Saturday, February 7, 2009

The Ascent of Money
An Integral Review of Niall Ferguson's History of Money

The (A)Scent of Money

When will Historians and Economists Stop Fueling the Economic Crisis Myths?

An editorial by Dr. David Martin, Executive Chairman, M·CAM
February 7, 2009

The African proverb reminds us that until the lions have their storytellers, the hunters will remain the heroes. Niall Ferguson’s The Ascent of Money is a masterful case study in the consensus of economists and historians to ignore this admonition from ancient wisdom. To his credit, his financial history is a delightfully rich exposition representing the prowess of an exceptionally talented and expansive inquiry into the stories that support a consensus myth. As a historian and author, a finer compilation may not exist. However, the evolutionary supposition that hails financial innovation (an oxymoron which I will address shortly) as the catalyst for the improvement of the human condition across the millennia not only lends itself to the historical myopia rife in the narrative but endangers those who would seek a deeper understanding to conclude in error that they are gaining a balanced perspective. Not surprisingly, in his treatment of the immediate financial challenge, he joins his Harvard and establishment economist colleagues in lamenting the inability to have apprehended the certainty and depth of the economic collapse, and impending propagation thereof, upon whose precipice our economy now stands.

Ironically, Ferguson dances on the edge of a breakthrough but avoids the temptation to let it take flight. His siren song of innovation fails to contemplate that each hero epic innovation recounted in this sweeping tale was, at its core, the opportunistic leveraging of information asymmetry. Innovation, in The Ascent of Money has the stench of swindle at every turn. From the early risk management swindles of the Scottish clergy to the LTCM swindle rewarded with the Nobel Prize (caution noted to Grameen whose focus on credit rather than profitable industrial output has launched a thousand usurers), it is disingenuous in the extreme to suggest that progressive, willful obfuscation of knowledge and understanding should be dubbed “innovation”. A phone call to a few behavioral psychologists could have made a much-needed breakthrough in unmasking the progressive fervor with which information opacity - rather than the democratization thereof - is the real story underpinning this piece.

It is lamentable that this book will enjoy its own ascent in readership on the eve of even greater financial calamity – an event that with greater care, Ferguson's work could have helped alert and attenuate. On this day, February 7, 2009 – when the New York Times reported the massive U.S. facilitated massacre of innocent civilians in the Democratic Republic of Congo – a reader of Ferguson and the Times could see this and his book as unrelated. A closer (and more informed perspective) could have shown the linkage between the Potosí silver genocide documented in 1638 (page 23) from which Ferguson quotes Fray Antonio de la Calancha, “Every peso coin minted in Potosí has cost the life of ten Indians who have died in the depths of the mines,” and the fact that the U.S. government’s interest in bombing the Lord’s Resistance Army is inextricably linked to the economic interests of those who benefit from the life-blood of regional metals which support our modern portable music necessities. Where is the historical warning calling humanity to consider the alchemy that has turned blood to gold – the only alchemy that the esoterics have mastered and the modern alchemists have rendered infinitely scalable? Where is the clarity of inquiry recognizing that it was the drug addiction of an opium obsessed United Kingdom that cowed China (page 289) such that today’s reader can see that the self-same drug and its new imperial user’s addictions is being used to create the liquidity that flows in the form of the exsanguinated blood of Coalition and local combatants alike in conflicts from the Tigris to the Pacific Ocean? In the argument that it is monetary and banking innovation that alleviates poverty, where will we find discourse about the earnings disparity between Chinese laborers and their consuming U.S. counterparts that has propped up the Chimerica myth (page 335-337) which will fuel the political unrest that makes 1914 look like an afternoon street-fight?

No, it isn’t banking sophistication that has vaulted the world’s elite into their self-congratulatory utopian advancement. It is in the consensus coalescence of the empowered few repeating the pervasive myth that in an era of Google and CNN, we are breaking down “dangerous barriers” that humanity has become more impoverished. After all, despite his laudatory assessment of our improvement, more and more children are falling below the poverty line in the U.S. Regression-based prediction – the elixir of economists from Chicago to Washington D.C. to New York to Massachusetts to London – is not hard or mysterious as alleged, rather it is irrelevant. All of the bubble bursting that has come before was not only known well in advance but, by watching the actual audacious bravado of its co-conspirators, it was fully knowable. The problem is that we all have failed to realize that a system built on knowledge asymmetry and the colonialization of the mind is entirely imbued with self-evident failures. When the nominal trade bets against transparent value accretion (in the form of Credit Default Swaps in Planet Finance) eclipses the total productivity of Planet Earth, we invite certainty, not surprise. 2007 and 2008 were neither meteor nor asteroid. Rather, they were entirely reported, fully characterized maturations of a series of factors that this treatise carefully avoided. I trust in Volume II – The Descent Ferguson can speak with a bit more lion and a bit less hunter.


  1. David, Grameen has at worst substituted less onerous usury for the crippling usury that was bundled as supplier credit. The savings in financing costs have lifted over 2.5 million families out of poverty by any objective measure (arm size of girls, number of children receiving education, quality of roofing, etc.) Are there better ways? Probably, but in the interim no one has affected positively so many people in the bottom billion.
    Larry Stay, Salt Lake City, UT

  2. This is a wonderfully stunning critique, David; a sharp sword that should be unleashed on more than just this blog!

    Do you think the Times or any other major newspaper would print your review?

    For the rest of you who may be on the fence about what to think during these times...this man is in the KNOW.

    Kudos to you and yours!

  3. Wonderful article. Would love to see these posts replicated in larger forums.


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave