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Winner of the 2010 Pulitzer Prize

With penetrating insights for today, this vital history of the world economic collapse of the late 1920s offers unforgettable portraits of the four men whose personal and professional actions as heads of their respective central banks changed the course of the twentieth century


It is commonly believed that the Great Depression that began in 1929 resulted from a confluence of events beyond any one person?s or government?s control. In fact, as Liaquat Ahamed reveals, it was the decisions taken by a small number of central bankers that were the primary cause of the economic meltdown, the effects of which set the stage for World War II and reverberated for decades.

In Lords of Finance, we meet the neurotic and enigmatic Montagu Norman of the Bank of England, the xenophobic and suspicious Émile Moreau of the Banque de France, the arrogant yet brilliant Hjalmar Schacht of the Reichsbank, and Benjamin Strong of the Federal Reserve Bank of New York, whose façade of energy and drive masked a deeply wounded and overburdened man. After the First World War, these central bankers attempted to reconstruct the world of international finance. Despite their differences, they were united by a common fear?that the greatest threat to capitalism was inflation? and by a common vision that the solution was to turn back the clock and return the world to the gold standard.

For a brief period in the mid-1920s they appeared to have succeeded. The world?s currencies were stabilized and capital began flowing freely across the globe. But beneath the veneer of boom-town prosperity, cracks started to appear in the financial system. The gold standard that all had believed would provide an umbrella of stability proved to be a straitjacket, and the world economy began that terrible downward spiral known as the Great Depression.

As yet another period of economic turmoil makes headlines today, the Great Depression and the year 1929 remain the benchmark for true financial mayhem. Offering a new understanding of the global nature of financial crises, Lords of Finance is a potent reminder of the enormous impact that the decisions of central bankers can have, of their fallibility, and of the terrible human consequences that can result when they are wrong.
Published: Penguin Group on
ISBN: 9781440697968
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Given the subject matter of monetary policy, which as I suspected, I find deadly dull no matter how good the writing is, I'm pleased with myself for having stuck it out and gotten through this.

But I did learn some things:

That the Great Depression was caused by several factors: the insistence on reparations from Germany after WWI, coupled with the U.S. not backing down on the issue of war debt. The fact that the U.S. and Europe tried to get back on the gold standard. The intransigence of France in the early thirties. The untimely death of Benjamin Strong, who seemed the only guy who understood what was going on and had the social skills to convince the other financial world leaders of what needed to be done.more
Most interesting economic history I've read, thoroughly detailed and readable coverage of economic events surrounding the First World War and leading to the Second.more
I am not a non fiction reader but really enjoyed this book. The writer shows the history around the Great Depression and the effects before and after the event.How the two great banking powers at the same grew to be four (including the French and Germans) through necessity and to the amount of Gold that each held in their main banks. Also how everyone, though they tried to help the greater good of the larger group, always came back to the main point....how will any changes help them and their nation.Linked to the Gold standards the US grew after the war due to them being the seller of goods needed in Europe. Due to the Germans not wanting to pay reperations you see the lack of will to help each other in Europe. And overall you see the normal banks in it for themselves and not thinking how what they do could impact on the nation in a whole.Read the book and see how many links you make to what is happening now....have to admit I made a few more than I thought I would!more
A history of central banking from just before world war I to 1933 and the beginning of the recovery from the depression. It tries to focus on the gold standard and the pernicious efforts to uphold this 'commandment'. There are lessons: Simple minded principles are just that: simple minded. We are all in this together. it is important to be educated and understand how banking works. We do know a bit about how the economy works and woe to those who violate that knowledge. And unfortunately humans are emotional and can make a logical solution ineffective ( We have nothing to fear but fear itself.) I wish I understood more of how banking works than tis book gives.more
I have been somewhat concerned about the current economic situation in our country, but not knowing much about economics, I felt that this would be an appropriate book to read in order to gain some knowledge on the topic. I was not disappointed. Liaquat Ahamed not only provides us with a very informative book on the subject, but one that is also interesting and easy to understand. Ahamed tells the intriguing story of four men who were in control of the central banks in the United States, England, France, and Germany during World War I, and the era of the Great Depression. He explains the courses they chose to take in keeping their own countries afloat, and how their decisions affected the world economy. Sometimes their decisions were good, but many times their decisions only made things worse. One of these poor decisions was their determination to remain on the gold