Money talks...and writes history too

Money: A Story of Humanity by David McWilliams (Simon and Schuster £25, 416pp) 

If you still think of economics as ‘the dismal science’, then this firecracker of a book might change your mind. David McWilliams is an economist who formerly worked at UBS and the Irish Central Bank, and he’s produced an enthralling 400-page gallop through pretty much all of recorded history – but from the point of view of money.

 McWilliams sees money as generally liberating, progressive, globalising, a force for good, because ‘it releases human energy’. Yet money also ‘amplifies’ our darker instincts, he warns, its hidden allure often at work behind many of the most world-shaking events.

A lot of history has essentially been about money-grabbing by the already rich and powerful. Ordinary working people never seem to benefit much.

Sterling examples (excuse the pun) of major money-grabs, subsequently dressed up in the garb of political necessity, fiscal prudence or even godly righteousness, include the English Reformation. 

How very convenient for a heavily indebted Henry VIII that by switching from Catholicism to Protestantism he could seize the vast wealth of England’s monasteries for himself. 

Soon, ‘kings and princelings all over Germany followed Henry’s example. From the perspective of a bankrupt king, Protestantism was like winning the lottery.’ 

McWilliams offers a similarly cynical view of the French Revolution, where the Catholic Church was associated with the hated Ancien Regime. A golden opportunity for an asset-grab then, swiftly taken by the thoroughly unlikeable operator and statesman Charles-Maurice de Talleyrand. 

As the author observes, ‘You must be some kind of almighty class of scoundrel if Napoleon describes you as “a pile of s*** in silk stockings”.

 But by December 1789 the enforced nationalisation of Church lands had provided the revolution with enough collateral to back the issue of 400 million livres’ of a kind of government bond – and the French economy was saved.

Britain, the arch-enemy of Revolutionary France, tried to destabilise it again via the cunning plan of flooding France with counterfeit currency. Sly and underhand, for sure, but economically astute. 

Later though, Britain herself became a target for such a black op in currency forgery, courtesy of Adolf Hitler. And it very nearly came off. 

Employing the services of a crooked Jewish forger called Salomon Smolianoff, by 1943 the Nazis and their team of counterfeiters in the concentration camps had produced a staggering £134million in fake notes, ‘which amounted to four out of every ten pounds then in circulation’. This is some £7.5billion in today’s terms, reckons McWilliams, a truly economy- wrecking sum.

The plan was to air-drop these phoney millions over England by bomber fleet, hoping that with such a colossal overnight increase in the money supply, ‘inflation would rip through the system... triggering panic’.

The only reason this malevolently brilliant operation failed was because Germany couldn’t spare the bombers due to the increasingly desperate situation on the Eastern Front.

The hidden hand of money is everywhere, funding war and peace, kings and revolutions, grand imperial projects and even art booms. And it’s all a complete fiction. 

Today’s ‘fiat money’, printed by government diktat and unrelated to any tangible assets like gold or silver, really is smoke and mirrors – but if everyone continues to believe in it with equal zeal, then it retains colossal power.

In terms of human psychology, at least, money is strangely akin to religious faith. Whether it’s objectively ‘true’ or not is irrelevant.

The ultimate form of fictional money is surely Bitcoin, where you exchange hard currency for, literally, segments of computer code: not an asset, argues this economist, more a ‘tradable gambling contract’ – yet it has still created many new millionaires, and even billionaires. 

But national currency – pounds, dollars, yuan – is a bit of a scam as well. You can use only the currency that a particular state issues within that country, the state can print more whenever it wants – directly reducing the value of the pound in your pocket – but you try printing more for yourself and you go straight to jail. Second only to the power of declaring war, says McWilliams, is the state’s ironfisted control over money.

We have come a long way from the ancient Sumerians 5,000 years ago, although it’s startling to learn that they already knew all about both simple and compound interest. 

The first known human writing – on a clay tablet – documents a loan of barley to a chap called Kushim for his micro-brewing business, circa 3000BC, repayable after two and a half years at a hard-nosed 33.33 per cent.

The Romans had banks and bankers, insurance contracts, shareholder capitalism and even quantitative easing. Under Emperor Tiberius, an attempted coup by the rebel Sejanus sent panic through the economic system, and triggered a credit crunch. ‘What is the solution to too little money? More money, and lots of it,’ says McWilliams.

According to historian Tacitus, the emperor bailed out the banks of Rome with a colossal 100million sesterces, and it worked. ‘A masterclass in what a central bank and treasury could – and should – do in a credit crunch.’

For mathematical and financial wizardry, perhaps no one beats Leonardo of Pisa, better known as Fibonacci – his ‘Fibonacci sequence’ of numbers appears everywhere in natural patterns.

In 1185, this young maths geek stood on a Sicilian quayside pondering why the Arab traders there, dealing in saffron and cinnamon, almonds and myrrh, could do complex sums rapidly in their heads, while the Europeans were using an abacus. Were the Europeans just stupid?

 No, they were using Roman numerals, which catastrophically meant no zero. An Indian invention from the 3rd century BC, zero is surely the greatest lightbulb moment in maths, hence the excellent Indian joke:

‘What did the Indians ever give the world? Nothing.’

Maths was revolutionised, buying and selling were transformed, economies boomed, and the Renaissance began to blossom.

‘Without Leonardo of Pisa, there is no Leonardo da Vinci.’ A sweeping statement, maybe, but, asks McWilliams, you try adding XXVIII and MXIV in your head without translating them into Arabic numerals. Impossible! As a result, European thought, trade and science was held back.

The book is full of such claims and startling revelations, not to mention a brilliant deconstruction of The Wizard Of Oz as a satire on the Gold Standard (which it was intended to be). The Wizard represented the banking elite and the Yellow Brick Road, the Gold Standard itself. It’s an argumentative and highly enjoyable read. 

And on one thing we can surely all agree: whatever else happened in 2008, the bill was paid, and is still being paid, by everyone else, not the guilty. More shocking, says this ex-banker, ‘soaring wealth inequality was not the unintended consequence of quantitative easing – it was the objective’.