215) A ascensão do dinheiro (com algumas recaidas...)
Allen Lane £25 pp464
The Sunday Times review by Edward Chancellor
From The Sunday Times, October 26, 2008
More than two centuries ago, Adam Smith described bankers' credit as providing “a sort of wagon-way through the air”. Our modern bankers have displayed the recklessness of Phaethon in recent years and their soaring chariots are currently hurtling towards the earth. But now that they are universally blamed for the global financial crisis, it is refreshing to find someone springing to their defence. Far from being excoriated, maintains the historian Niall Ferguson, financiers should be celebrated as the source of our wealth and prosperity.
Ferguson bolsters his bold argument about the importance of finance with 500 years of historical analysis. In the late Middle Ages, he points out, the northern Italians begat banking, book-keeping and bonds, and with their wealth patronised Renaissance painters such as Botticelli. In the 17th century, the Dutch pioneered central banking and joint-stock companies, and gave birth to Rembrandt and Vermeer. Britain's rise to greatness owed as much to its early financial revolution as to any other factor. The Bank of England, established in 1694, kept interest rates low, provided a ready market for government bonds, and enabled the country to finance what would otherwise have been ruinously expensive wars. Countries such as China that failed to develop modern monetary methods, Ferguson reminds us, fell far behind over the course of the 18th and 19th centuries.
Economies that have combined banking, bond and stock markets, insurance and secure property rights have “performed better over the long run than those that did not”, writes Ferguson. But financial innovation, as the world has recently rediscovered to its cost, can also be perilous. Take the case of France in the early 18th century when John Law, a Scottish-born gambler and convicted murderer, persuaded the regent, Louis d'Orleans, to embark on the boldest financial experiment in history.
Law claimed to have discovered the philosopher's stone. He believed that credit could turn paper money into gold. Establishing a national bank in Paris, he used this institution to support an extraordinary business venture which took over the great French trading companies, the farming of the tax revenues, the tobacco monopoly and sundry other activities. Shares were issued to pay for these acquisitions and loans from Law's bank supported their value. A bubble then inflated in the stock of the Mississippi Company. But as this bubble began to deflate, Law resorted to desperate measures - attempting vainly to stop the share price falling and outlawing the personal possession of gold.
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The collapse of the Mississippi bubble in 1720 produced a long-lasting dislike among the French for central banks and paper credit. Well into the 20th century, French peasants preferred to hoard gold at home rather than deposit their savings in a bank. The political and economic consequences of this bust were profound. While the financial revolution paved the way for Britain's industrial revolution, France's ancien régime crumpled under the weight of its expensive debts. Had Law succeeded, Ferguson suggests, history would have turned out differently.
Ferguson refers to Law as a “con man”. Yet over the following centuries, he points out, much of Law's vision has been realised. Private companies that raise capital in the stock market are generally accepted as more efficient than government-run corporations. Paper money, supported by central banks, has freed modern economies from an atavistic dependence on gold.
The breakdown of the post-war Bretton Woods agreement in the early 1970s heralded a second financial revolution. During this period, there has been an extraordinary burst of innovation in the field of finance - mortgage and myriad other types of loans have been turned into tradable securities and sold on in the market, insurance has been invented to protect against the threat of default on bonds, and derivatives have allowed many other types of financial and economic risks to be hedged.
Until recently, economists and regulators celebrated the ability of banks to originate loans and sell them on to willing buyers. Risk was said to be better distributed through the system and the economic cycle was apparently less volatile. We all benefited from cheaper credit. However, the subprime debacle that broke out in the summer of 2007 has changed such rosy perceptions. In recent weeks, the financial system has teetered on the brink of collapse, saved only by hugely expensive government bail-outs. The techniques of modern finance seem as as discredited today as Law's innovations appeared in his time.
In truth, both these crises, the modern one and the 18th-century French one, share a common origin. Law deliberately encouraged the inflation of the Mississippi Company's stock, lending increasing amounts of money to speculators who bought shares at ever higher prices. His “system”, as it was called, couldn't survive the bursting of the bubble. The recent advances in modern finance - securitisation, credit-default swaps and so forth - likewise fuelled a global property bubble and are, in turn, threatened with obsolescence by the losses produced by the housing bust.
In The Ascent of Money, Ferguson claims that we need history to understand finance. Now that our current crisis is compared daily with the Great Depression, nobody would deny that the lessons of history should have been better heeded. Ferguson's own contribution, however, might have had more heft. The book bears the hallmarks of a work written to accompany a television documentary. Furthermore, the dramatic events of recent weeks have made some of Ferguson's claims appear outdated. He praises the hedge-fund industry for “hedging” its clients against market decline. Recent evidence suggests that is not the case. It is no longer tenable to argue that “we seem to have been living through the ascent of man the banker”.
Ferguson proposes that finance is an evolutionary process, in which the fittest activities survive. Yet unlike the natural world, the financial world suffers from adverse selection. During the late boom, those who took on the most debt accumulated the largest fortunes. This crisis is serving as an extinction event for the over-leveraged. The next generation of financiers will be less ambitious and earn smaller bonuses. But they will probably do a better job at allocating capital. That is progress of sorts.