The Ascent of Money

Niall Ferguson

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As in 1719, so in 1929, there were unscrupulous insiders, like Charles E. whole source
As in 1719, so in 1929, there were unscrupulous insiders, like Charles E.
85 Secondly, under the pre-1913 system, before the Fed had been created, a crisis of whole source
85 Secondly, under the pre-1913 system, before the Fed had been created, a crisis of this sort would have triggered a restriction of convert…
Arguably a much worse stock market crash had occurred at the end of July 1914, whole source
Arguably a much worse stock market crash had occurred at the end of July 1914, when the outbreak of the First World War precipitated such a…
Amid talk of war and fears of a 1914-style market shutdown, Greenspan slashed rates again, whole source
Amid talk of war and fears of a 1914-style market shutdown, Greenspan slashed rates again, from 3.
The New York Times’s front page the next morning said it all when it asked whole source
The New York Times’s front page the next morning said it all when it asked ‘Does 1987 Equal 1929?
On ‘Black Monday’, 19 October 1987, the Dow fell by a terrifying 23 per cent, whole source
On ‘Black Monday’, 19 October 1987, the Dow fell by a terrifying 23 per cent, one of just four days when the index has fallen by more than 1…
And, just as in 1719, the rewards to investors seemed irresistible. whole source
And, just as in 1719, the rewards to investors seemed irresistible.
In the three years after 1997, Enron’s stock price increased by a factor of nearly whole source
In the three years after 1997, Enron’s stock price increased by a factor of nearly five, from less than $20 a share to more than $90.
’105 In the euphoria of April 1999, the Houston Astros even renamed their ballpark Enron whole source
’105 In the euphoria of April 1999, the Houston Astros even renamed their ballpark Enron Field.
It also laid bare the defects of a system of insurance that divided responsibility between whole source
It also laid bare the defects of a system of insurance that divided responsibility between private insurance companies, which offered protec…
Like the World Trade Center on 11 September 2001. whole source
Like the World Trade Center on 11 September 2001.
Or Baghdad on pretty much any day since the US invasion of 2003. whole source
Or Baghdad on pretty much any day since the US invasion of 2003.
1335–1410) stipulates that the insurers agree to assume the risks ‘of God, of the sea, whole source
1335–1410) stipulates that the insurers agree to assume the risks ‘of God, of the sea, of men of war, of fire, of jettison, of detainment by…
1335–1410) stipulates that the insurers agree to assume the risks ‘of God, of the sea, whole source
1335–1410) stipulates that the insurers agree to assume the risks ‘of God, of the sea, of men of war, of fire, of jettison, of detainment by…
Then, in a remarkable rush of intellectual innovation, beginning in around 1660, that theoretical... whole source
Then, in a remarkable rush of intellectual innovation, beginning in around 1660, that theoretical basis was created.
Under the Law of Ann (1672), the widow and children of a deceased minister of whole source
Under the Law of Ann (1672), the widow and children of a deceased minister of the Church of Scotland received only half a year’s stipend in…
A supplementary scheme had been set up by the Bishop of Edinburgh in 1711, but whole source
A supplementary scheme had been set up by the Bishop of Edinburgh in 1711, but on the traditional pay-as-you-go basis.
‘Tho’ Chance produces Irregularities,’ wrote de Moivre in 1733, ‘still the Odds will be infinitely whole source
‘Tho’ Chance produces Irregularities,’ wrote de Moivre in 1733, ‘still the Odds will be infinitely great, that in process of Time, those Irr…
As the Illustrated London News described it in 1867: They are washed with plenty of whole source
As the Illustrated London News described it in 1867: They are washed with plenty of hot and cold water and soap, and receive six ounces of…
Bismarck's social insurance and its stated aim whole source
The aim of Otto von Bismarck’s social insurance legislation, as he himself put it in 1880, was ‘to engender in the great mass of the unprope…
The standard Lloyd’s policy had in fact already been modified (in 1898) to exclude ‘the whole source
The standard Lloyd’s policy had in fact already been modified (in 1898) to exclude ‘the consequences of hostilities or warlike operations’ (…
34 The Japanese were insured; between 1879 and 1914 their insurance industry had grown from whole source
34 The Japanese were insured; between 1879 and 1914 their insurance industry had grown from nothing into a vibrant sector of the economy, of…
34 The Japanese were insured; between 1879 and 1914 their insurance industry had grown from whole source
34 The Japanese were insured; between 1879 and 1914 their insurance industry had grown from nothing into a vibrant sector of the economy, of…
Great Kanto earthquake strikes Japan whole source
On 1 September 1923, a huge earthquake (7.
