Two Great Christmas Gifts

With Christmas just a couple of weeks away here are two really worthwhile book recommendations that will stimulate your mind and open your eyes to the future, by reviewing the past.

Major kudos to Steve DeAngelis of Enterra Solutions for this post. Steve writes about Niall Ferguson, the Laurence A. Tisch Professor of History at Harvard University and the William Ziegler Professor at Harvard Business School, on the release of his new book, The Ascent of Money: The Financial History of the World.

Steve links a review by Shelby Coffey III in the November 30, 2008 Washington Post, "Markets Don't Make Bubbles, People Do," and makes insightful comments about both the review and Ferguson's book.

A brief excerpt of Steve's post.

People choking in the grasp of the current financial crisis are wondering how we got in this position and what we can do about it. Ferguson's web site provides this synopsis of his new book:

"Bread, cash, dosh, dough, loot: Call it what you like, it matters. To Christians, love of it is the root of all evil. To generals, it’s the sinews of war. To revolutionaries, it’s the chains of labour. But in The Ascent of Money, Niall Ferguson shows that finance is in fact the foundation of human progress. What’s more, he reveals financial history as the essential back-story behind all history. The evolution of credit and debt was as important as any technological innovation in the rise of civilization, from ancient Babylon to the silver mines of Bolivia.

...The importance of Ferguson's book is that it highlights how essential capital flows are for the success of globalization. The only way to bring millions of more people out of poverty is to create wealth. Ferguson's book explains why financial systems are essential in that endeavor.

Coffey's review noted these remarks made by Ferguson on MSNBC.

Ferguson is making the rounds with his new book, saying last week on MSNBC that the United States should follow up the G-20 Economic Summit with a "G-2" meeting with just the Chinese. The professor also winningly confesses that even he is confused about the thrust of Treasury Secretary Henry Paulson's $700 billion rescue fund. Ferguson has, nonetheless, written an admirably illuminating book that will take its place beside such modern classics as John Train's The Money Masters, Peter L. Bernstein's Against the Gods, and Adam Smith's Supermoney.

Ferguson's comments about a summit with China mirror much of what Thomas Barnett has been advocating about locking China in at today's prices.

Read the whole post: Show Me the Money.

Niall Ferguson is one of my favorite authors, writing The War of the World and Colossus: The Rise and Fall of the American Empire among other best sellers. His expertise in economic history, coupled with an amazing ability to be a great storyteller gives him two tools, that make him one of the important scribes of our time. Among his teaching positions he is also a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior Research Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford University.

His newly released book The Ascent of Money: A Financial History of the World is described this way on Amazon.

Niall Ferguson follows the money to tell the human story behind the evolution of finance, from its origins in ancient Mesopotamia to the latest upheavals on what he calls Planet Finance.

Through Ferguson’s expert lens familiar historical landmarks appear in a new and sharper financial focus. Suddenly, the civilization of the Renaissance looks very different: a boom in the market for art and architecture made possible when Italian bankers adopted Arabic mathematics. The rise of the Dutch republic is reinterpreted as the triumph of the world’s first modern bond market over insolvent Habsburg absolutism. And the origins of the French Revolution are traced back to a stock market bubble caused by a convicted Scot murderer.

With the clarity and verve for which he is known, Ferguson elucidates key financial institutions and concepts by showing where they came from. What is money? What do banks do? What’s the difference between a stock and a bond? Why buy insurance or real estate? And what exactly does a hedge fund do?

This is history for the present. Ferguson travels to post-Katrina New Orleans to ask why the free market can’t provide adequate protection against catastrophe. He delves into the origins of the subprime mortgage crisis.

Perhaps most important, The Ascent of Money documents how a new financial revolution is propelling the world’s biggest countries, India and China, from poverty to wealth in the space of a single generation—an economic transformation unprecedented in human history.

Based on my previous reading of Ferguson's work I hardily recommend this book to everyone who desires a clear understanding of the current times and how in the end, it is always the money that makes the world go around.

Ferguson's book should be have equal billing on any one's Christmas wish list alongside Thomas Barnett's book, Great Powers: America and the World After Bush to be published in February 2009. Tom recently posted the table of contents on his blog to give readers a road map of where he is going with his vision of grand strategy.

Great Powers Table of Contents and for more Great Powers material.

It is described this way at Amazon.

