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Unofficial Book Club Digest: The Ascent of Money

Rather than rant endlessly about the brilliance of this book, I'll quote extensively:

"...On reflection, we have been here before. A hundred years ago, in the first age of globalization, many investors thought there was a similarly symbiotic relationships between the world's financial centre, Britain, and continental Europe's most dynamic industrial economy. That economy was Germany's. Then, as today, there was a fine line between symbiosis and rivalry. Could anything trigger another breakdown of globalization like the one that happened in 1914? The obvious answer is a deterioration of political relations between the United States and China, whether over trade, Taiwan, Tibet or some other as yet subliminal issue [emphasis added]. The scenario may seem implausible. Yet it is easy to see how future historians could retrospectively construct plausible chains of causation to explain such a turn of events. (340)"

"It seems that, for all our ingenuity [innovating different forms of representative value - currency, derivatives, commodities, etc], we are doomed to be 'fooled by randomness' and surprised by 'black swans'. It may even be that we are now living through the painful deflation of a multi-decade 'super bubble'.
There are three fundamental reasons for this. The first is that so much about the future - or, rather, futures, since there is never a singular future - lies in the realm of uncertainty, as opposed to calculable risk...brilliantly expressed by Keynes in 1937. 'By "uncertain" knowledge,' he wrote in a response to critics of his General Theory,
...I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty ... The expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain [remember, he's writing this in 1937], or ... the rate of interest twenty years hence... About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know. (344-5)"

Again, the book is The Ascent of Money: A financial history of the world by Niall Ferguson.

[For the textually challenged, there's also this PBS Special.]

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