standard. As it turned out, recovery for most countries only began after they departed from the gold standard. However, Ahamed points out that there were also others to blame for the economic failures. Some of those who were blameworthy were the politicians who were involved in the Paris Peace Conference after World War I. Many of these people were so hateful and greedy that all they wanted to do was squeeze every cent they could from their enemies. France wanted to force the Germans to pay reparations that were too steep for them. In addition, the U.S. wouldn't forgive any of the debt that was owed to them by Britain and France. These rifts not only destroyed the world's financial system, but it eventually led the world into another world war. This book kept you engrossed by relating the life stories of the bankers who were involved, as well as the role Maynard Keynes, world renowned economist, played. In addition, Ahamed summed up his work with a comparison of the Great Depression era to that of the financial crisis of the late 1990s to early 2000s. It is an outstanding endeavor which made learning about world economics interesting and enjoyable.more
This is the best non-fiction book I've read, or am likely to read, this year. I bought this in 2010 while I was reading several books about the financial crisis. It had lots of good reviews and won several prizes, including the Pulitzer Prize for history in 2010 and the FT/Goldman Sachs Business Book of the Year for 2009. It's Liaquat Ahamed's first book, and he was interviewed on the Guardian Books podcast and sounded like a genuinely nice guy, which always makes me more likely to read something. It's 500 pages, so it sat there for ages till I was in the mood for a solid non-fiction read again. I will be forcing it on my real life friends who like economics, history, or politics, work for central banks, or are interested in the causes of WW2. You don't need to have an economics background to read it, but it will definitely make it an easier read.Ahamed starts his book at the end of World War 1 and tells the story of how the western world ended up in a series of financial disasters that lasted through the 1920s and well into the 1930s. He does this by focusing on four central bankers: Montagu Norman, Governor of the Bank of England, Hjalmar Schacht, at the Reichsbank, Emile Moreau at the Banque de France, and Benjamin Strong, Governor at the New York Fed. All four were interesting guys with plenty of eccentricities to liven up the book. Norman and Strong became very good friends. Their decisions, and indecision at critical times, contributed to an imbalanced global economy tipping over into chaos again and again. It has huge parallels to what's going on today in the US and in the Eurozone.The book has a great blend of economics and anecdote - I have dogeared so many pages. Some other reviewers have found the anecdotes offputting, but I loved them.The story goes something like this (and without Ahamed's eloquence): Before World War 1, most world economies operated fixed exchange rates under a system called the gold standard. Money was backed by gold - you could rock up to the central bank, present your francs or dollar notes, and ask for a gold ingot. This worked well enough, and was treated as the holy grail of macroeconomics by central bankers and politicians. Trying to stick to the gold standard after World War 1 made already serious economic problems insurmountable.The Allies were enormously in debt to the US, which had entered the war much later, and Germany was even more enormously in debt to the Allies because of the level of reparations payments assigned at Versailles. The US already had much more gold than it needed, and it kept getting more. Ahamed covers the endless negotiations about Germany's reparations really well, and goes through everything that followed - Germany's hyperinflation, France's surprising economic bounce-back until the 1930s by fixing their exchange rate lower than sustainable (making its exports recover quickly), the UK getting back onto the gold standard at too high a rate, Germany's financial crisis in 1929, the US stock market crash, then a series of banking crises from 1931-33.In the end, but too late to avoid the massive hardship of the depression, the US abandoned the gold standard and let the value of the US dollar fall. The central bankers come out of the book looking fairly useless (albeit when faced with extremely difficult problems - hindsight is a wonderful thing), and so do most of the politicians. FDR and Keynes look pretty good overall.more
Political economy is not a subject of interest to most popular historians. David McCullough, for instance, or even Ron Chernow are unlikely ever to tackle the challenge of making something as complex as the Great Depression intelligible to everyday readers. Liaquat Ahamed, however, has stepped up to the plate and, though he misses a couple of pitches before connecting, hits a home run with this book.The literature on the economic problems of the 1920s and the Great Depression of the 1930s is enormous, but most of it was written by economists and is unintelligible to the average reader. Ben Bernanke's "Essays on the Great Depression" is perhaps the most authoritative analysis, but requires a fairly deep understanding of macroeconomic theory. The writings of Barry Eichengreen, including his book "Golden Fetters" on the critical role played by the gold-based exchange rate system, are more accessible but still highly technical and a challenging read.By focusing on the central bankers (from Britain, Germany, France, and the United States) who were at the center of economic policymaking in the 1920s and 1930s, Ahamed has found a vehicle that permits a non-technical telling of this extremely important story, one that most people have absolutely no knowledge