In civilian and military circles alike, The Pentagon’s New Map became one of the most talked about books of 2004. “A combination of Tom Friedman on globalization and Carl von Clausewitz on war, [it is] the red-hot book among the nation’s admirals and generals,” wrote David Ignatius in The Washington Post. Barnett’s second book, Blueprint for Action, demonstrated how to put the first book’s principles to work. Now, in Great Powers, Barnett delivers his most sweeping— and important—book of all.

In Great Powers, Barnett offers a tour de force analysis of the grand realignments that are both already here and coming up fast in the spheres of economics, diplomacy, defense, technology, security, the environment, and much more. The “great powers” are no longer just the world’s major nation-states but the powerful forces, past, present, and future, moving with us and past us like a freight train. It is not a simple matter of a course correction but of a complete recalibration, and the opportunities it presents are far greater than the perils. Barnett gives us a fundamental understanding of both, showing us not only how the world is now but how it will be.

I will have more on Great Powers in the coming weeks.

Economics! The Glue That Holds Our World Together

The people have spoken and we prepare to usher in a new administration. On first blush, it is impossible to guess with any certainty how great the course changes will be for our ship of state.

My blog friend Dan of tdaxp.com who was just as sceptical of Obama as I, wrote this post,Change.gov.

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Dan said:

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This is a good sign. Hopefully the transition from the Bush and Obama Administration goes well. The creation of the Office of the President-Elect and creation of the .gov domain name for it, imply that both the Bush and Obama teams are working hard to transition from one set of political appointees to another, but also demonstrate regime continuity to other countries, as well.

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I note that our nation has peacefully changed regimes 43 out of 44 times during our history. This change seems to be off to a smooth transition.

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Turning to the biggest challenge facing both the United States and in turn the nations of our shared World is the economic crisis. It is the first, and most important challenge for our new President and his team. As in past major System Perturbations, working together in a bi-partisan way is the only tactic that works. In our connected world this now means everyone.

To help illustrate my point, I will highlight a series of post this week by Steve DeAngelis of Enterra Solutions.

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Steve wrote this the day after the election.

On the day after elections in America, it seems like a good time to talk about democracy elsewhere. Politicians like to talk about politics and the ideologies behind their particular brand of politics. In the West, we are fond of democracy -- especially representational democracy -- and we try to spread the gospel about it wherever we go. Often we hear it in speeches like the one President Woodrow Wilson gave before Congress in April 1917: "The world must be made safe for democracy. Its peace must be planted upon the tested foundations of political liberty." Over a decade and a half before that speech, Wilson had defined what he meant by democracy.

.....My colleague Tom Barnett and I have preached that if you want to instill democratic principles in governments then improve the lives of the people in autocratic countries. Economic progress almost always precedes political progress. Asia provides two good examples of economics racing ahead of politics: relations between North and South Korea and relations between Taiwan and China. In both cases, economic ties are much stronger than political ones and economic policies in North Korea and China are much more liberal than political policies...

Read the whole post here: Economics Drive Political Change.

Steve then writes about how the effect of our own lax credit rules caused a butterfly effect that has spread it's effect across the globe.

We've all heard about the butterfly effect -- the notion that a butterfly can gently flaps its wings somewhere in the world and set in motion a series of events that result in catastrophic wind damage thousands of miles away. The current financial crisis is something like that. It began with easy credit being given to people who couldn't afford it and with so-called "liar loans." The simple act of lying on a credit form -- repeated hundreds of thousands of times -- set in motion a series of events that has resulted in catastrophic financial damage thousands of miles away in emerging markets. These emerging markets represent the future of the global financial system and governments are trying to find ways to throw them a lifeline.

Steve ends this post with these words of wisdom for our new administration.

Fear must be replaced with hope. At the same time, credit must be extended in an economically sound way. Consumption based on risky credit creates rather than solves problems. Romania sits on the cusp of prosperity and letting it slide back into the morass of poverty that gripped it while it was part of the Soviet bloc would be unwise. The same can be said about most emerging market countries. Financial isolation is no longer an option in a connected world. In the NBC television series Heroes, characters were told, "Save the cheerleader and save the world." Today's heroes need to save emerging market countries to save the world.

Read more...Trust and Credit in Emerging Markets.

In this last post, Steve DeAngelis explains why Americans should be concerned with economic conditions outside their own country.

