The Ascent of Money and Chiamerica

The Ascent of Money by Niall Ferguson

The next time anyone blames Wall Street and the US Federal Reserve for the global economic downturn, throw the book at him. Not just any book but Niall Ferguson’s The Ascent of Money.

This excellent, immensely readable history of banking and finance published last year not only saw the crisis coming but was quick to pin the blame – not on America but on Chiamerica. Ferguson, an eminent British economic historian, describes how American consumers binged on cheap Chinese goods until the US economy went bust, dragging the rest of the world into a recession.

Here’s a televised part of the book dealing with Chiamerica.

Ferguson writes:

In effect, the People’s Republic of China has become banker to the United States of America.

At first sight, it may seem bizarre.Today the average American earns more than $34,000 a year… the average Chinese lives on less than $2,000. Why would the latter want to lend to the former?

The answer is that, until recently, the best way for China to employ its vast population was through exporting manufactures to the insatiably spendthrift US consumer.

To ensure that those exports were irresistibly cheap, China had to fight the tendency for the Chinese currency to strengthen against the dollar by buying literally billions of dollars on world markets…

From America’s point of view, meanwhile, the best way of keeping the good times rolling in recent years has been to import cheap Chinese goods. Moreover, by outsourcing manufacturing to China, US corporations have been able to reap the benefits of cheap labour too. And, crucially, by selling billions of dollars of bonds to the People’s Bank of China, the United States has been able to enjoy significantly lower rates of interest than would otherwise have been the case.

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A writer in the White House

Dreams From My Father by Barack Obama

It was such a pleasure reading Dreams From My Father. It doesn’t read like a book written by a politician at all. Barack Obama has the novelist’s touch. How can you put down a book with passages like this?

Three o’clock in the morning. The moon-washed streets empty, the growl of a car picking up speed down a distant road. The revellers would be tucked away by now, paired off or alone, in deep, beer-heavy sleep, Hassan at his new lady’s place – don’t stay up, he had said with a wink. And now just the two of us to wait for the sunrise, me and Billie Holiday, her voice warbling through the darkened room, reaching toward me like a lover.

I’m a fool… to want you.
Such a fool… to want you.

It’s pure magic, Barack Obama describing the night after a college party makes you feel his loneliness as he listens to the music in his room.

He describes winter in Chicago and how it affected his work as a community organizer:

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