of, though it was of central importance in shaping the global economic system we have today. He has read the economic literature and in this book proceeds to explain it in human terms.Moreover, focusing on the personalities and politics behind the policy mistakes of the time highlights an important point: the Great Depression was a man-made event, an avoidable confluence of events and decisions that had catastrophic consequences. True, even the most expert of the decision-makers of the time did not really understand all the consequences of their actions - we benefit from that famously golden hindsight. But as Ahamed's story makes clear, they understood enough to know that many of their actions put the global economy at risk, but they went ahead anyway, often because of the short-term benefits to national, as opposed to international, economic growth and stability. One can argue, in fact, that the Great Depression (the worldwide catastrophe, not the cyclical downturn in the United States sparked by the 1929 Wall Street crash) was the result of a massive failure of economic diplomacy. As an already unstable system of international finance began collapsing in 1931, central bankers, constrained by national biases, domestic priorities, and an unquestioning allegiance to the gold standard, failed to act and the global economy collapsed. This failure was recognized at the time, and it's the reason why the post-World War II economic system, created at the Bretton Woods conference in 1944, was not placed in the hands of central bankers. Economic diplomacy has, ever since, been the province of finance and foreign ministries as much, or more, than central banks.My only quibble with Ahamed's book (the reason I don't see it as a clean, first-swing home run) is his compulsion to find "colorful" stories to attract readers who might otherwise be put off by economic history. He never fails to profile (mercifully, usually in a brief paragraph) any interesting character he comes across. For instance, discussing key individuals who influenced Benjamin Strong (the New York Fed chief who is one of his main characters) at the time of the 1919 Versailles Peace Conference, Ahamed describes the colorful life of Willard Straight (pp. 133-134). Straight was an adventurous, controversial character who spent years in China as a US diplomat and as a sometime agent of E.H. Harriman, who was interested in Manchurian railway developments. The problem is, he died suddenly in December 1918, before the Versailles conference got underway, and then it turns out that Strong himself fell ill and did not reach the conference until the final days in the summer of 1919. Just what role Straight may, or could, have played is not revealed. The colorful anecdote is enough to justify his inclusion.Still, this is the best explication I've found, in fluent, non-technical English, of the causes of the Great Depression. I recommend it to anyone who wants to understand this epochal period of 20th century world history.more
Lords of Finance illuminates the world of banking from 1914 to 1933 -- by focusing on four men who ran central banks (or rough equivalent) in the US, England, France and Germany and how they interacted. Since I'm reading my way through Pulitzer-Prize winners in history, it was inevitable that I would be reading a book about economics. That's actually pretty ironic for someone who received a "gentleman's C" in economics back in community college. I was an office worker in said community college at that time, and struck a deal with an economics instructor who was facing low enrollment in and possible cancellation of a particular Macroeconomics class. He said that if I signed up and attended every class he'd guarantee me a "C." I'm ashamed to admit it now, but if undergraduate grades were given out for under-achievement, I would easily have earned straight As. So, I was happy to take the deal as I needed one more social science course to finished my degree. I attended every class; but did not read the textbook, take notes or try in the least to understand the material. I turned in the exams with only my name filled in. I'm sure the instructor thought I would at least TRY to earn something above a C but, alas, I didn't.I tell this story on myself to demonstrate my lack of understanding of and antipathy toward anything economic. That's why I was surprised to so enjoy Lords of Finance. Without talking down to readers, the author was able to explain some pretty arcane concepts and make the story of what happened in the world during the Great Depression understandable. Reading Lords of Finance doesn't make me want to sign up for another economics class but it did help me understand what I missed.Lords of Finance helped me understand why the Great Depression went on for so long (ineptness of the central bankers and their unreasoning love affair with the gold standard); and why Germany was so eager to support Adolf Hitler (the terms of the peace treaty ending World War I crippled Germany's economy to the point that most people saw now way out of it without a strong leader, even a nutty one). The Epilogue provided a Reader's Digest version of the book, but wouldn't have made much sense without reading the entire book.My hats go off to Liaquat Ahamed for writing a book understandable (with some bit of work on my part) to even an economics-averse reader!more
Scary stuff. Describes the culture of international bankers and the system that developed between WWI and WWII and details how we are living with the effects today.more
