In The Concept of Money, we touched on what money is, how it derives its value, and what causes changes in its value.

In The Monetary System, we explained the current structure of the monetary system, who the major players are, and how they interact.

In this post, we feature part 1 of 6 of the series The Ascent of Money, which explains the financial history of the world.

This series is based on Niall Ferguson’s book, The Ascent of Money: A Financial History of the World, and it covers the details of how we got to where we currently are financially. It explains how the modern financial systems that are in place came to be and why they they work the way they work.

Niall Ferguson is the Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor at Harvard Business School. He is a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior Research Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford University.

In part 1 of this series, titled Dreams of Avarice, Ferguson takes us on a journey (both back in time an geographically) to where money originated, where the practices of lending money began, and where the practice of lending money grew from small-scale operations to the larger-scale business of banking.

The Ascent of Money (Part 1): Dreams of Avarice

There are a couple of things we would like to emphasize about part 1 of this series and how it applies to your personal finances.

The first is the way basic banking works. Banks take their deposits, money that people put in their bank accounts, and lend it to people at a higher interest rate than the interest rate they pay depositors on their money.

The rates paid for deposits and the rates charged for loans vary from bank to bank, so it is worthwhile to do some research when you are looking to either deposit money or borrow money to find the highest rate on your money and the lowest rate on your loans. A good place to start is our Deals section.

The second thing we’d like you to notice is that the financial world is one of innovation. Financial product and service providers are constantly inventing new products and services. These new products and services often start out providing huge benefits to society as a whole. However, as they get more complex, people start to find ways to abuse these innovations in order to personally profit from the situations they create.

The next major financial innovations after the origination of money and the practice of money-lending were the invention of bonds and the establishment of the bond market.

Go to the next post in the series - The Ascent of Money (Part 2) - Human Bondage.

Learn more about Niall Ferguson at his website - NiallFerguson.com.
Buy Niall Ferguson’s book - The Ascent of Money: A Financial History of the World.

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