•By Prof Niall Ferguson

•A Financial History Of The World

 Finance is about people not equations
 History repeats itself
 A history rich with folly…!
 Turbulent times are ahead and knowledge is vital
 A lay persons guide
 Things make sense if you know where they came
from…
 The Barter System…
 Money as seashells, wooden sticks, feathers..
 Money as metal…(The Spaniard Story..?)
 Virtual Money

 Money really is “trust inscribed”..?

 Root of the word credit is “credo”- Latin for “I

believe”
 Founded by…?
 Rise and Fall of the Medici family..(too big to

fail..?)
 Rise of the Rothschild's..
 Rise and fall of the modern banks..?
 How bonds came  Bonds are still the
about? same…
 The story of Italy
 A story Of Argentina
 Is this a story of the
 The story of American
fall of a modern state
Civil War..
of USA..?

Medieval Modern
 John Law  Ken Lay
Fake profits
Fake profits


 Cheap money supply  Cheap money supply
 Image of a successful  Image of a successful
company
company  Accounting gimmicks and
 Dividends funded with executives selling stocks
new stock issue
Mississippi Bubble Enron scandal

The rules are still the same:-

• Manipulation
•The Regulator Connection
• “Jump out of the window” syndrome…
 Insurance ( A failed system..?)
 Welfare state
 Disincentivising people
 Bankrupting states
 Case in point:- Chile vs Japan
 The Great Moderation
 Free wheelers (Hedge Funds)
 Derivatives (Financial Weapons Of Mass
Destruction..?
 AIG’s near demise..
 Human tendency
 Political Objectives (Housing state)
 Belief (One way track to riches..?)

 The Flaw
 Conflicting Objectives
 Mass loans are designed to be loss making.
 Who will take the loss….?
  Mass loans  Mass loans
 Interest rates fixed  Floating Interest rates
 As interest rates rise  As interest rates rise
institutions go consumers cannot
bankrupt or fraudulent. pay..
 Savings institutions  Securitization
vanish

1987 2009

•Real Estate like anything else can fluctuate in value…

•Highly Levered

SAFE AS HOUSES….?????
 Tables have turned
 Chinese savers funded the American boom
 Chinese exports make EDLP (Wal-mart alone
outsources close to $11b to China)
 China is today single largest bond holder of
US T-bills.

 Made for each other….?

 Just like England- Germany in 1914..!!
 What if U.S. and China fight..?
 Human instincts are where they were before..

 Against the God’s..? (Running in circles)

 Darwinian theory prevails…

 History has repeated itself and will repeat
itself.

 THIS TIME IT IS DIFFERENT..?

 TOO GOOD TO BE TRUE..!!

 A knowledge of History is the “ultimate tool”,

to keep yourself sane, when irrationality
becomes fashion…