This is an excellent international economic/finance history focusing principally on the period from the end of World War I up through the early phases of the Great Depression, but also taking the story on through the Bretton Woods Conference of June 1944. It focuses on the activities of the central banks of Britain, the US, France and Germany. It shows how decisions that were made by the heads of these banks helped lead to the calamity of the stock bubble, the October '29 crash, and the severity of the depression that followed. Two big problems he identifies were the massive reparations assessed on Germany and the attempt of the four nations to adhere to the Gold Standard even though a great bulk of the world's gold was in American after WWI. Then, too, there was a confluence of a lot of "bad" economic problems occuring all at once. Well written, a bit of humor now and then. My only minor quibble is the subtitle: "The Bankers who Broke the World." I found it hard to blame the particular four gentlemen on the book's cover as they did the best they could given the limitations of understanding they were working with, and the fact that the Gold Standard is all they knew. Actually two of them: the American Strong and the German Schacht seem to get rather favorable reviews, Shacht's perhaps a bit grudgingly. John Maynard Keynes is the far-sighted hero of the book; and the author gives due credit to the FDR New Deal for getting the US economy back on track. This book is a wonderful tonic after having just suffered through the God-awful Amity Shlaes book "The Forgotten Man."more
Another recent and excellent book on finance, this time the central banker's view from the 1920's and 30's.Liaquat firmly puts the blame for the Great Depression on central bankers refusal to abandon the gold standard. Liquidity was restrained when it needed to be released, with the central bank heads in Great Britain, France, the United States and Germany fearing the loss of the stable gold "anchor". They didn't trust politicians to act responsibly when printing money, which may be a fair judgement in normal times, but 1) gold was not distributed evenly and was highly restrictive 2) 1929+ was an emergency and the world economy needed a large and quick injection of liquidity.An alternative view was given by Treasury Secretary Andrew Mellon with regard to the Great Crash, "..... It will purge the rottenness out of the system.... People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." The author gives the quotation but doesn't share the opinion although it could equally have some validity.A further complication arose from the war reparations that Germany couldn't pay, and which Great Britain and France needed to settle war debts to the United States. He shows how this issue poisoned international relations at a time when positive and constructive attitudes were needed.Altogether an great book.more
This is a good historical book. I like the approach of describing the actual lives of the bankers in question, who actually come across as sympathetic figures. Actually, they led pretty interesting lives, and this woven in with all the economic stuff is the main strength of the book. You get the sense that he is talking about people, not economics theory. I don't think that the book quite supports the conclusion on the dust jacket, that the "decisions taken by a small number of central bankers . . . were the primary cause of the economic meltdown." In fact the book itself gives a rather different conclusion, p. 501, pinning the primary blame on the Versailles treaty and reparations, and only secondly on the bankers. I would have appreciated a bit more attention to why the gold standard brought (or helped bring) the system down -- perhaps with an overview of different theories as to what actually caused the crash. The book got off to a good start, but by the middle of the book it became harder to follow the argument. You start to hear about other bankers and characters besides our main four, and the characters and plot becomes harder to follow. As you are reading the book, if you know nothing in particular about economics, you have to ask yourself, "so what exactly is so bad about the gold standard?" Might it not have prevented Germany's hyper-inflationary period, for example? And the subsequent recoveries of Germany and the U. S. in the 1930's don't exactly support this conclusion, either. Germany afterward experienced a recovery of sorts during the 1930's, despite remaining on the gold standard. The U. S., which effectively devalued its currency and ceased reliance on the gold standard, had perhaps a "better" recovery, but still had very high levels of unemployment -- higher, evidently, than Germany. So how does the gold standard tie into this? After reading the book, let's put it this way -- I'm not advocating a return to the gold standard! The book actually seems to support the thesis that the dust jacket blurb purports that the book refutes: that in fact the Great Depression was the result of "events beyond any one person's or government's control." If they were due to one person or one government, the author needed to point out a particular person or government, and say -- "Here! If only Strong, or Schacht, or Norman, or Moreau, had just done X instead of Y -- everything would have been different." But such a point never emerges.more
A great review of the causes of the great depression and the men involved at the highest levels of government.more
This is a long and sometimes tedious book, but it's full of great historical information. There have been times when I've stopped short and thought "if only politicians and bankers had read this a couple of years ago...." It's a thorough analysis of the political, economic and monetary policies and decisions made from the early 20th century through the years following World War II which established an international framework of economic policies, most of which we live with today. In fact, some of the roots of our current economic and financial crisis could be said to lie in the decisions made during this time. The author focuses largely on the personalities of the decision-makers involved, which just emphasizes the sometimes-trivial factors that influence international events.Its a great book, but be patient.more