He writes:

Many Americans who are worried about their economic futures wonder why they should be concerned about someone else's financial crisis half a world away. There are a number of reasons. It was the building boom in China that resurrected the slumping heavy machinery business in the United States. It has been consumers in emerging market countries who have helped ease America's trade deficit over the past several months. Emerging market countries are the West's best hope for reigniting a growing global economy and keeping them afloat so that they can continue to progress is critical.

The anger that has risen among the general public in the U.S. about the government's rescue plan demonstrates that they don't understand the difference between liquidity and solvency. The Treasury is trying to ensure liquidity so that insolvency doesn't become a bigger challenger than it already is. Insolvent companies are going to fail, but they need not drag down the entire economy. President Bush has called for an international meeting to address the global crisis; but Landler notes that "there is a limit to what the United States can do to solve the problems of these countries" because it is wrestling with major financial problems of its own.

"'The most important thing the United States can do is stabilize its financial system,' Mr. Lowery, of the Treasury, said. 'The other thing we can do is to support the actions taken by emerging-market countries.'"

Writing from the eastern side of the Pacific, Shawn of Asia Logistics wrap, has this post about our economic connectivity with Asia.

He begins:

Although most people understand that U.S. trade with Northeast Asia is quite large and significant, it is only tangible for many of us when you begin to break that trade down to a more local level. By using the term tangible, I am referring to the goods and services we buy, the companies or organizations with which we are employed, and the people with whom we interact on a regular basis.

Over the next few posts Shawn will offer a case study of a tangible economic connection between Korea and our own state of Georgia.

Shawn explains his motive this way.

My goal is to provide study material for those interested in better understanding the positive impacts of FDI on local, U.S. communities and also touch on what makes communities successful in attracting FDI. I believe the effort to educate others on the positive impacts of FDI is extremely important at a time when trade with other countries, including countries friendly to the United States, is more and more perceived as a negative for the U.S. economy.

Read more:

Case Study: South Korean FDI in the State of Georgia, Part I

At the top of this post I wrote that economics would be the most important task facing the new administration. To further illustrate that I offer this post by Thomas Barnett, who in this latest Sunday column, makes this observation and prediction about the legacy of the Bush-Cheney administration.

Tom writes:

Barack Obama's victory presents to America a wonderful opportunity to redefine our engagement with the world's rising great powers.

Along those lines, it's worthwhile to remember what Bush-Cheney got right with China.

....We were told by international affairs realists at Cold War's end that America would not be allowed to continue owning the world's largest gun, that other great powers would necessarily balance us symmetrically by creating one of their own.

This has not happened and isn't close to happening anywhere, not even with "rising China," whose military build-up specifically targets our ability to target their ability to target Taiwan's ability to defend itself....

Tom wrote that the most important non-issue since 2001 was:

The lack of a serious U.S.-China confrontation in the years since 9/11 is the most important dog that did not bark across the Bush-Cheney administration.

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In the grand sweep of history, this is arguably George W. Bush's greatest legacy: the encouragement of China to become a legitimate stakeholder in global security.

In true non-partisan form, Barnett in his sweeping grand visionary view made this comment.

Indeed, history will likely judge this success as greater than the Bush administration's failures in Iraq.

Barnett, who has publicly backed the change that he felt Barak Obama would bring to American leadership, ended with this important advice to the new government.

Democrats, who now control both Congress and the White House, would do well to retain the Bush administration's long-term perspective on China, especially during this moment of profound global economic uncertainty, when we need Beijing's help almost as much as it needs Washington's calm leadership.

Barnett: What Bush- Cheney got right with China .

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No nation can rule the world and try and impose it's will on others without unintended consequences coming back to haunt them. Our nation has been the catalyst for change that has benefited not only Americans, but people in every corner of the world. Let us hope we set our course carefully and sail on to meet the challenges and overcome them as we have been doing for the past 232 years.

It's The Money Stupid!

Trade beads 500 BC

Ancent Chinese Money

Gold Dubloons

$Money$

"It's the money stupid" has been a refrain, made popular by politicians in recent years. I first heard this term decades ago when a history professor in describing the motivation behind the Age of Discovery exclaimed that, "It was the money, that rich white guys sought, when they expanded across the globe." That quote as politically incorrect as it would be interpreted today, is at the core of what makes the world function. Money, the token of value that allows for easy trade transactions, is also the primary tool of peace.

Examples of societies who gravitated to trade and in turn creating methods of currency, stand out in contrast to those societies whom, only relied on total warfare to restock their community pantry.

