Отдавна съм забелязал, че за много хора (включително и повечето завършили икономика, ако съдя по нивото на състуденти и колеги) финансите и икономиката са нещо свръхестествено – неразбираемо и сложно, пълно с чужди думички, формули, графики. За по-конспиративно настроените пък, финансите и икономиката са пъклен заговор за експлоатацията на човек от човека и понеже са неестествено състояние на обществото, трябва да бъдат премахнати/ограничени…

Понеже за разлика от гореописаните хора, не приемам света мистично или идеологически, а по-скоро причинно-следствено, за да разбера нещо, за да си го обясня, винаги ми е било най-удобно да погледна корените му, да видя от къде идва, как се развива, за да стигне до сегашното си състояние. Защото принципите са същите, само сложността се увеличава с времето – а е много по-лесно да разбереш първо принципите, на които са основани елементарните действия в миналото (за всичко става дума – човешки и семейни отношения, хранене, икономика и т.н.), които постепенно се усложняват днес.

Книгата на Найл Фюргюсън, подходящо наречена Възходът на парите: финансова история на света прави точно това в сферата на финансите – описва зараждането на икономическата активност още в древните общества, първите пари, как и защо са се появили. Преминава през античния свят и средновековието, обяснявайки първите финансови инструменти (акции, менителници) и как древните са ги прилагали, възхода на банкерството и на италианската фамилия Медичи – първите международни банкери (самотни конници, разнасящи ковчежета с пари насам натам :) ) и обменители на валути. И, разбира се, стига до съвременния свят, с неизмеримо сложните финансови институции и операции.

Всъщност, в един определен смисъл, Възходът на парите: финансова история на света е много подобна на Богатството на народите на Адам Смит – защото обяснява по прост и разбираем начин развитието на финансовата система – от мидени черупки през медни монети, до краткосрочни брейди облигации. Тя дава разбиране за финансите като за естествен и нормален резултат от взаимоотношенията между хората през вековете, които искат да търгуват и обменят стоки и блага. ( )