I was looking for a book that described how the Great Depression started and saw this one at the book store. It was exactly what I wanted. Ahamed does a admirable job of making the economics easy to understand while keeping the story lively with the profiles of the four central bankers. Nice job! Recommended!more
This is an awesomely good book, which is easy to read and tells an absorbingly interesting story. It traces the financial history of the world from 1914 to the 1930's. The bankers mentioned in the title are Montagu Norman of the Bank of England, Moreau of the Bamque de France, Schacht of Germany, and Ben Strong of the Federal Reserve Bank of N.Y. Their world crashed in 1929 and the years thereafter, and the events of those years are related, with verve and clarity. One shudders to think what would have happened in 2008-2009 if the urgings of the Neanderthals who said the governments of the world should do nothing had been listened to. And the book shows that the Great Depression of the Hoover years was effectually ended (except as to jobs) by the New Deal. This is one of the best books I have ever read on financial history.more
According to the author, the Depression resulted from a 'perfect storm'. Several crises occurred within a short time (approx. 2 years). Even the best bankers were hampered by their blinkered dogmatism, which led them to endorse the gold standard. By the time the crises started to happen in the late 20's, the best three bankers had been sidelined. The head of the NY Fed, Benjamin Strong, died in 1928. The heads of the Bank of England and the Reichsbank (respectively Montagu Norman and Hjalmar Schacht) presided over institutions that had lost the wherewithal to effect the emergency measures that were (as they recognized) called for. The two central banking systems that could have effected these measures, those of France and the USA, were poorly led and failed to act. Keynes is the hero of Mr. Ahamed's narrative, since Keynes opposed the gold standard as well as reparations and the re-payment of war debts.more
If you want to know why we're in the economic situation that we're in, I suggest reading Lords of Finance. This book gives about 30 years of history and economics-- 1900-1930-- and shows how the four most powerful bankers at that time caused the Great Depression. The author shows the parallels between then and now.more
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Reviews

Given the subject matter of monetary policy, which as I suspected, I find deadly dull no matter how good the writing is, I'm pleased with myself for having stuck it out and gotten through this.

But I did learn some things:

That the Great Depression was caused by several factors: the insistence on reparations from Germany after WWI, coupled with the U.S. not backing down on the issue of war debt. The fact that the U.S. and Europe tried to get back on the gold standard. The intransigence of France in the early thirties. The untimely death of Benjamin Strong, who seemed the only guy who understood what was going on and had the social skills to convince the other financial world leaders of what needed to be done.more
Most interesting economic history I've read, thoroughly detailed and readable coverage of economic events surrounding the First World War and leading to the Second.more
I am not a non fiction reader but really enjoyed this book. The writer shows the history around the Great Depression and the effects before and after the event.How the two great banking powers at the same grew to be four (including the French and Germans) through necessity and to the amount of Gold that each held in their main banks. Also how everyone, though they tried to help the greater good of the larger group, always came back to the main point....how will any changes help them and their nation.Linked to the Gold standards the US grew after the war due to them being the seller of goods needed in Europe. Due to the Germans not wanting to pay reperations you see the lack of will to help each other in Europe. And overall you see the normal banks in it for themselves and not thinking how what they do could impact on the nation in a whole.Read the book and see how many links you make to what is happening now....have to admit I made a few more than I thought I would!more
A history of central banking from just before world war I to 1933 and the beginning of the recovery from the depression. It tries to focus on the gold standard and the pernicious efforts to uphold this 'commandment'. There are lessons: Simple minded principles are just that: simple minded. We are all in this together. it is important to be educated and understand how banking works. We do know a bit about how the economy works and woe to those who violate that knowledge. And unfortunately humans are emotional and can make a logical solution ineffective ( We have nothing to fear but fear itself.) I wish I understood more of how banking works than tis book gives.more
