibid.
Enron: It pioneered many of the dubious business practices that continue to plague us today. ibid.
The most basic financial impulse of all is to save for a rainy day. Niall Ferguson, The Ascent of Money e4: Risky Business
We’re stuck with random uncertainty. ibid.
It leaves you wondering why we bother spending so much on insurance policies every year. ibid.
A new idea began to emerge in Japan – that the state should take care of risk. ibid.
In theory derivatives offer a new way to hedge against an uncertain future. ibid.
It’s the English-speaking world’s favourite game – property. And today the stakes in the game are higher than ever. Niall Ferguson, The Ascent of Money e5: Safe as Houses
Property ownership was once the preserve of an aristocratic elite. ibid.
Yet the Savings & Loan crisis was a mere tremor compared with the property earthquake that would strike the US market twenty years later … The subprime quake would shake the entire world of finance to its very foundations. ibid.
We tend to think of property as a one-way bet. ibid.
In our time we’ve witnessed the zenith of global finance. In 2006 the world’s total economic output was worth around $47 trillion. The total value of stock and bond markets was roughly $119 trillion. More than twice the size. And the amount outstanding of the strange new financial life-form known as derivatives was $473 trillion. Ten times larger ... This is the story of financial globalisation. Niall Ferguson, The Ascent of Money e6: Chimerica
According to [George] Soros’s Theory of Reflexivity, financial markets can’t possibly be perfectly efficient much less rational ... His biggest coups came from being right about losers not winners. And the greatest of these was among the most momentous speculative hits in all of financial history. On September 16th 1992 with the British £ in big trouble I watched as Soros put out a contract on the Bank of England ... So sure was he that the £ would drop that he bet $10 billion. ibid.
The Nobel Prize in Economics. It seemed as if Intellect had triumphed over Intuition. As if rocket science had taken over from risk-taking. Equipped with their magical black box, the partners in LTCM seemed poised to make money far beyond the wildest imaginings of even George Soros. And then in the summer of 1998 when every self-respecting hedge-fund manager should have been playing with his yacht something happened that threatened to blow the lid right off the Nobel Prize winner’s black box: Reality started to misbehave ... On Monday August 17th 1998 a giant asteroid smashed into Planet Finance. ibid.
The only chance of survival was to find a White Knight to rescue them. And the most powerful Knight in town was none other than George Soros. It was the ultimate humiliation: the Quants from Planet Finance begging for a bail-out from the Prophet of Irrational Unquantifiable Reflexivity ... Fear that Long Term’s failure could trigger a general financial meltdown, the New York Federal Reserve hastily brokered a multi-billion-dollar bailout by fourteen Wall Street banks. ibid.
The Ascent of Money has seldom been smooth. Time and again it’s been punctuated by big painful crises. ibid.
American borrowers have come to rely on Chinese savers, a symbiotic relationship between China and America that I call Chimerica. ibid.
So enormous have Chinese savings become in recent years they’ve enabled globalisation to do the most almighty U-turn. Previously, it was the rich English speakers who lent money to the poor Asian periphery. But now it’s the Chinese who are lending money to the Americans. Welcome to the strange new hybrid country of China and America – I call it Chimerica. ibid.
The People’s Republic of China has become banker to the United States of America. ibid.
What starts with competition for Olympic medals could end in a battle over dollars if the Chinese decide one day to cut off their credit line to the American empire. Maybe as it name suggests Chimerica is nothing more than a chimera ... The really big crises come just seldom enough to be beyond the living memory of the people who run today’s companies, banks and funds. ibid.
The Ascent of Money has been one of the key factors in human progress, an extraordinary story of innovation, intermediation and integration that has done as much as anything to help people escape from the drudgery of subsistence agriculture. And yet Planet Finance can never quite escape from the gravitational force of Planet Earth. Because the Quants can never take full account of the human factor – our tendency to underestimate the probability of black swans. Our propensity to veer from euphoria to despondency. Our chronic inability to learn from History. ibid.
Strong’s intervention really paved the way for the financial system we have today. Thanks to all that credit he created, the Stock Market rose higher and higher. Masters of Money II: Hayek, BBC 2012
Hayek believed Strong’s policy was sowing the seeds of an eventual bust. ibid.
Who was responsible for the downfall of Enron? Only a few years ago Enron was the nation’s seventh largest corporation. Enron: The Smartest Guys in the Room, written McLean & Elkind & Gibney, 2005
Ken Lay and Jeff Skilling had built their own plush state rooms. They were known as the smartest guys in the room. Captains of a ship too powerful to go down. ibid.