Ah, the good feelings of having been away for a couple weeks. Now it’s back to work.
Among the spires of York (great place to visit, by the way), I took the opportunity for some light holiday reading. As mentioned in my About page, the books I favour tend to favour financial history. This trip’s selection was Paper Promises: Money, Debt and the New World Order by Philip Coggan. Overall, a great read for folks like me: plenty of history, easy reading – bordering on ‘page turner’ material. Some thoughts:
- The author is a long-time financial journalist; most recently the Buttonwood columnist for The Economist. That was a big draw for me, as I’m a fan of the magazine’s writing style.
- An early focus for the book was the path of using precious metals for money over time.
- One strand I hadn’t considered before was the impact of the Industrial Revolution and rapid productivity gains on prices: there was a huge increased demand for money as more and more goods were produced and traded, which would’ve meant disastrous deflation unless more gold/silver arrived in Europe at about the same time (thanks to new mines, this is what happened).
- The gold standard, as many Americans think of the early 20th century, was actually an exercise in fiat money anyway: only a small proportion of the paper money supply was kept in gold. The repeal of the US gold standard in 1971 happened because the bluff was called, in a way!
- Early experiences with paper money (e.g. France in early 1700s) were pretty disastrous; I wonder what will happen in future, when the temptation to print to cover growing liabilities rises considerably…
- I really liked the narration around the 2007-2008 crisis, in particular answering the question “Where did all the money go?” Great exposition around the conundrum that perceived ‘value’ for things like housing and other assets assumes they can be sold without moving the market; if everyone wants to sell houses at the same time, the lost ‘value’ when selling at a discount never actually existed…it was merely an imagination of the person holding the house.
- The final part of the book reflects on post-crisis financials, particularly the intergenerational transfer of wealth that I’ve touched upon before. Things are not looking well for many governments’ finances.
- In sum: well worth reading, though the final part of the book is a bit dated already (so policy prescriptions might raise eyebrows). Loved the writing style and history.