A brief history of money in three steps
Vivek Kaul’s trilogy looks at the place of money in human life and its precarious fate
The Easy Money trilogy (HarperCollins Publishers India, ₹350 each) may look like a lot of words on a simple subject: money. It’s what you use in the form of coins and notes to buy stuff: That’s what we tell children, and it doesn’t require any more complicated an explanation for grown-ups either.
But what happens when you have too much of it? Easy access. One might rejoice at first, but as the trilogy shows through an extensive account of global financial history, it can lead to needless risk taking, many a times culminating into panic and chaos. This phenomena of easy access to a simple means of payment and its consequences is what Vivek Kaul explores in the three books.
Kaul has used excellent research, bolstered by his journalistic approach, to gather and sew together information and data seamlessly into the books: Evolution Of Money From Robinson Crusoe To The First World War; The Evolution Of The Global Financial System To The Great Bubble Burst; and The Greatest Ponzi Scheme Ever And How It Is Set To Destroy The Global Financial System.
The first book starts out simple, with different objects that were used to barter in the past. From cowrie shells in Asia to salt in Africa, cacao beans in Mexico, even tobacco, these items were all legitimate forms of “money” used to buy other things. This isn’t new information but the recounting still holds the readers’ interest. Kaul, then, explains how gold and silver became the two most important commodities to trade among tribes, kingdoms, and, eventually, countries.
The first point that jumps out is that financial risk-taking tends to recur over several periods. Each time, risks are taken by a few in power, and the consequences, borne by all. Risks that don’t work upset the system, and, eventually, the result, as Kaul shows, is higher income inequality in society. Once again, he isn’t giving new information, but the way it’s presented makes you realize that the spirit of money embodies absolutely any form it takes. Be it paper money, gold or silver, along with its use as a means of trade, it ignites ego, greed and risk in society.
Kaul shows that any type of tampering with the market-determined value of money has roots going back centuries. Devaluing currency—for example, what China did in 2015 or what Russia did with its rouble in 1998—is not a new concept. In the first book, Kaul illustrates how gold and silver coins were consistently devalued over the centuries to accommodate the needs of kings who were in debt, or, simply, greedy. Early in the trilogy, it’s apparent that individual greed rather than collective policymaking, incompetence rather than calculated monetary action, and selfish decision-making rather than meaningful action, is what brings about change in monetary value.
This is the second learning: People in power, the ones with authority, make all the decisions, but rarely is it the right one for the masses. In the first book, Kaul refers to 16th century England, where repeated debasement carried out by successive rulers reduced the metal content in coins so substantially that queen Elizabeth I suggested launching an entire set of new coins and scrapping the old. This is somewhat reminiscent of our own experience with demonetization. The events leading up to both these phenomena were different and centuries apart, but, ultimately, show how one person’s idea of a solution can potentially change the course of events.
The most poignant demonstration of such an instance is perhaps Winston Churchill’s decision to return to the gold standard after World War I, and his choice to keep the same parity of pound to dollar. This decision was primarily responsible for the recession that followed in Britain over the next few years, for all the jobs lost and income not earned. Kaul retells this story to highlight, without expressly saying it, the issues around whimsical decision-making by people in power.
Kaul has put the latest examples of this historical trend in the third volume, where he shows how the US politicians’ push for housing for all led to an accumulation of retail debt; how economist Alan Greenspan’s lapse in decision-making when it mattered the most spurred on what can be described as an earthquake in the US banking system (and the global financial system), and last, how Henry Paulson’s decision meant that Lehman Brothers eventually became the exception to the rule.
This rule is the third important conclusion the book refers to: that large corporations and banks have taken government bailouts for granted. As money shifts from one lender to the another, its value increases, but there is little concern about the actual value of the underlying asset. Instead of protecting the working class, bailouts have made leaders take greater risks with little fear of the liability and accountability that comes with failure. The bonuses of the top management and CEO salaries, Kaul points out, didn’t diminish despite the colossal failure of the banking system being exposed in the aftermath of the global financial crisis (GFC).
In spite of its retelling of the facts already out there—pick up Niall Ferguson’s The Ascent Of Money, a popular book that has a similar story to tell—Kaul’s books are written accessibly and raise interesting questions. The detailing, including personality portraits of certain prominent individuals, offers an intimate touch. Where the books fall short is in putting forth the author’s own conclusions about the events he describes. We don’t get to know how he feels because most of the opinions and conclusions, though well researched, are bites from other publications.
In the last line of the book, Kaul does give us a sample of his opinion, but, by waiting till the end, he perhaps makes the others’ opinions weightier. As a result, many of the conclusions of the third book, which is also the most relevant in our times, are about the US economy and the US dollar. While the dollar, no doubt, is the most important currency in the world today, micro factors in other economies differ widely. For example, it would be interesting to know which economies suffered the least in the aftermath of the global financial crisis, and the factors that led to such a scenario. Are there financial and economic models other than the apparently flawed American one we can learn from? These are some of the questions that remain unanswered.
While the first part of the trilogy is a fun read, interspersed with gripping historical facts, the second makes for useful reading not only for those interested in financial markets but also for traders, to learn about the impact globalization can have on prices and demand. The third part is more difficult: If you don’t understand financial markets and their nuances, you may feel a bit heavy in the head trying to get through it. Kaul, for his part, has tried to simplify the details, but the system and its workings are so complicated that the problems arising from them can perhaps not be retold in too plain a manner.
The Easy Money trilogy is for the shelves of students interested in the subject. For the layperson working in a global firm, who got laid off in 2009 and has struggled to find a professional footing since, it would be a book to read to know who they can blame for their situation.