Niall Ferguson on 'The Ascent of Money'

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Niall Ferguson on 'The Ascent of Money'

04 Nov 2008

Speakers: Niall Ferguson

Niall Ferguson explores the economic crisis that was triggered in the summer of 2007, and attempts to explain how it happened and who is responsible. How did the sub-prime mortgages – a little-known phrase before 2007 – lead to the fall of some of Wall Street’s biggest names, the nationalisation of banks, and a global recession?

Ferguson traces the roots of the current crisis right back to the rise of money-lending in Renaissance Italy, and the first ‘stock market bubble’ in early eighteenth century Scotland. He traces the rise of sub-prime mortgages back to Franklin Roosevelt’s New Deal economic policies of the 1930s, which eventually filtered across the Atlantic in the 1980s, as Margaret Thatcher’s Conservative government encouraged people to buy the houses they lived in. The English-speaking world in particular, Ferguson says, loves to play the property market - but by encouraging sub-prime households to own their own homes, banks are allowing people to rack up huge personal debts.

Ferguson goes on to discuss ‘Chimerica’ – the overlapping economies of America and China – the two countries together account for 13% of the world’s land surface, one third of its population, half of its economic ouput, and two-thirds of its economic growth. Without the interaction between these economies – without Asian savings to shore up America’s financial deficit – the current crisis would never have happened. However, whilst America is often perceived as the symbol of consumerism, many Britons are in a worse position than their American counterparts when it comes to personal debt – in Britain, debt as a proportion of disposable income has increased by from 100% to 180% in the past 20 years.

The story of the ascent of money, Ferguson concludes, is one of progress – but one of erratic progress. He ends on an optimistic note, stating that he believes the ‘age of leverage’ is coming to an end.

Niall Ferguson

Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor at Harvard Business School. Philippe Roman Chair in History & International Affairs at LSE IDEAS