It awarded the economics prize in 1997 and now the word pays a high price for it!

Foolhardy speculations led to the current economic crisis.
The Ascent of Money
A financial history of the world by Niall Fergusson, Penguin, 2009, pp441, paperback.

The book, the paperback edition has come out only a month ago. The edition has a latest introduction and an afterword that means just as we are talking of a possible recovery is still far off, if we see what is being given in the last chapter.
The current economic crisis is not one more once-a-century event as such/?
This time the global financial crisis is truly global, as it encompasses the entire world, the big and small nations, as there is first a truly globalised, more integrated world and the financial markets are so closely intertwined. Second, the real boom in the wake of the latest technological revolutions, computers, internet and the rise of wealth all across the world has also given rise to much more an unequal and ineqitous world.

The rich and the poor are now much more acutely aware of the many implications for living a high life in the sense of much consumerism and reckless high spending everywhere. The IT revolution has also triggered a large scale migration of talented human resources, there is very large Indian IT personnel in the USA and UK and therefore, there is migration and much high-tech IT jobs are cornered by the new migrants, there is resentment, rise of racism, there is tension of various types in the new globalised world.

Barack Obama, the US president has to talk of “No to Bangalore, Yes, to Buffalo”
Bill Gates, the Microsoft chairman comes to India and openly talks of what the US president thinks about blocking or limiting the flow of talented foreigners as wrong. The Wall Street bankers in the USA are a peculiar tribal lot. Their invest banks, all famous names, century old names and their reputation is now gone for their reckless speculations and bringing about a bust. Lehman Brothers, Bear Stearns, were all gone bankrupt and other banks either bout out or merged or renamed as banks and the net result is the US government has to shell out an astonishingly high bailout to the tune of some 700 billion dollars.

All this has created a panic and the so-called subprime crisis, was a credit-crunch-induced financial crisis of a gigantic nature the world hasn’t seen for nearly a century. The rise and fall of money!

Or, how to explain and understand the current meltdown, recession or depression? Yes, this is the subject matter of the new book by Prof.Niall Fergusson, who is a professor at both Harvard and Oxford and he is also the author of some of the well-received best seller books.

He is an authority of the Empire history, how Britain built its empire and what the empire means today for the Britons as well as for the former colonies like India.
But this book is a sellout of sorts. Here he has combined his sense of history as well as his sense of statistics of an unprecedented nature. The book is full of rare and important data.

The global financial crisis is now on everyone’s mind and the lips. Even the poor, illiterate and rural migrants, from Orissa’s Ganjam district who went to Surat want to understand and how to transfer their money back home to their villages, use the English word “recession”! So, the English word “recession” becomes now an Indian language word! Yes, such is the power of the current crisis.

The book under review opens up with data like this: In 2007, the income of average Americans was 34,000 per annum. It went up by 5 per cent. Cost of living rose by 3.5 per cent. So, the Average actually in terms of real income was better off by 1.5 per cent. Now, if you allow for inflation, the Average’s life didn’t improve at all. But then the highest executives like the one at the investment bank, Goldman Sachs received income that were two thousand times! Goldman’s net income at 46 billion dollars exceeded the entire gross domestic product (GDP) of more than a hundred countries of the world! Then he gives a list of such CEOs of large financial companies, various names, like hedge funds etc and the net take home pay of these bigwigs are mind-boggling. The result?

2007 saw the worst financial crisis since the Great Depression. Is the world fair? Not at all? Is this the fat-cat capitalism? It is. The whole history of mankind has been unkind to money lender and money dealers! Why?

They had always caused miseries to the borrowers as well as to the common folk! So, money is really a veil. It hides and creates an illusion of health and well-being but in actuality it really causes much anger and misery and that is why the Bible to all religious texts condemns money -making aim all sorts of manner of beautiful and memorable words and languages.

So, the best brains, all Harvard graduates, went into finance and finance sector jobs commanded three times more salaries than in any other sectors. To cut the story short, the Wall Street banks indulged in unabated speculations and took risks and the net result was a sudden collapse of all reputed names. So, money lending and banking jobs in the USA took a very different turn and the US proved to the last straw in the wind.

This book makes for such an engrossing reading. I spent a whole forenoon running through the pages, the first and the last chapters are pure delight, and it is not the hard figures and the dry numbers that caught my attention. It is the way Fergusson carries you through the utter stupidities and unethical calling of such knowledge like economics that led to the foolish ends.

Space limits my own enthusiasm for saying many more things than I can.
The Nobel Economics Prize committee committed the stupidest of things by awarding the Prize to two economists who did the most dishonourable thing so finding out the eternal truths to speculate and make quick money.

In October 1997 LTCM, the Lon Term Capital Management (LTCM) authors, Merton and Sholes were awarded the Nobel Prize in economics. They were the ultimate Brains Trust (page 326). Says Fergusson:”It is as if intellect triumphed over instinct; rocket science over risk-taking” Just to prove the point, the Nobel men’s “balc-box), their entire wisdom packed into a mantra, they bet on their speculation, the ultimate speculation that led them in just five months. In one single day, on Friday 21 1998 it lost 550 million; almost the entire capital was wiped out!

That was the terrible lesson that taught the world many fundamental truths!
Don’t take the Americans seriously! They could do many serious things; they could ruin the world, the world economy.

The only consolation is the world is now learning a painful lesson. The Americans are the world’s reckless consumers, they borrow and borrow and the Chinese lend and invest so heavily in the US assets.

You have to really read Fergusson chapter after chapter to get all the small details of the dollars and pennies. Yes, he is so capable of surprising you with such little statistics you can’t have it anywhere else.

The books read not like a dry economics text. It reads like a great piece of literature. It is worth a life time experience I got, a student of economics myself!
A book that would remain forever a favourite of many readers. In a way, Fergusson is a later-day Galbraith. He has the capacity to engage and enliven boring topics like money and finance!

Image Source :

Post Navigation