Between 1930 and 1980, social transfers in Britain had risen from just 2. whole source
Between 1930 and 1980, social transfers in Britain had risen from just 2.
Similar problems were afflicting the US economy, where expenditure on health, Medicare, income se... whole source
Similar problems were afflicting the US economy, where expenditure on health, Medicare, income security and social security had risen from 4…
2 per cent of gross domestic product to 10 per cent in 1960, 13 per whole source
2 per cent of gross domestic product to 10 per cent in 1960, 13 per cent in 1970 and nearly 17 per cent in 1980, more than 6 per cent higher…
Pinochet concedes a new Chilean constitution whole source
In 1980, just seven years after the coup, Pinochet conceded a new constitution that prescribed a ten-year transition back to democracy.
The annual rate of return on the Personal Retirement Accounts has been over 10 per whole source
The annual rate of return on the Personal Retirement Accounts has been over 10 per cent, reflecting the soaring performance of the Chilean s…
It also gave the Chilean economy a massive shot in the arm, since the effect whole source
It also gave the Chilean economy a massive shot in the arm, since the effect was significantly to increase the savings rate (to 30 per cent…
Between January 1858 and May 1867, partly as a result of the Civil War, the whole source
Between January 1858 and May 1867, partly as a result of the Civil War, the price of wheat soared from 55 cents to $2.
Between January 1858 and May 1867, partly as a result of the Civil War, the whole source
Between January 1858 and May 1867, partly as a result of the Civil War, the price of wheat soared from 55 cents to $2.
88 per bushel, before plummeting back to 77 cents in March 1870. whole source
88 per bushel, before plummeting back to 77 cents in March 1870.
In rural England before 1832, according to statutes passed in the fifteenth century, only men whole source
In rural England before 1832, according to statutes passed in the fifteenth century, only men who owned freehold property worth at least for…
65 per cent in 1845 to just 2. whole source
65 per cent in 1845 to just 2.
From the late 1840s onwards, the combination of increasing grain production around the world, plu... whole source
From the late 1840s onwards, the combination of increasing grain production around the world, plummeting transport costs and falling tariff…
Electoral reform acts in 1832, 1867 and 1884 eroded what remained of the aristocratic stranglehold whole source
Electoral reform acts in 1832, 1867 and 1884 eroded what remained of the aristocratic stranglehold on British politics.
10 By 1845, however – even before the mid-century slump in grain prices, in other whole source
10 By 1845, however – even before the mid-century slump in grain prices, in other words – his debts were close to overwhelming him.
14 In August 1848, to the Duke’s horror, the entire contents of Stowe House were whole source
14 In August 1848, to the Duke’s horror, the entire contents of Stowe House were auctioned off.
Federal Home Loan Bank Board established whole source
A Federal Home Loan Bank Board had already been set up in 1932 to encourage and oversee local mortgage lenders known as Savings and Loans (o…
Fannie Mae created to buy mortgages whole source
This market came to life in 1938, when a new Federal National Mortgage Association – nicknamed Fannie Mae – was authorized to issue bonds an…
• • • In 1941 a real estate developer built a six-foot high wall right whole source
• • • In 1941 a real estate developer built a six-foot high wall right across Detroit’s 8 Mile district.
In the United States, where public housing was never so important, mortgage interest payments were whole source
In the United States, where public housing was never so important, mortgage interest payments were always tax deductible, from the inception…
Meanwhile, property prices roughly trebled between 1963 and 1979, while consumer prices rose by a whole source
Meanwhile, property prices roughly trebled between 1963 and 1979, while consumer prices rose by a factor of just 2.
And from 1966, under Regulation Q, there was a ceiling of 5. whole source
And from 1966, under Regulation Q, there was a ceiling of 5.
Only if one takes the story back to 1979 do British stocks beat British bricks. whole source
Only if one takes the story back to 1979 do British stocks beat British bricks.
As profit-hungry as their language was profane, the self-styled ‘Big Swinging Dicks’ at Salomon saw whole source
As profit-hungry as their language was profane, the self-styled ‘Big Swinging Dicks’ at Salomon saw a way of exploiting the gyrating interes…
First collateralized mortgage obligation issued whole source
The first issue of this new kind of mortgage-backed security (known as a collateralized mortgage obligation) happened in June 1983.
