温故而知新，可以为师矣

the title of this post is a quote from confucius' analects, "he who through knowledge of the old, understands the new, can be a teacher." a simple but powerful idea, which lies at the heart of one of the central points of this blog: long term averages always catch up with the market.

niall ferguson, a scottish professor who teaches history at harvard university, is a strong proponent of this concept. he has recently received much attention because in his book "the ascent of money", published just as the financial crisis was starting to unfold, he predicts the crisis and describes its causes.

he is also a talented speaker, and 2 months ago, when wall street froze up with fear, he delivered a brilliant speech at the carnegie council, in a room full of very old people eating muffins.

highlights:

* so many smart people were surprised by the crisis, because they only referred to their own life's experience. the problem is that this experience is never long enough to include the 1930's, and is therefore misleading. understanding financial history over a much longer period provides a far better perspective.

* increasing home ownership in america had a political aim; home owners tend to be more conservative and therefore vote conservative, compared to people who rent

* the much-talked-about decline of american power as a result of the crisis must be seen relative to how other powers are faring, and so far, they are not faring well. this, paradoxically, is good news for the u.s.

* the post-credit crisis era will depend to a large extent on the relation between china and america. for now, china has little choice but to keep buying american treasury bonds.

this is a rare opportunity to see a visionary from the world's number one academic institution speak, on a topic that is not only relevant now, but will remain relevant as long as money and markets exist. skip the very boring introduction by the host and drag the cursor directly to 4min 15sec in the video.



the book has also been made into a tv series by britain's channel 4, and although it has been removed from youtube, below is the first program, where professor ferguson explains the origin of modern banking in the west, and its role in society.