Robert Wright the author of The Moral Animal, pointed out that societies that cooperated and avoided conflict thrived, where societies that were constantly at war with their neighbors eventually were cut off from all contact and withered. And Jared Diamond, in the Pulitzer Prize-winning Guns, Germs, and Steel (1998), gave further support that societies became less violent when they learned through trade, that those they trade become quasi-kin, with whom conflict needed to be resolved quickly, in order to maintain the all important life sustaining trade.

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This week I was reminded of the these two books, and the words spoken by that long ago, history professor about it being the "Money" that makes the World what it is today.

The trigger for that recollection, came when I perused Tom Barnett's column this week. He writes to remind us of a future that is linked to interconnection through trade and in turn, "Money." The product of ecomomic interconnectivity is security and the advancement of civilization, by connecting as many people on the planet to each other through mutually beneficial arraignments. Thus, reducing the likely hood of total war conflict.

Tom writes:

Think about what made America the world's most stable and prosperous democracy for almost a century and a half: the middle class ideology that emerged when we knit together our sectional economies into a continental juggernaut following the Civil War. That class consciousness wasn't born when the victorious North imposed itself on the prostrate South but when the ambitious East integrated the frontier West.

Today's globalization echoes American experience as West networks East and East integrates South, reducing global poverty at speeds never before seen in human history. This international liberal trade order, modeled on our "uniting states," is America's greatest gift to the world.

Read the whole article:

Barnett: Finding logical center for grand strategy

Looking back one week the theme of money and the economic activity to make it is the theme of an earlier column by Barnett.

He begins:

With American combat troops now slated to depart Iraq by 2011, our intervention moves into its final phase, with the crucial goal being the expansion of economic opportunity for ordinary citizens.

When international business looks at oil-rich Iraq, it sees plenty of opportunity. What it doesn't see in many instances, despite rising security, are sufficient local counterparties - both private and public - to make the necessary deals happen.

As America moves on, we must leverage that example to lock in our hard-fought security gains with follow-on economic progress in connecting Iraq to globalization's juggernaut.

Read the whole article:

Barnett: Develop Iraq to cut deals with world

Adding more to the theme today of it being "It's the money stupid," are two posts by Steve DeAngelis, Enterra Solutions blog.

Steve writes:

The news coming out of Afghanistan over the past several months has been mostly bad. Violence is up and development progress has been stymied by the security situation. For most Americans, Afghanistan was the right conflict to undertake following the terrorist attacks of 9/11. The fact that progress has been spotty and that the Taliban seems to be gaining strength in their Pakistani sanctuaries has generated calls for an Afghani surge comparable to the one that made a difference in Iraq.

As tense as U.S./Afghan relations might be at the moment, even the Afghans understand the importance of creating a secure environment to foster a better future. Sustainable development requires a stable and secure environment. President of the World Bank Group, Robert B. Zoellick, recently provided his thoughts on how to proceed in Afghanistan ["The Key to Rebuilding Afghanistan," Washington Post, 22 August 2008].

Read the whole story at"

Moving Forward in Afghanistan

And turning to another example of ecomomic progress being the catalsys for permanent change is this post by Steve DeAngelis about North Korea.

North Korea looks to be once again a country in trouble that cannot even feed its own people [see "U.N. says North Korea needs $503 million in food aid," by Ben Blanchard, Washington Post, 2 September 2008]. I have repeatedly asserted that historically economic progress precedes political progress. Impoverished people are much more tolerant of repressive governments if they believe they hold the key to a better economic future.

Anyone that has followed the Beijing Olympic Games has to have been struck by the Western character of the Chinese audience. I don't know if the Chinese government issued grooming and dress standards for ticket holders, but gone were the drab military-style outfits that characterized the awful days of the Cultural Revolution. The Chinese audience was genuinely polite to the achievements of foreign athletes and just as clearly thrilled with the achievements of their own athletes. There was nothing staged about that. Economics has clearly changed China for the better and its citizens are the beneficiaries of most of those changes. That is exactly the kind of changes that the South Koreans would like to see in the North.

Once globalization washes over walls of North Korea's isolation, it will help bring millions of people living there out of poverty. It will do it one job at a time, but it will succeed.

The whole post:

Breaching North Korea's Walls using Economic Development

In reflection of today's links about money, often touted as the root to all evil. I have another take. Money and economic interaction is the essence of kinship that binds people together. Individuals and societies may falter and fail to see this truth for moments in time, but those who recognized this truth will endure.