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What makes civilisation possible? Goetzmann posited that it is money or finance. Financial innovation was the key ingredient that made human progress thus civilisation possible.
The main problem, is how for any one person or company afford the huge investment that makes huge projects possible? In Mesopotamia, we first had loans and bookkeeping so farmers could borrow money to buy seeds and employ labor, to pay back with interest once harvest was done.
Greece and Rome were powerful because they had access to metal mines that provided precious metals to make coins that effectively expanded their money supply, and all countries accepted the metals for trade. Greece also invented pooling of money to finance trade voyages with detailed contracts and a functional court to mediate disputes. The Chinese however first invented paper money backed by banks or governments.
The Templars built stations all across Europe to the middle east to enable the invention of Traveller’s cheque where one could deposit their money in Europe and withdrew alone the way and at the destination. The Chinese invented similar country wide banking stations.
The Venice government issued bonds that paid interest to finance its wars. It always repaid and so had good credits. Monarchs who did not repay their creditors found themselves shut out of the credit market.
Amsterdam and subsequently London used the publicly sold bonds to finance their empires, fought wars and colonised. The horrible American slave trade and Opium trade were prime examples of the exploits.
Europe prospered mainly because of financial innovation from the study of risks (from gambling), enabling hem to sell insurance and annuities.
In America shares were favoured over bonds and this allowed publicly traded companies to be formed that built the railways, ports etc. Unfortunate in China the government controlled all the resources and thus lagged behind in this amazing financial technology.
And then there was modern finance, with securitization that was supposed to spread risk and further allowed investors to invest their money. Then new theories such as efficient market theorem that enabled the calculation of option prices appeared.
Throughout history, the wisdom of crowds sometimes turned into the madness of mobs and over-enthusiasm led to over-pricing and then crash and depression. It cannot really be prevented.
A well researched book that took real effort to read but ultimately extremely worthwhile.
The main problem, is how for any one person or company afford the huge investment that makes huge projects possible? In Mesopotamia, we first had loans and bookkeeping so farmers could borrow money to buy seeds and employ labor, to pay back with interest once harvest was done.
Greece and Rome were powerful because they had access to metal mines that provided precious metals to make coins that effectively expanded their money supply, and all countries accepted the metals for trade. Greece also invented pooling of money to finance trade voyages with detailed contracts and a functional court to mediate disputes. The Chinese however first invented paper money backed by banks or governments.
The Templars built stations all across Europe to the middle east to enable the invention of Traveller’s cheque where one could deposit their money in Europe and withdrew alone the way and at the destination. The Chinese invented similar country wide banking stations.
The Venice government issued bonds that paid interest to finance its wars. It always repaid and so had good credits. Monarchs who did not repay their creditors found themselves shut out of the credit market.
Amsterdam and subsequently London used the publicly sold bonds to finance their empires, fought wars and colonised. The horrible American slave trade and Opium trade were prime examples of the exploits.
Europe prospered mainly because of financial innovation from the study of risks (from gambling), enabling hem to sell insurance and annuities.
In America shares were favoured over bonds and this allowed publicly traded companies to be formed that built the railways, ports etc. Unfortunate in China the government controlled all the resources and thus lagged behind in this amazing financial technology.
And then there was modern finance, with securitization that was supposed to spread risk and further allowed investors to invest their money. Then new theories such as efficient market theorem that enabled the calculation of option prices appeared.
Throughout history, the wisdom of crowds sometimes turned into the madness of mobs and over-enthusiasm led to over-pricing and then crash and depression. It cannot really be prevented.
A well researched book that took real effort to read but ultimately extremely worthwhile.
