Book Review: The Ascent of Money, by Niall Ferguson

This probably should be a quick review, not because the book deserves a short review but rather because it's a fairly simple book to explain: as the sub-title indicates, this is "a financial history of the world." Obviously, this particular subject could be a massive one, and the book is less than 500 pages in length, so Ferguson is selective in how he approaches topics. But the selections he makes are effective and, in many cases, very timely.

My reason for picking up this book to begin with is a little odd: I saw a quick video clip in which the author was discussing the financial situation in the Middle East (around the time of the riots in Egypt), and I was impressed by how interesting and articulate he seemed to be. I should note that "interesting and articulate" aren't generally words that come to mind when discussing people who specialize in the study of finance or economics. When I saw the book at Costco (somewhat embarrassing, but true), I was curious about what Ferguson would be like as a writer. It turns out he's an equally interesting and articulate writer.

More than this, however, he's incredibly accessible in how he conveys the information. For someone like me, this is the type of material that can get complicated in a hurry: I usually start to zone out the moment that words like derivative make an appearance. But Ferguson is an exceptionally good writer (he's trained as a historian, so he knows how to convey potentially dry material in a captivating way), and he's obviously interested enough in the subject matter to ensure that the reader can appreciate it. Rather than overload the reader with a bunch of dull facts, he tells a story; after all, financial matters affect individuals, and the stories about individual situations are usually the most interesting.

Additionally, I was interested in understanding the recent -- and global -- financial crisis a little better, as in, how on earth did a bunch of people defaulting on mortgages in the US cause so many problems around the world? Well, this particular passage pretty much summed it up for me:

The key to this financial alchemy was that there could be thousands of miles between the mortgage borrowers in Detroit and the people who ended up receiving their interest payments. 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. At the time, 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. Those who knew best the flakiness of subprime loans -- the people who dealt directly with the borrowers and knew their economic circumstances -- bore the least risk. They could make a 100 per cent loan-to-value 'NINJA' loan (to someone with No Income No Job or Assets) and sell it on the same day to one of the big banks in the CDO business. In no time at all, the risk was floating up a fjord. (p. 270)

Ahh...now that I can understand.

So I definitely recommend The Ascent of Money, assuming (of course) you're interested in the subject to begin with. It's not necessarily the quickest read, but I did find that when I sat down and starting going through it, I was able to move along at a good pace. All said, I probably didn't spend more than five days on it, and while I read in bits and spurts I had no trouble picking it back up and getting right back into the story.

Year of publication: (in the US) 2009
Number of pages: 442