Du Bois Institute for African and African American Research, appeared to welcome the trend, pointing whole source
Du Bois Institute for African and African American Research, appeared to welcome the trend, pointing out that fifteen out of twenty successf…
In the 48235 ZIP code, which includes the 5100 block of West Outer Drive, subprime whole source
In the 48235 ZIP code, which includes the 5100 block of West Outer Drive, subprime mortgages accounted for more than half of all loans made…
5 million new minority homeowners by the end of the decade, Bush signed the American whole source
5 million new minority homeowners by the end of the decade, Bush signed the American Dream Downpayment Act in 2003, a measure designed to su…
Between 1955 and 2006 the proportion of non-farm mortgages underwritten by the government fell from whole source
Between 1955 and 2006 the proportion of non-farm mortgages underwritten by the government fell from 35 to 5 per cent.
That, he points out, is very nearly the total market capitalization of all the listed whole source
That, he points out, is very nearly the total market capitalization of all the listed companies in the world’s top twenty economies – and ro…
It was here in 1981 that a group of 1,800 families defied the military junta whole source
It was here in 1981 that a group of 1,800 families defied the military junta then ruling Argentina by occupying a stretch of wasteland.
Glasgow has come a long way since my fellow Scotsman Adam Smith wrote the seminal whole source
Glasgow has come a long way since my fellow Scotsman Adam Smith wrote the seminal case for the free market, The Wealth of Nations, in 1776.
Muhammad Yunus founds Grameen Bank in Jobra whole source
His mutually owned Grameen (‘Village’) Bank, founded in the village of Jobra in 1983, has made microloans to nearly seven and a half million…
True, after his initial recommendations were accepted by the Peruvian government in 1988, there was whole source
True, after his initial recommendations were accepted by the Peruvian government in 1988, there was a drastic reduction in the time it took…
4 Yet between 1700 and 1950 there was a ‘great divergence’ of living standards between whole source
4 Yet between 1700 and 1950 there was a ‘great divergence’ of living standards between East and West.
By 1820 per capita income in the United States was roughly twice that of China; whole source
By 1820 per capita income in the United States was roughly twice that of China; by 1870, nearly five times higher; by 1913 nearly ten times;…
By 1820 per capita income in the United States was roughly twice that of China; whole source
By 1820 per capita income in the United States was roughly twice that of China; by 1870, nearly five times higher; by 1913 nearly ten times;…
Emperor Yongzheng bans opium in China whole source
This was a practice that the Emperor Yongzheng had prohibited over a century before, in 1729, because of the high social costs of opium addi…
Jardine and Matheson found Canton trading firm whole source
William Jardine and James Matheson were buccaneering Scotsmen who had set up a trading company in the southern Chinese port of Guangzhou (th…
Lin Zexu arrives in Canton to end opium trade whole source
On 10 March 1839 an imperial official named Lin Zexu arrived in Canton under orders from the Daoguang Emperor to stamp out the trade once an…
Nothing like this had happened since its foundation in 1773. whole source
Nothing like this had happened since its foundation in 1773.
(The Bank of England was granted suspension of the 1844 Bank Act, which imposed a whole source
(The Bank of England was granted suspension of the 1844 Bank Act, which imposed a fixed relationship between the Bank’s reserve and note iss…
5 per cent of the 1866 level. whole source
5 per cent of the 1866 level.
By the time this happened, Russian 5 per cent bonds of the 1906 vintage were whole source
By the time this happened, Russian 5 per cent bonds of the 1906 vintage were trading at below 45 per cent of their face value.
Some have traced the origins of the war back to the naval race of the whole source
Some have traced the origins of the war back to the naval race of the mid-1890s; others to events in the Balkans after 1907.
By the end of 1914, Russian bonds were down 8. whole source
By the end of 1914, Russian bonds were down 8.
• • • George Soros: hedge fund capo dei capi and master of reflexivity A whole source
• • • George Soros: hedge fund capo dei capi and master of reflexivity A Hungarian Jew by birth, though educated in London, George Soros…
61 According to Perkins’s book, The Confessions of an Economic Hit Man, two Latin American whole source
61 According to Perkins’s book, The Confessions of an Economic Hit Man, two Latin American leaders, Jaime Roldós Aguilera of Ecuador and Om…
His book The Alchemy of Finance (1987) begins with a bold critique of the fundamental whole source
His book The Alchemy of Finance (1987) begins with a bold critique of the fundamental assumptions of economics as a subject, reflecting the…
In 1969 he was long real estate. whole source
In 1969 he was long real estate.
He was long Japan in 1971. whole source
He was long Japan in 1971.
He was long oil in 1972. whole source
He was long oil in 1972.
But the probability of such an event was 1 in 1024 – effectively zero. whole source
But the probability of such an event was 1 in 1024 – effectively zero.