Lory borrowed to read - 13.08.2024

This review is based on the Blinkist version of the book...thus a summary and my review needs to be qualified as such. Presumably the original full text has much more details and research.....but it also takes much longer to read. If I like the Blinkist version, I might seek out and read the full book.
The financial system is evolutionary in nature.....through market selection: the financial equivalent of natural selection. The firms that adapt to these new situations grow and prosper and are imitated by others. This is the financial equivalent of gene reproduction.
On the other hand, firms that cling to outdated practices and fail to produce sufficient returns are doomed to extinction.
Value of money comes from the trust we place in it, not from intrinsic worth......When the Spanish conquistadors swept through Central and South America in the sixteenth century, they were largely motivated by the quest for gold and silver....What happened though was that the increased supply of coinage actually led to its depreciation in value, regardless of what rare metal it was made of....The conquistadors failed to realize that the power and value of money comes not from its physical worth but from what people are willing to give you for it...It doesn’t matter what it is made of, as long as society trusts in its value.
We trust that the money we use will hold its value and that, unlike the Spaniards, our central banks won’t overproduce it. We trust that banks will keep our money safe, and they trust us to pay our loans back. Without this trust, money is not worth the paper it’s printed on.
The vast majority of money in the world doesn’t even physically exist; it is entirely virtual and can be transferred electronically across the world without ever materializing physically.
These worthless tokens are accepted as holders of value because together we trust in them.
The system of credit and debit funds the financial system via the creation of money.
The invention of credit and debit was one of the most important developments in human history. It stands alongside technological and scientific advancements as a driving force in human progress.....The earliest forms of borrowing and lending are found in ancient Mesopotamia. This simple process of borrowing and lending eventually evolved into the system of credit as we know it today....Banks are the primary creators of credit, which in turn funds the financial system through the expansion of money.....The expansion of money means credit actually creates money. Say you deposit € 100 into the bank. They will probably keep a little of this money in reserve and lend, say, € 90 to someone else. That person may place this loaned money in another bank, which then repeats the first bank’s process, keeping a little and loaning out the rest, e.g., € 80.....The system has therefore created € 270 from the original € 100, and the money supply has effectively been widened.
Monetary expansion has been crucial in the funding of the financial system, as the money created can be used to fund investments or buy goods. Without this basic relationship between debtor and creditor, the financial system would stall because the supply of money would become stagnant.
The financial system is a combination of interconnected financial markets and institutions developed over centuries.....In medieval Italy, increased trade with the Arab world brought with it financial rewards and better systems of accountancy. This led to the creation of the first banks, because merchants needed access to credit in order to fund their trade....Banks are crucial to the financial system because they fund the system by facilitating credit....War was the catalyst for the next financial development: the invention of bonds and the bond market....Again, this development first appeared in medieval Italy where city states were constantly at war with a need of funds to pay for soldiers and weapons.....They raised these funds through the sale of bonds: loans to the government that paid a fixed rate of interest. These government IOUs could be traded on the bond market.
The next development of the financial system first appeared in seventeenth-century Holland: the joint-stock company. Companies funded themselves by selling shares of ownership,
In the eighteenth century, insurance companies used analysis of the financial markets to create huge investment portfolios that helped manage risk. Governments also greatly expanded their role in the area in the twentieth century......Finally, beginning in the 1920s, the real estate market was expanded massively through deregulation and government incentives.
Finance, in particular access to credit, is the most effective route out of poverty.
Banks, for example, allow savers to deposit money that can then be loaned to those in need. If the money were not put in the bank, it would lie dormant until its owner spent it. By depositing it in the bank, the money is made available to others. It can be transformed from its static state into a more dynamic form (credit) and thus be transferred from the “idle to the industrious.”.....Without access to reliable credit, poor people have to borrow from less-reputable sources......Access to credit allows people to make long-term plans and decisions such as buying property, starting a business or investing in an enterprise.....As an example, consider microfinance in poor areas......These loans can fund the purchases of expensive items such as livestock or can help the borrowers start their own micro-businesses. Just a small amount of affordable credit can make a dramatic difference in areas of poverty.
Strong financial system society will prosper at the expense of financially inefficient.
In inefficient financial systems, such as the communist command economy or medieval feudalism, capital is unable to flow freely. Bureaucrats control financial resources inefficiently to fulfill political _targets, or they hoard wealth to enforce social hierarchy. The situation is static, with little incentive for financial development.....The financial system that developed in Western Europe allows the freest and most efficient flow of capital when compared to other existing systems. Competition is fierce; financial institutions need to be profitable and reliable, otherwise they will be swept aside by better ones......The more efficient nations spread their geographical reach.......This manifested itself primarily as the rise of European Empires, In the twentieth century, the spread of the Western financial system continued through globalization.....In seventeenth-century Europe, the Netherlands, the birthplace of the stock market and a major developer of modern banking, was able to free itself from the much larger Spanish Habsburg Empire......Although the Empire was more abundant in gold and silver deposits, it had little economic understanding, which allowed the Netherlands to constantly outperform its rival economically.
The financial system mirrors human nature and is deeply irrational and unequal.
No financial system is perfect. This is because the people who control it and invest in it are human beings, and humans are irrational by nature....These irrational faults and inequalities are mirrored and even intensified in the financial system.....Firstly, financial rewards are not shared out equally. Those with the right attitude and skills to succeed in the financial world can gain wealth and power, while others will not earn the same rewards....Just as people experience mood swings, the financial markets also crash from highs to lows very quickly. Investor confidence is especially fragile. People are easily scared when their money is involved....People will also watch to see what other investors do in certain situations and then copy them. This tends to make financial markets unstable, because people rush in and out of investments en masse.
The stock market tends to develop bubbles, all of which eventually burst.
Sometimes the market will inflate at such a sharp rate that prices become unsustainable. Like an overfilled balloon, the pressure bursts the market, making prices fall dramatically. This is known as a stock market bubble.....The average financial career of a Wall Street CEO lasts 25 years–not long enough for most to grasp the up-and-down-nature of the market. Many feel that the good times will go on forever and fail to understand the downside of high growth.....The final reason for bubbles is that people don’t fully understand the financial system; many are lured in by tales of high profit margins and extraordinary growth.
Inflation and hyperinflation: often caused by political mismanagement of a currency.
A small amount of inflation is to be expected in any economy as more money is always being created, but excessive inflation, or hyperinflation, can be very dangerous.
It is particularly perilous for those holding government bonds and savings in a particular currency, because these forms of wealth become less and less valuable ....... Hyperinflation....can only occur, though, if a nation prints enormous amounts of money and fails to keep its national debt under control......its root causes are political.
Currency depreciation and hyperinflation can be effective ways for a government to wipe out its domestic debts, because they significantly decrease the value of these debts. Hyperinflation will always carry far-reaching, negative effects for society as a whole. It destroys the wealth of domestic creditors and savers whilst also hurting those on fixed salaries.
Both private insurance and the welfare state are imperfect systems for minimizing financial risk and uncertainty. Modern private insurance was invented in eighteenth-century Scotland by two hard-drinking Protestant ministers who wanted to provide financial aid to the families of deceased vicars. They used advancements in social and statistical analysis to create the first insurance scheme...This new system of private insurance provided financial help to the unfortunate and partially mitigated the element of financial risk in life......Before long, politicians realized that by providing insurance for these people, they could promote social stability and win over voters....The welfare state aims at minimizing financial risk through policies such as universal health care, old-age pensions and free education. There is, however, a downside: it has been argued that high taxes and universal coverage remove incentives to work hard and save money....Over the last few decades, there has been a backlash against the welfare state. Some governments have attempted to dismantle parts of the welfare system to encourage people to take financial risks once again.
Deregulation of real estate market: how political decisions can have dramatic financial repercussions.....Governments, especially those in the English-speaking world, have pursued policies to increase the percentage of home owners.....Yet, whilst this goal of a property-owning democracy was politically advantageous, its financial ramifications have been unbalancing. Consider for instance the 2008 financial crisis, the largest since the Wall Street Crash of 1929. It led to bank failures, national bailouts and a global debt crisis, and its cause lay in the deregulation of the US housing market....Politically, the loans were a positive step towards widening property ownership, especially amongst ethnic minorities.
Financially, however, subprime lending was unsustainable;
Final summary
The modern financial system, developed over centuries, is irrational, unequal, unstable and difficult to control. Nevertheless, it provides the most efficient method for the creation and allocation of capital. This allocation of money to the areas it is most needed is crucial to economic development and human progress.
My take on the book: It’s actually quite a good historical summary of the ascent of money. Interesting to note the constant referral to the irrationality of people and markets. I think this understanding is relatively recent. Not long ago the “market” was assumed to be the epitome of efficiency. Four stars from me. ( )

A fantastic history of money. Essential to understand the psychological underpinning of value. ( )

This book went some places I didn't expect it to, and avoided others I expected it to visit. There was plenty to soak up, but some of the concepts were a bit complicated for me. ( )