Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance (Yale Series in Economic and Financial History)

As if the subtitle of this book is not enough in and of itself! This is captivating financial history written in a thoroughly accessible style. Klaus recounts tales of guile and guts so audacious they are hardly believable. Some men were no good crooks and some were so bad you almost rooted for them to pull it off. And some did. The list of both the swindlers and those swindled contains a who’s who of Victorian names and notables, as well as many cons almost lost to history. My favorite anecdote details how a young Disraeli got caught up in a New World mining concern, apparently setting off his life long pattern of debts and living beyond his wealth, as well as his writing as a means to dig his way out of financial trouble. Klaus’ book weaves history seamlessly with the politics, culture, and literature of the day. I enjoyed the frequent Dickens interjections. Klaus details, again and again, how those less scrupulous than Adam Smith got away with so many shenanigans in an age when gentlemen like Smith still held to the the ethos, “man naturally desires, not only to be loved, but to be lovely; or to be that thing which is the natural and proper object of love. He naturally dreads, not only to be hated, but to be hateful; or to be that thing which is the natural and proper object of hatred. He desires, not only praise, but praiseworthiness; or to be that thing which, though it should be praised by nobody, is, however, the natural and proper object of praise. He dreads, not only blame, but blame-worthiness; or to be that thing which, though it should be blamed by nobody, is, however, the natural and proper object of blame.”

Above all an unexpectedly and incredibly entertaining read! Forging Capitalism was recommended to me by a friend that knew of my passion for history though I delighted to discover that Ian's well researched historical insights and observation are complimented by a profoundly humorous and entertaining voice. A highly recommended read!

I love to read about anything regarding financial matters, so I was immediately intrigued by this book. However, if you are not especially interested in all things financial, this might be a bit of a slog, no disrespect meant to the author. And, likewise, if you are expecting something in the style of, say, Michael Lewis, well...no. It's not badly written by any means, but the strength of the book is also its weakness, being concerned with matters of fraud in early commerce might not be a subject that all will warm up to. I got a little lost a couple of times, as when he went into detail about a fraud perpetrated in 1910 concerning a cotton trading firm in Alabama. Bills of lading, transfer agents, banks, railroads, foreign purchasers, court cases, etc. was hard for me to follow, so I'm sure that I didn't get the full impact of what he was trying to convey with this example. On the other hand, though, this book covers areas of finance that have been lightly written about, his sections about the evolution of insurance was very instructive. If you are a serious student of finance, this should be a five-star rating. For someone with a more general interest, somewhere between three and four starts. Sorry to break the chain of five-star reviews. I'm glad I read the book, and I did get some useful information from it. I just can't get five-star excited about it.

This is a great read- substantive, enlightening and fun. Klaus deftly moves from one outlandish character to the next, giving the reader through a series of vignettes both a deeper understanding of the forging of the capital markets we know today and the prism through which they were viewed at the time. More impressive still given the topic, Klaus manages to give the reader plenty of fodder for reflection without ever lapsing into heavy-handedness or pedantic prose. I will also add that, for anyone that has suffered through accounts of bills of lading before, Forging Capitalism is an oasis in the desert and without question the most entertaining account of that instrument to date.

I'm not sure it's worth reading or even finishing. The first section is quite weak and adds almost nothing to Dawson's account of the Poyais fiasco. The second section is better, but the account of principal-agent and risk is not coherent, and the history of financial fraud in London is awfully shallow. I don't know that the secondary literature was reviewed very carefully, but on the face of things, I doubt it. As for the rest, I'm afraid sunk cost takes over. Maybe there's.gold, but I'm not likely to find out. Ecstatic reviews and blurbs from heavy hitters in a very prestigious series. Something doesn't quite wash here. Wish I knew what it was.

This is an excellent piece of financial history and, at the same time, a superbly entertaining book. Ian Klaus provides a compelling history of the back and forth between fraud and financial innovation, and thereby illuminates why markets and institutions formed the way they did. At the same time, he introduces us to a number of colorful characters and swindlers that are fascinating in their own right. As an economist interested in financial history, I highly recommend this book. You'll enjoy it!

Forging Capitalism is one of those rare books which are really fun to read and also allow you to pull information from and look smart at a dinner table. I would recommend this book to everyone who is affected by fraud and manipulations of financial instruments and markets (this means everyone!).

Klaus writes with effortless care. Masterful handling of a sweeping subject. Offers powerfully relevant insights, and makes sure his readers have a good time along the way.

A moderately interesting Economics bookclub choice. Here are my notes:OverallI moderately enjoyed this book. It was well written and covered some scandals that were interesting, and that I was previously unaware of. However, it is clear that the book has been written in the author’s spare time. As such it is an impressive effort, but is betrayed by its lack of depth: just 6 frauds form the core of the book. These are used to highlight flaws in the financial system, and he claims that the reforms that resulted from them ultimately led to the modern financial system. This too big an extrapolation. To be done properly more data in the form of a wider survey of frauds was required. In sum, I found this book moderately diverting but shallow and forgettable.The goodI enjoyed the opening chapter on the social and moral effects of trade. Philosophers such as Adam Smith believed that commerce through fair exchange had resulted in social virtues such as honesty and thrift that had benefitted society. Commerce was both a moral and an economic force for good.The 6 frauds covered were discussed in some depth and were all interesting. I particularly enjoyed the discussion of Lord Cochrane’s stock market coup, of the Poyais development scandal and the Beaumont Smith Consuls fraud.His characterisation of trust within financial markets moving from trust based on status, to reputation, to reputation with verification, to verification with through paid third parties was plausible but ultimately unconvincing.The badThe big thing is the lack of depth. Not enough frauds were covered. In addition there is a lack of breadth to his knowledge. For example, he quotes extensively from Dickens’ Our Mutual Friend on the importance of reputation and how it can be manufactured. Yet in the discussion about the Watts Life Insurance fraud not once does he quote from Dickens’ Martin Chuzzlewitt whose plot centres round a fake Life Insurance company. I was left with the impression that he was good on the bits he knew, but that he knew relatively little.He is confused in his discussion of status and reputation. He seems to believe that the two can be separated but then proceeds to confuse them. For example on page 107 he states that : “Reputation building mechanisms included furnishings, etiquette, manner, dress and the location of one’s home.” This is not reputation, but status. To build a commercial reputation you had to build it in commercial circles through successful transactions.The examples that he gives that to support his assertion that trust was initially based on status do not hold weight. Lord Cochrane’s stock market fraud did not succeed because he was a Lord, but because his courier was dressed to look the part of a cavalry officer returned from the Napoleonic wars. Sir Gregor MacGregor was the son of a sea captain, who married into wealth and then became a failed South American revolutionary general. His ability to perpetrate his fraud had nothing to do with his status, and all to do with his exploiting the zeitgeist of the time. If anything, MacGregor’s fraud shows how you can perpetrate a successful fraud with neither reputation nor status if you have enough chutzpah.Lack of charts.