Banks wanting to protect themselves against higher volatility – for example, another 1987-style s... whole source
Banks wanting to protect themselves against higher volatility – for example, another 1987-style stock market sell-off – were happy buyers.
If you had invested $10 million in Long-Term in March 1994, it would have been whole source
If you had invested $10 million in Long-Term in March 1994, it would have been worth just over $40 million four years later.
If they had gone back eighty years they would have captured the last great Russian whole source
If they had gone back eighty years they would have captured the last great Russian default, after the 1917 Revolution.
Meriwether himself, born in 1947, ruefully observed: ‘If I had lived through the Depression, I whole source
Meriwether himself, born in 1947, ruefully observed: ‘If I had lived through the Depression, I would have been in a better position to under…
If the models had gone back even eleven years, they would have captured the 1987 whole source
If the models had gone back even eleven years, they would have captured the 1987 stock market crash.
Not many people foresaw that this credit crunch would cause a British bank to suffer whole source
Not many people foresaw that this credit crunch would cause a British bank to suffer the first run since 1866 and end up being nationalized.
114 Could anything trigger another breakdown of globalization like the one that happened in 1914? whole source
114 Could anything trigger another breakdown of globalization like the one that happened in 1914?
The average career of a Wall Street CEO is just over twenty-five years,116 which means whole source
The average career of a Wall Street CEO is just over twenty-five years,116 which means that first-hand memories at the top of the US banking…
3 One recent study of the available data for gross domestic product and consumption since whole source
3 One recent study of the available data for gross domestic product and consumption since 1870 has identified 148 crises in which a country…
Frank Knight distinguishes uncertainty from risk whole source
As Frank Knight argued in 1921, ‘Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has…
’8 The same point was brilliantly expressed by Keynes in 1937. whole source
’8 The same point was brilliantly expressed by Keynes in 1937.
In Citigroup’s official family tree, numerous small firms – dating back to the City Bank whole source
In Citigroup’s official family tree, numerous small firms – dating back to the City Bank of New York, founded in 1812 – are seen to converge…
’ (implying that it really should be) as long ago as 1898. whole source
’ (implying that it really should be) as long ago as 1898.
Of the world’s 100 largest companies in 1912, 29 were bankrupt by 1995, 48 had whole source
Of the world’s 100 largest companies in 1912, 29 were bankrupt by 1995, 48 had disappeared, and only 19 were still in the top 100.
This was part of a general explosion of debt which saw total debt (financial, corporate, whole source
This was part of a general explosion of debt which saw total debt (financial, corporate, household and government) rise from just over 160 p…
In the years before 2007, the appetite of investors grew dramatically for mortgage-backed and other whole source
In the years before 2007, the appetite of investors grew dramatically for mortgage-backed and other asset-backed securities.
Even some of those (notably Ken Griffin’s Citadel) that performed well in the initial phase whole source
Even some of those (notably Ken Griffin’s Citadel) that performed well in the initial phase of the crisis suffered heavy losses in 2008.
30 It remains to be seen whether the extraordinary measures taken by Western governments since whole source
30 It remains to be seen whether the extraordinary measures taken by Western governments since September 2008 will have the desired effect…
A direct consequence of all these new expenditures will be a huge increase in the whole source
A direct consequence of all these new expenditures will be a huge increase in the government deficit, which is set to exceed 12 per cent of…
Fed facilitates Bear Stearns sale to JPMorgan whole source
In March it had proved possible, with the help of $30 billion from the Federal Reserve Bank of New York, to find a buyer for Bear Stearns in…
Bernanke on Fiscal Crisis Solutions whole source
History suggests that, whenever a financial crisis becomes sufficiently severe, ultimately the only solution is a fiscal solution, and we wi…
China joins the WTO whole source
When China had been admitted to the World Trade Organization in 2001, its gross domestic product had been just 13 per cent of US GDP on a cu…
Obama signs the American Recovery and Reinvestment Act whole source
the centrepiece of fiscal policy – and certainly the most Keynesian measure – was the 2009 American Recovery and Reinvestment Act (ARRA), a…
Greece's true budget deficit revealed whole source
By using swaps to shift new borrowing off the public balance sheet, the Greek government was able to claim in early 2009 that its deficit th…
Charlemagne becomes king of the Franks whole source
Prices were still being quoted in terms of silver denarii in the time of Charlemagne, king of the Franks from 768 to 814.
Charlemagne crowned Emperor whole source
by the time Charlemagne was crowned Imperator Augustus in 800, there was a chronic shortage of silver in Western Europe.