I have been somewhat concerned about the current economic situation in our country, but not knowing much about economics, I felt that this would be an appropriate book to read in order to gain some knowledge on the topic. I was not disappointed. Liaquat Ahamed not only provides us with a very informative book on the subject, but one that is also interesting and easy to understand. Ahamed tells the intriguing story of four men who were in control of the central banks in the United States, England, France, and Germany during World War I, and the era of the Great Depression. He explains the courses they chose to take in keeping their own countries afloat, and how their decisions affected the world economy. Sometimes their decisions were good, but many times their decisions only made things worse. One of these poor decisions was their determination to remain on the gold standard. As it turned out, recovery for most countries only began after they departed from the gold standard. However, Ahamed points out that there were also others to blame for the economic failures. Some of those who were blameworthy were the politicians who were involved in the Paris Peace Conference after World War I. Many of these people were so hateful and greedy that all they wanted to do was squeeze every cent they could from their enemies. France wanted to force the Germans to pay reparations that were too steep for them. In addition, the U.S. wouldn't forgive any of the debt that was owed to them by Britain and France. These rifts not only destroyed the world's financial system, but it eventually led the world into another world war. This book kept you engrossed by relating the life stories of the bankers who were involved, as well as the role Maynard Keynes, world renowned economist, played. In addition, Ahamed summed up his work with a comparison of the Great Depression era to that of the financial crisis of the late 1990s to early 2000s. It is an outstanding endeavor which made learning about world economics interesting and enjoyable.more
This is the best non-fiction book I've read, or am likely to read, this year. I bought this in 2010 while I was reading several books about the financial crisis. It had lots of good reviews and won several prizes, including the Pulitzer Prize for history in 2010 and the FT/Goldman Sachs Business Book of the Year for 2009. It's Liaquat Ahamed's first book, and he was interviewed on the Guardian Books podcast and sounded like a genuinely nice guy, which always makes me more likely to read something. It's 500 pages, so it sat there for ages till I was in the mood for a solid non-fiction read again. I will be forcing it on my real life friends who like economics, history, or politics, work for central banks, or are interested in the causes of WW2. You don't need to have an economics background to read it, but it will definitely make it an easier read.Ahamed starts his book at the end of World War 1 and tells the story of how the western world ended up in a series of financial disasters that lasted through the 1920s and well into the 1930s. He does this by focusing on four central bankers: Montagu Norman, Governor of the Bank of England, Hjalmar Schacht, at the Reichsbank, Emile Moreau at the Banque de France, and Benjamin Strong, Governor at the New York Fed. All four were interesting guys with plenty of eccentricities to liven up the book. Norman and Strong became very good friends. Their decisions, and indecision at critical times, contributed to an imbalanced global economy tipping over into chaos again and again. It has huge parallels to what's going on today in the US and in the Eurozone.The book has a great blend of economics and anecdote - I have dogeared so many pages. Some other reviewers have found the anecdotes offputting, but I loved them.The story goes something like this (and without Ahamed's eloquence): Before World War 1, most world economies operated fixed exchange rates under a system called the gold standard. Money was backed by gold - you could rock up to the central bank, present your francs or dollar notes, and ask for a gold ingot. This worked well enough, and was treated as the holy grail of macroeconomics by central bankers and politicians. Trying to stick to the gold standard after World War 1 made already serious economic problems insurmountable.The Allies were enormously in debt to the US, which had entered the war much later, and Germany was even more enormously in debt to the Allies because of the level of reparations payments assigned at Versailles. The US already had much more gold than it needed, and it kept getting more. Ahamed covers the endless negotiations about Germany's reparations really well, and goes through everything that followed - Germany's hyperinflation, France's surprising economic bounce-back until the 1930s by fixing their exchange rate lower than sustainable (making its exports recover quickly), the UK getting back onto the gold standard at too high a rate, Germany's financial crisis in 1929, the US stock market crash, then a series of banking crises from 1931-33.In the end, but too late to avoid the massive hardship of the depression, the US abandoned the gold standard and let the value of the US dollar fall. The central bankers come out of the book looking fairly useless (albeit when faced with extremely difficult problems - hindsight is a wonderful thing), and so do most of the politicians. FDR and Keynes look pretty good overall.more
Political economy is not a subject of interest to most popular historians. David McCullough, for instance, or even Ron Chernow are unlikely ever to tackle the challenge of making something as complex as the Great Depression intelligible to everyday readers. Liaquat Ahamed, however, has stepped up to the plate and, though he misses a couple of pitches before connecting, hits a home run with this book.The literature on the economic problems of the 1920s and the Great Depression of the 1930s is enormous, but most of it was written by economists and is unintelligible to the average reader. Ben Bernanke's "Essays on the Great Depression" is perhaps the most authoritative analysis, but requires a fairly deep understanding of macroeconomic theory. The writings of Barry Eichengreen, including his book "Golden Fetters" on the critical role played by the gold-based exchange rate system, are more accessible but still highly technical and a challenging read.By focusing on the central bankers (from Britain, Germany, France, and the United States) who were at the center of economic policymaking in the 1920s and 