Tuesday, August 10, 2010

Niall Ferguson on George W. Bush

From Niall Ferguson's The Ascent of Money, paperback, Penguin Books, 2008-09, page 119:

During [George W.] Bush's time in the White House, his administration ran a budget deficit in seven out of eight years. The federal debt increased from $5 trillion to more than $9 trillion. In 2008 the Congressional Budget Office forecast a continued rise [in the federal debt] to more than $12 trillion in 2017.

Where was the anti-spending Tea Party then?

Bonus: It is no coincidence that in English the root of "credit" is credo, the Latin for "I believe." (page 31).

Page 36: "For Christians, lending money at interest was a sin. Usurers, people who lent money at interest, had been excommunicated by the Third Lateran Council in 1179. Even arguing that usury was not a sin had been condemned as heresy by the Council of Vienna in 1311-12...

See Deuteronomy: 'Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury.' In other words, a Jew might legitimately lend to a Christian, though not to another Jew. The price of doing so was social exclusion." (pages 36-37)

Money is worth only what someone else is willing to give you for it. An increase in its supply will not make a society richer, though it may enrich the government that monopolizes the production of money. Other things being equal, monetary expansion will merely make prices higher. (page 27, on inflation)

"The Weimar tax system [which led to massive inflation, making the German mark basically worthless] was feeble, not least because the new regime lacked legitimacy among higher income groups who declined to pay the taxes imposed on them. At the same time, public money was spent recklessly, particularly on generous wage settlements for public sector unions." (See page 104. My reaction? The more things change, the more they stay the same.)

Once there had been meaningful social ties between mortgage lenders and borrowers. Jimmy Stewart [in It's a Wonderful Life] knew both the depositors and the debtors. By contrast, in a securitized market (just like in space) no one can hear you scream--because the interest you pay on your mortgage is ultimately going to someone who has no idea you exist. (page 262)

"Roughly two fifths [40%] of the world's population is effectively outside the financial system, without access to bank accounts, much less credit." (page 282)

On LTCM: At the end of August 1997 [prior to the its collapse in August 1998] the fund's capital was $6.7 billion, but the debt-financed assets on its balance sheet amounted to $126.4 billion, a ratio of assets to capital of 19 to 1...On Friday 21 August 1998, it lost 550 million--15 per cent of its entire capital, driving its leverage up to 42:1. (pages 324, 327)

"In 2007, the United States needed to borrow around $800 billion from the rest of the world; more than $4 billion every working day. China, by contrast, ran a current account surplus of $262 billion, equivalent to more than a quarter of the U.S. deficit." (page 355)

Note: Italy invented banking; the Dutch founded the first joint-stock company (i.e., stocks); France founded the first central bank; and the Scots founded the first insurance company.

1 comment:

Alison said...

This was aired in the UK a couple of years ago, and I really wanted to get you the book as I knew it would be right up your street. But it was not to be, I'm glad you found it. You should watch the dvd if Netflix has (I enjoyed when the BBC aired, made lots of notes and never got around to blogging). That said, book is more detailed, thus might spoil.