Articulate burrowing of financial history

Having been in the foreign exchange market for nearly twenty-five years, I have done more than my fair share of writing, teaching, running programmes and, indeed, developing study material on the subject. So much so that I am bored to tears with reading about fundamentals, the history of the foreign exchange market, or, horror of horrors, An Introduction to Core Concepts.

However, never having reviewed a book before, and having always been somewhat intrigued by Mark Mobius — as much for his exotic and elegant name as anything else — I jumped at the opportunity to review his new book on foreign exchange.

Having undertaken the task and received the book, my first thought was, “Oh, oh, why did I take up this foolishness?” But, as I browsed through the book, I found it to be excellent in many ways. First of all, it is wonderfully readable — a remarkable achievement for a relatively flat subject, and particularly for someone like myself, who already has a fair grasp of the “core concepts”. The layout, with any number of bite-sized box items, interspersed with cartoons, tables, graphs, and, oh yes, text, makes the book a very easy read.

Secondly, there are a huge number of very interesting tidbits — for instance, I didn’t know how the dollar sign ($) came to be. Nor, for that matter, did I know that Irving Fisher, who is widely scoffed at today as the man who, a few days before the stock market crash of 1929, said, “Stock prices have reached what looks like a permanently high plateau”, was also the first economist to understand the difference between nominal and real (ie, inflation-adjusted) interest rates.

But as much as entertaining, the book is an articulate and comprehensive read taking us through conceptual beginnings like the origin of money; to the evolution of markets and trading communities; to the sophistication of these communities as they evolved to global markets today.

Surprise highlights include a case study of Johan Palmstruch, considered to be the earliest banker, but generally forgotten in textbooks. Again, it was very interesting to learn that usury, which is not permitted in Islam (“Believers do not live on usury….” says the Koran), is also frowned upon by the Bible, as well as in several traditions of India, and is also looked askance at by more modern Western philosophers like Thomas Aquinas and Immanuel Kant.

Mr Mobius also describes the Great Depression in considerable detail, explaining how excessive debt, speculative prices, discriminatory trade restrictions and international monetary disorder — all a chilling reminder of the current crisis — led to the collapse of global financial markets. He points out perceptively that “the free float system started by default” since world governments could not come to an agreement. Thus, the widely prevailing monetary system we have today was born out of chaos — perhaps, a tribute to our ability to come back from “the end of the world”.

This almost spiritual sense is also found in the section on ethical issues involved in currency speculation. There are many celebrated investors/speculators/what have you who, like people who reach peaks in other fields such as science and the humanities, show signs of advancing spiritualism, and it is, indeed, heartening to see this repeated here.

There are, of course, a few disappointments — for example, the somewhat superficial treatment of derivatives and the emerging markets crises — but you can’t cover the world in a book. But, as I said, these are very few, and more than made up by, for instance, the detailed look at hedge funds and strategies that they use — information that would not be easily accessible to the lay reader.

Perhaps the most interesting part is Mr Mobius’ look at the future, where he points out two conflicting trends. The first is about accelerating globalisation and the complete shift to electronic money — there is a very interesting section on the QQ, a new Chinese coin created by online marketers, which has already moved into the real world. The second is a brief mention of Community Currencies, which, in many senses, are a reactionary response to globalisation.

All in all, a very entertaining book — you can be sure it will be a hit as a giveaway at forex and other conferences. Mr Mobius is nothing if not a smart businessman.

FOREIGN EXCHANGE
AN INTRODUCTION TO THE CORE CONCEPTS (MARK MOBIUS MASTERCLASS)

Mark Mobius
Wiley
250 pages; $34.95