1930s, Ahamed has found a vehicle that permits a non-technical telling of this extremely important story, one that most people have absolutely no knowledge of, though it was of central importance in shaping the global economic system we have today. He has read the economic literature and in this book proceeds to explain it in human terms.Moreover, focusing on the personalities and politics behind the policy mistakes of the time highlights an important point: the Great Depression was a man-made event, an avoidable confluence of events and decisions that had catastrophic consequences. True, even the most expert of the decision-makers of the time did not really understand all the consequences of their actions - we benefit from that famously golden hindsight. But as Ahamed's story makes clear, they understood enough to know that many of their actions put the global economy at risk, but they went ahead anyway, often because of the short-term benefits to national, as opposed to international, economic growth and stability. One can argue, in fact, that the Great Depression (the worldwide catastrophe, not the cyclical downturn in the United States sparked by the 1929 Wall Street crash) was the result of a massive failure of economic diplomacy. As an already unstable system of international finance began collapsing in 1931, central bankers, constrained by national biases, domestic priorities, and an unquestioning allegiance to the gold standard, failed to act and the global economy collapsed. This failure was recognized at the time, and it's the reason why the post-World War II economic system, created at the Bretton Woods conference in 1944, was not placed in the hands of central bankers. Economic diplomacy has, ever since, been the province of finance and foreign ministries as much, or more, than central banks.My only quibble with Ahamed's book (the reason I don't see it as a clean, first-swing home run) is his compulsion to find "colorful" stories to attract readers who might otherwise be put off by economic history. He never fails to profile (mercifully, usually in a brief paragraph) any interesting character he comes across. For instance, discussing key individuals who influenced Benjamin Strong (the New York Fed chief who is one of his main characters) at the time of the 1919 Versailles Peace Conference, Ahamed describes the colorful life of Willard Straight (pp. 133-134). Straight was an adventurous, controversial character who spent years in China as a US diplomat and as a sometime agent of E.H. Harriman, who was interested in Manchurian railway developments. The problem is, he died suddenly in December 1918, before the Versailles conference got underway, and then it turns out that Strong himself fell ill and did not reach the conference until the final days in the summer of 1919. Just what role Straight may, or could, have played is not revealed. The colorful anecdote is enough to justify his inclusion.Still, this is the best explication I've found, in fluent, non-technical English, of the causes of the Great Depression. I recommend it to anyone who wants to understand this epochal period of 20th century world history.more
Lords of Finance illuminates the world of banking from 1914 to 1933 -- by focusing on four men who ran central banks (or rough equivalent) in the US, England, France and Germany and how they interacted. Since I'm reading my way through Pulitzer-Prize winners in history, it was inevitable that I would be reading a book about economics. That's actually pretty ironic for someone who received a "gentleman's C" in economics back in community college. I was an office worker in said community college at that time, and struck a deal with an economics instructor who was facing low enrollment in and possible cancellation of a particular Macroeconomics class. He said that if I signed up and attended every class he'd guarantee me a "C." I'm ashamed to admit it now, but if undergraduate grades were given out for under-achievement, I would easily have earned straight As. So, I was happy to take the deal as I needed one more social science course to finished my degree. I attended every class; but did not read the textbook, take notes or try in the least to understand the material. I turned in the exams with only my name filled in. I'm sure the instructor thought I would at least TRY to earn something above a C but, alas, I didn't.I tell this story on myself to demonstrate my lack of understanding of and antipathy toward anything economic. That's why I was surprised to so enjoy Lords of Finance. Without talking down to readers, the author was able to explain some pretty arcane concepts and make the story of what happened in the world during the Great Depression understandable. Reading Lords of Finance doesn't make me want to sign up for another economics class but it did help me understand what I missed.Lords of Finance helped me understand why the Great Depression went on for so long (ineptness of the central bankers and their unreasoning love affair with the gold standard); and why Germany was so eager to support Adolf Hitler (the terms of the peace treaty ending World War I crippled Germany's economy to the point that most people saw now way out of it without a strong leader, even a nutty one). The Epilogue provided a Reader's Digest version of the book, but wouldn't have made much sense without reading the entire book.My hats go off to Liaquat Ahamed for writing a book understandable (with some bit of work on my part) to even an economics-averse reader!more
Scary stuff. Describes the culture of international bankers and the system that developed between WWI and WWII and details how we are living with the effects today.more