Third Lateran Council excommunicates usurers whole source
For Christians, lending money at interest was a sin. Usurers, people who lent money at interest, had been excommunicated by the Third Latera…
Fibonacci publishes the Liber Abaci whole source
he published in 1202. In it, readers could find fractions explained, as well as the concept of present value
Franciscan order founded whole source
They were especially detested by the Franciscan and Dominican orders, founded in 1206 and 1216
Council of Vienne condemns usury advocacy whole source
Even arguing that usury was not a sin had been condemned as heresy by the Council of Vienna in 1311–12.
Expulsion of Jews from Spain whole source
Jews had been expelled from Spain in 1492.
Jews seek refuge in Venice whole source
The Jewish presence in Venice dates from 1509, when Jews living in Mestre sought refuge from the War of the League of Cambrai.
Venice establishes the Jewish ghetto whole source
In 1516 the Venetian authorities designated a special area of the city for Jews on the site of an old iron foundry which became known as the…
Venice grants Jews subject status via charter whole source
The charter he succeeded in obtaining in 1589 granted all Jews the status of Venetian subjects, permitted them to engage in the Levant trade
First Medici convicted of a capital crime whole source
Between 1343 and 1360 no fewer than five Medici were sentenced to death for capital crimes.
Cosimo de' Medici takes over the family bank whole source
By the time he passed on the business to his eldest son Cosimo in 1420, he had established a branch of the bank in Venice as well as Rome
Death of Giovanni di Bicci de' Medici whole source
When Giovanni died in 1429 his last words were an exhortation to his heirs to maintain his standards of financial acumen.
Medici expelled from Florence, bank records burned whole source
Finally, in 1494, amid the chaos of a French invasion, the family was expelled and all its property confiscated and liquidated.
Cosimo de' Medici made Grand Duke of Tuscany whole source
in 1569 was created Grand Duke of Tuscany.
The Bank of Amsterdam is founded whole source
The Amsterdam Exchange Bank (Wisselbank) was set up in 1609 to resolve the practical problems created for merchants by the circulation of mu…
Stockholms Banco founded whole source
with the foundation of the Stockholms Banco in 1657, that this barrier was broken through.
Bank of England created whole source
The third great innovation of the seventeenth century occurred in London with the creation of the Bank of England in 1694.
Francisco Pizarro arrives in the New World whole source
The illegitimate son of a Spanish colonel, Francisco Pizarro had crossed the Atlantic to seek his fortune in 1502.
Pizarro's first expedition into Peru whole source
he led the first of three expeditions into Peru in 1524.
Pizarro's third expedition departs Panama whole source
This third expedition set sail from Panama on 27 December 1530.
Spanish Conquest of the Inca Empire whole source
In 1532, however, the Inca Empire was brought low by a man who, like Christopher Columbus, had come to the New World expressly to search for…
Manco Capac revolts against Spanish rule whole source
Despite a revolt led by the supposedly puppet Inca Manco Capac in 1536, Spanish rule was unshakeably established
Assassination of Francisco Pizarro in Lima whole source
Pizarro himself died as violently as he had lived, stabbed to death in Lima in 1541 after a quarrel with one of his fellow conquistadors.
Silver discovered at Cerro Rico whole source
When an Indian named Diego Gualpa discovered its five great seams of silver in 1545, he changed the economic history of the world.
Spain's first sovereign default whole source
the Spanish crown ended up defaulting on all or part of its debt no fewer than fourteen times between 1557 and 1696.
Adam Smith founds economics with The Wealth of Nations whole source
In the century after he published The Wealth of Nations (1776), there was an explosion of financial innovation
Bank of England note-issue monopoly reaffirmed whole source
by a protracted process of trial and error, the Bank of England developed public functions, in return for the reaffirmation of its monopoly…
Britain scraps usury laws on the discount rate whole source
With the final scrapping in 1833 of the usury laws that limited its discount rate on commercial bills
Britain lifts joint-stock banking restrictions whole source
After 1858, the restrictions on joint-stock banking were lifted, paving the way for the emergence of a few big commercial banks
US National Bank Act passed whole source
The 1864 National Bank Act had significantly reduced the barriers to setting up a privately owned bank
US reaches peak number of state and national banks whole source
from fewer than 12,000 in 1899 to more than 30,000 at the peak in 1922.
New York Federal Reserve Bank established, 1913 whole source
legislation was not passed to create the Federal Reserve System until 1913.
US banks reach their peak number whole source
from fewer than 12,000 in 1899 to more than 30,000 at the peak in 1922.
US introduces deposit insurance whole source
The introduction of deposit insurance in 1933 did much to reduce the vulnerability of American banks to runs.