From Shylock's pound of flesh to the loan sharks of Glasgow, Niall explains the origins of credit and debt, and shows why credit networks are an indispensable part of any civilization. For the more developed they are, the less likely it is that creditors will exploit their leverage over debtors, as happens in "Third World" Glasgow. Indeed, in Memphis, Tennessee, it's the bankrupt who is king, walking away from debts in a way that would once have been unthinkable.
How did finance get out of the ghetto and become the realm of the masters of the universe? The answer lies in the rise of the bond market in Renaissance Italy. With the advent of bonds, war finance was transformed-a transformation that spread to North Western Europe and ultimately across the Atlantic. It was the bond market that made the Rothschilds the richest and most powerful family of the nineteenth century. True, the great inflations of the mid twentieth century threatened to weaken the power of the international bond market, wiping out the real value of generations of savings. But since central bankers joined forces with financial markets to defeat inflation, more and more of us have joined the ranks of bondholders.
Why do stock markets produce bubbles and busts? Niall goes back to the very origins of the joint stock company in Amsterdam and Paris, tracing the rise of the Dutch East India Company and the fall of the French Mississippi Company. He finds some telling parallels between the French financier John Law and Enron CEO Ken Lay—and asks if the bust like that of 1719 (or 1929) could happen again in our time. Drawing on the new theories of behavioral finance, he shows why human beings have a herding instinct when it comes to investment. And no one can accurately predict when the bulls might suddenly stampede.
Life is a risky business—which is why people take out insurance. But in the face of a really big and unexpected disaster, like a hurricane or a war, the state has to step in. Niall travels to New Orleans, post-Katrina, to ask why the free market can’t provide adequate protection against catastrophe. His quest for an answer takes him back to the origins of modern insurance in the early nineteenth century and to the birth of the welfare state in post-World War Two Japan. What went wrong with the welfare state? And why did Chile embark on the world’s most radical reform of social security in the 1970s and 1980s? What lessons can we learn in Santiago as the American and European welfare states approach a similar day of reckoning?
It sounded like a simple idea: give back state-owned assets to the people. After all, what better foundation for a property-owning democracy than a campaign of privatization, encompassing housing? An important economic theory says that markets can’t function without mortgage markets, because it’s only by borrowing against their assets that entrepreneurs can get their businesses off the ground. Yet what if the mortgage market is revolutionized by securitization, the buzzword of the 1980s, meaning that countless individual mortgages are bundled together and sold off to the highest bidder? And what if in the second wave an elite of private equity companies buy up all the shares—taking the company private again, and narrowing the charmed circle of property ownership?
Question: What’s an emerging market? Answer: One where emergencies happen. And yet since the 1990s the world has seen an amazing turnaround. Once risky markets in Asia, Latin America and Eastern Europe—which took down pioneer hedge fund Long-Term Capital Management in 1998—seem to have become better investments than the U.K. or U.S. stock market. The explanation is the rise of “Chimerica”, the economic marriage of the People’s Republic of China and the United States of America. But how much sense does it make for poor Chinese savers to lend to rich American spenders? Could Chimerica turn out to be a chimera—and could its breakdown usher in a financial crisis to match even the meltdown of 1914, when the world’s leading stock markets literally closed their doors.
Presenter and Writer - Niall Ferguson
Series Producer - Melanie Fall
Series Director - Adrian Pennink
Producer - Joanna Potts
Director of Photography - Dewald Aukema
Series Editor - Orly Danon
Executive Producer - Simon Berthon