Gold News

Niall Ferguson – At It Again

Ackers, brass, needful, spondulicks, rhino – anything but Gold for the million-earning Harvard professor...

"MONEY IS TRUST, not metal," says Niall Ferguson, Harvard egghead and furrow-browed global media star, in his latest book and TV series, The Ascent of Money.

Or rather, that's what the program schedules claim here in London. Ferguson actually says that "Money is not metal. It is trust inscribed." But such Latinate words – like the distinction between money (from moneta; "mint, coinage") and credit (from credo; "I believe") – make for gawky soundbites, all out-sized limbs and acne-scars where smooth-talking straight-to-camera head-shots are required.

So to save you (and ourselves) the trouble of watching or waiting for the opening instalment on Channel Four or PBS – depending on which of Ferguson's trans-Atlantic markets you fit – let's not bother with the subtlety of Ferguson's argument.

Nobody else does. Least of all, it seems, the economic historian himself.

In a dry, academic paper on "monetary rules & policy credibility in developing countries" last month, he happily wrote of the time-inconsistency theorem and the credibility effects of hard pegs. He even used the odd Latin phrase – inter alia – to move his argument forwards. But on telly...?

"Bread, cash, dosh, dough, loot, lucre, moolah, readies, the wherewithal...Call it what you like, money matters. To Christians, love of it is the root of all evil. To generals, it is the sinews of war. To revolutionaries, it is the chains of labor..."

This prime-time bathos – taken verbatim, apparently, from the opening shots of episode one and the introduction to his 432-page, $29.95 opus (it's most certainly blurbed on the jacket) – leads pretty much every review in the British press. Expect the same cut'n'paste journalism when The Ascent of Money hits North America. Because it works, as Niall's progress so clearly shows. A seven-figure income demands low demotic if a tenured professor is to escape the lecture hall and really start pulling in the ackers, brass, bucks, coinage, needful, spondulicks, rhino...

"What's the most lucrative work you've ever done?" asked a gushing hack from the London Times last month.

"It would probably have to be the consulting and advising work I have done for investment banks and hedge funds," came the reply. "In the glory days of 2006, demand for a historical financial perspective was very high and there was a point when it was not impossible for me to get $100,000 for a one-hour speech at some extravagant hedge-fund manager conference in an exotic location."

Hot on the heels of this easy money bonanza – a signal of just how over-inflated faith in debt, credit and hedge funds had become – the real prize showed up: a chance to help make policy inside the White House! Not since Ronald Reagan promised "Morning in America" had a TV star got so close to the Oval Office. Least of all a Scotsman with a British passport and no vote in the US election.

Unlike his English air-time rival, Simon Schama, however – who had the front to force his disenfranchised opinion on America with a TV series and supporting book-tour – Prof. Ferguson picked the wrong side. And sadly for anyone hoping to start trusting in credit again, he still can't get past a soundbite first chewed up and spat out at the end of the 20th century.

"The Twilight of Gold appeared to have arrived," claimed Professor Ferguson of the late 1990s, stepping out of the lecture hall and into his gypsy fortune-teller's tent, in his 1999 tome, The Cash Nexus. "True, total blackout is still some way off," he forecast, and "gold has a future, of course, but mainly as jewelry."

Roll on a decade or so, and the Gold Price in Dollars, Euros, Sterling and pretty much everything else has trebled and more. Yet still the fact eludes our hero. Trust, not metal, only acts as money for as long as trust is not abused. Belief in credit makes a poor substitute when blind faith gets what it's got coming.

What Ferguson called in 1999 the "historic anomaly" of gold's previous surge – peaking at $850 an ounce for a few brief moments early in 1980 – was only felled by double-digit interest rates, paid by the Federal Reserve under Paul Volcker to restore faith in the Dollar and kill the soaring inflation of 1976-82. Yet in a speech supporting John McCain made this April, Ferguson thanked Ben Bernanke's "pretty fancy footwork" for making this only the worst financial crisis since the 1970s, not the 1930s.

Fancy footwork meaning the worst negative real interest rates in three decades. Pretty fancy meaning the failed and swiftly reversed attempt to keep nominal US rates at 5% after Bernanke's predecessor, Alan Greenspan, inflated the currency to dance round the 2000-01 recession.

Indeed, as Niall Ferguson told the Toronto Globe & Mail in October:

"The one thing we have learned from the Depression is that you must avoid massive bank failures. It was really the collapse of the banks that caused the great contraction. We've managed, through the aggressive efforts of the Fed, to stave off that nightmare scenario. We've repressed this crisis. That's why I call it the Great Repression."

Is there no doubt, no dark midnight of the TV schedules in amongst the library stacks? "Well, I have been debating today whether Gold Bars really are the answer," Ferguson confessed to the New York Magazine last month. (Like the London Times, it also wanted to know more about his money than his research.)

But "they probably aren't," he decided. Contrarian investors, as you were!

Don't get us wrong; relying on history to try and plan for the future remains the only practicable course. If you won't study the past, there's little else worth the trouble. But that's not the same as asking historians to forecast the future, however. Smart, serious scholars – even those who've yoked history and finance together to create something new, exciting, deep – can trip up when trying to describe today, let alone the world of tomorrow.

"Ferguson ends with a chapter, strongly influenced by Schumpeter and Darwin, which describes financial markets as evolutionary, marked as he puts it by Cambrian Expansions and Great Extinctions," reports the ever-doubtful, ever-cautious James Buchan in The Guardian's recent review. "It is bravura Ferguson, supremely self-confident, demotic or even pubby, and ending at a point that is the precise reverse of observable reality."

Ferguson's comedy pratfall this time around? "The only species that is now close to extinction in the developed world is the state-owned bank," he concludes The Ascent of Money, before scrawling across the final page-proofs, "though the nationalisation of Northern Rock suggests the species is not quite dead'."

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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