Book Review: Money for Nothing: The Scientists, Fraudsters, and Corrupt Politicians Who Reinvented Money
Excellent History and Entertaining Primer to Financial Markets
In Money for Nothing: The Scientists, Fraudsters, and Corrupt Politicians Who Reinvented Money, Panicked a Nation, and Made the World Rich Thomas Levenson traces the beginnings of our current financial system back to 18th century London. While a story about finance may seem to have narrow appeal, in Levenson’s capable hands, this story will be appreciated by a much broader audience.
The role of the narrative historian is to “connect the dots”. That is, to identify disparate events and to weave them together into a cohesive tale that informs and entertains the reader. Sometimes the dots are easy for the historian to identify. But other times, the historian must reach for dots that are more obscure. Levenson opted to reach for obscure dots. In Money for Nothing he has managed to connect the London Plague of 1690, Isaac Newton’s development of differential calculus, England’s unending wars with France, the South Sea Bubble and Robert Walpole’s term as Prime Minister of England. The connections work seamlessly
At its heart, this is the story of how England borrowed funds to finance its wars with France. England’s borrowing capabilities were greatly enhanced when the South Sea Company assumed its outstanding debts from creditors in exchange for shares of South Sea stock. South Sea, therefore, received payments on the debts from England and either kept them as added capital or paid them out as dividends to its shareholders. Most importantly, Levenson describes how, after the debts were converted to South Sea shares, the shares were fungible and could be traded, at prevailing prices, on the newly formed Exchange Alley.
As Levenson tells the story, this development of financial markets took place at a time when scientists and mathematicians were starting to quantify actions and risks that had previously been unquantifiable. This quantification could have been used to rationally value the South Sea shares. But, alas, it was not. Levenson’s is a story about people, not numbers. So instead of using available tools to value the stock, the investors acted in response to their greed and emotion. This greed and emotion fueled what became the South Sea Bubble.
Levenson explains how England was able to recover from the ultimate bust of the Bubble and to create workable financial markets. However, he warns that new financial instruments, like the ones that fueled the South Sea Bubble, are constantly being created and that investors, to this day, still find themselves investing based upon their greed and emotion rather than mathematical quantification.
I rated this very informative and entertaining book 4.0 stars. It should appeal to fans of English History. And it is also a good primer for anyone interested in financial markets.
In Money for Nothing: The Scientists, Fraudsters, and Corrupt Politicians Who Reinvented Money, Panicked a Nation, and Made the World Rich Thomas Levenson traces the beginnings of our current financial system back to 18th century London. While a story about finance may seem to have narrow appeal, in Levenson’s capable hands, this story will be appreciated by a much broader audience.The role of the narrative historian is to “connect the dots”. That is, to identify disparate events and to weave them together into a cohesive tale that informs and entertains the reader. Sometimes the dots are easy for the historian to identify. But other times, the historian must reach for dots that are more obscure. Levenson opted to reach for obscure dots. In Money for Nothing he has managed to connect the London Plague of 1690, Isaac Newton’s development of differential calculus, England’s unending wars with France, the South Sea Bubble and Robert Walpole’s term as Prime Minister of England. The connections work seamlessly
At its heart, this is the story of how England borrowed funds to finance its wars with France. England’s borrowing capabilities were greatly enhanced when the South Sea Company assumed its outstanding debts from creditors in exchange for shares of South Sea stock. South Sea, therefore, received payments on the debts from England and either kept them as added capital or paid them out as dividends to its shareholders. Most importantly, Levenson describes how, after the debts were converted to South Sea shares, the shares were fungible and could be traded, at prevailing prices, on the newly formed Exchange Alley.
As Levenson tells the story, this development of financial markets took place at a time when scientists and mathematicians were starting to quantify actions and risks that had previously been unquantifiable. This quantification could have been used to rationally value the South Sea shares. But, alas, it was not. Levenson’s is a story about people, not numbers. So instead of using available tools to value the stock, the investors acted in response to their greed and emotion. This greed and emotion fueled what became the South Sea Bubble.
Levenson explains how England was able to recover from the ultimate bust of the Bubble and to create workable financial markets. However, he warns that new financial instruments, like the ones that fueled the South Sea Bubble, are constantly being created and that investors, to this day, still find themselves investing based upon their greed and emotion rather than mathematical quantification.
I rated this very informative and entertaining book 4.0 stars. It should appeal to fans of English History. And it is also a good primer for anyone interested in financial markets.
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