Rob Coyte's Blog

It provides a comprehensive and interesting overview albeit in a relative short period of time and I thoroughly recommend you either watch the DVD or read the book.

Through looking at the history of money the overall conclusion is that we never learn from history when it comes to issues concerning money. Given the current financial crisis it provides a look at how we got here and indeed a much needed perspective.

Some of the interesting stories include the establishment of the first limited liability company in 1602 by the Dutch and how they fought wars to protect their interests. Niall takes a close look at the first stock market bubble “The Mississippi Bubble” caused by a Scots man John law, a convicted murderer and a compulsive gambler. This was basically a Ponzi scheme, named after an Italian American Charles Ponzi, which has remerged recently by the former Wall Street legend Bernie Madoff that has lost tens of Billions. He looks at the dubious business and accounting practices of Enron and its subsequent collapse from being the darling of wall street. He draws the parallel between this financial disaster and the “Mississippi Bubble” some three hundred years earlier. He talks about the modern day fraudulent practices and the “cooking of the books” and the dishonest actions of the directors and senior management led by Ken Lay. Most of the deception incurred by Enron was by their methods of “hiding debt” off balance sheet and such practices have been picked up by other executives in the western world to lead to today’s financial crisis.

He looks at stock markets booms and crashes and the “herd mentality” that investors demonstrate to cause such huge over reactions, from the overly optimistic to the overly pessimistic, indeed greed to fear. Probably one of the most famous descriptions of this was by former Federal Reserve Governor Alan Greenspan who called it “irrational exuberance”.

He looks at the fallacy of “Safe as Houses” and how investors at their own peril take the view that property never goes down. Whether this be it investors or owners in real estate itself or indeed to lenders that lend money against property. Niall says “No amount of financial alchemy can turn little suburban boxes into treasure chests with roofs”. From individual circumstances such as the losses incurred by the 2nd Duke of Buckley who lost his immense wealth in property spanning more than 67,000 acres in England, Ireland and Jamaica, or collectively such as The Great Depression which saw US property prices plunge as people became unemployed and could not afford their mortgages.  Other examples include the  1960’s Savings and Loans crisis which saw US property values collapse, in the UK property prices fell by 18% between 1989-1995, and then the big one in 1990 the Japan property market collapsed by 75%.

From the very first bankers, the Loan sharks who inflicted physical injury for non payments, they have never behaved well.  Ever since deregulation of the banking sector it has definitely been a case of “caveat emptor” or “Buyer Beware”. In 1984 in Dallas, Texas The Empire Savings and Loan scandal in Texas where the bank scammed investors for by raising deposits to then fund borrowings for lenders so they can buy worthless property at highly inflated prices with a developer they were in business with. This scam cost $153 Billion which was a bill put by the tax payer but this amount was going to be miniscule compared to the crisis 20 years away. The “Sub Prime” collapse which has caused global financial dysfunction as a result of banks lending people with no incomes loans to buy houses. The banks packaged these loans (securitised them) and the sold them off (for a fee) to investors all around the world. When the loans were seen as bad due to rising interest rates or declining property prices the chaos followed.

Probably one of the most fascinating aspects I felt of the series was how invariably the powerful have fallen. This is no more evident by the fall of Lehman Brothers, Bear Sterns and Merrill Lynch in the latest crisis.

Niall also looks at globalisation and the over reliance of the developed world on having their spending being funded (borrow money) by what were considered the “Emerging Markets” lead by the rising giant China.