The Ascent of Money: A Financial History of the World: 10th Anniversary Edition

Economies that combined all these institutional innovations – banks, bond markets, stock markets, insurance and property-owning democracy – performed better over the long run than those that did not, because financial intermediation generally permits a more efficient allocation of resources

The volume of derivatives – contracts derived from existing securities or transactions, such as interest rate swaps or credit default swaps (CDS) – has grown even faster, so that by the end of 2006 the notional value of all ‘over-the-counter’ derivatives (excluding those traded on public exchanges) was just over $400 trillion. Before the 1980s, suc

In the words of Bill Gross, who runs the world’s largest bond fund at the Pacific Investment Management Company (PIMCO), ‘bond markets have power because they’re the fundamental base for all markets. The cost of credit, the interest rate [on a benchmark bond], ultimately determines the value of stocks, homes, all asset classes.’

Thus, for the next quarter century, did governments resolve the so-called ‘trilemma’, according to which a country can choose any two out of three policy options: full freedom of cross-border capital movements; a fixed exchange rate; an independent monetary policy oriented towards domestic objectives.57

Once again, however, the opportunity for financial innovation was provided by war.

the people who live in the world’s safest country are also the world’s most insured.

The financial crisis that struck the Western world in the summer of 2007 provided a timely reminder of one of the perennial truths of financial history. Sooner or later every bubble bursts. Sooner or later the bearish sellers outnumber the bullish buyers. Sooner or later greed turns to fear.

The decision of the Nixon administration to sever the final link with the gold standard (by ending gold convertibility of the dollar) sounded the death knell for Bretton Woods in 1971.

Financial history has not ended, any more than political history ended with the fall of the Berlin Wall. But the next financial crisis will not be like the last one. It will not be triggered by defaults in US subprime mortgages, nor transmitted round the world by under-capitalized banks. It will be different because no two financial crises are ever