This is an excellent international economic/finance history focusing principally on the period from the end of World War I up through the early phases of the Great Depression, but also taking the story on through the Bretton Woods Conference of June 1944. It focuses on the activities of the central banks of Britain, the US, France and Germany. It shows how decisions that were made by the heads of these banks helped lead to the calamity of the stock bubble, the October '29 crash, and the severity of the depression that followed. Two big problems he identifies were the massive reparations assessed on Germany and the attempt of the four nations to adhere to the Gold Standard even though a great bulk of the world's gold was in American after WWI. Then, too, there was a confluence of a lot of "bad" economic problems occuring all at once. Well written, a bit of humor now and then. My only minor quibble is the subtitle: "The Bankers who Broke the World." I found it hard to blame the particular four gentlemen on the book's cover as they did the best they could given the limitations of understanding they were working with, and the fact that the Gold Standard is all they knew. Actually two of them: the American Strong and the German Schacht seem to get rather favorable reviews, Shacht's perhaps a bit grudgingly. John Maynard Keynes is the far-sighted hero of the book; and the author gives due credit to the FDR New Deal for getting the US economy back on track. This book is a wonderful tonic after having just suffered through the God-awful Amity Shlaes book "The Forgotten Man."more
Another recent and excellent book on finance, this time the central banker's view from the 1920's and 30's.Liaquat firmly puts the blame for the Great Depression on central bankers refusal to abandon the gold standard. Liquidity was restrained when it needed to be released, with the central bank heads in Great Britain, France, the United States and Germany fearing the loss of the stable gold "anchor". They didn't trust politicians to act responsibly when printing money, which may be a fair judgement in normal times, but 1) gold was not distributed evenly and was highly restrictive 2) 1929+ was an emergency and the world economy needed a large and quick injection of liquidity.An alternative view was given by Treasury Secretary Andrew Mellon with regard to the Great Crash, "..... It will purge the rottenness out of the system.... People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." The author gives the quotation but doesn't share the opinion although it could equally have some validity.A further complication arose from the war reparations that Germany couldn't pay, and which Great Britain and France needed to settle war debts to the United States. He shows how this issue poisoned international relations at a time when positive and constructive attitudes were needed.Altogether an great book.more
This is a good historical book. I like the approach of describing the actual lives of the bankers in question, who actually come across as sympathetic figures. Actually, they led pretty interesting lives, and this woven in with all the economic stuff is the main strength of the book. You get the sense that he is talking about people, not economics theory. I don't think that the book quite supports the conclusion on the dust jacket, that the "decisions taken by a small number of central bankers . . . were the primary cause of the economic meltdown." In fact the book itself gives a rather different conclusion, p. 501, pinning the primary blame on the Versailles treaty and reparations, and only secondly on the bankers. I would have appreciated a bit more attention to why the gold standard brought (or helped bring) the system down -- perhaps with an overview of different theories as to what actually caused the crash. The book got off to a good start, but by the middle of the book it became harder to follow the argument. You start to hear about other bankers and characters besides our main four, and the characters and plot becomes harder to follow. As you are reading the book, if you know nothing in particular about economics, you have to ask yourself, "so what exactly is so bad about the gold standard?" Might it not have prevented Germany's hyper-inflationary period, for example? And the subsequent recoveries of Germany and the U. S. in the 1930's don't exactly support this conclusion, either. Germany afterward experienced a recovery of sorts during the 1930's, despite remaining on the gold standard. The U. S., which effectively devalued its currency and ceased reliance on the gold standard, had perhaps a "better" recovery, but still had very high levels of unemployment -- higher, evidently, than Germany. So how does the gold standard tie into this? After reading the book, let's put it this way -- I'm not advocating a return to the gold standard! The book actually seems to support the thesis that the dust jacket blurb purports that the book refutes: that in fact the Great Depression was the result of "events beyond any one person's or government's control." If they were due to one person or one government, the author needed to point out a particular person or government, and say -- "Here! If only Strong, or Schacht, or Norman, or Moreau, had just done X instead of Y -- everything would have been different." But such a point never emerges.more
A great review of the causes of the great depression and the men involved at the highest levels of government.more
This is a long and sometimes tedious book, but it's full of great historical information. There have been times when I've stopped short and thought "if only politicians and bankers had read this a couple of years ago...." It's a thorough analysis of the political, economic and monetary policies and decisions made from the early 20th century through the years following World War II which established an international framework of economic policies, most of which we live with today. In fact, some of the roots of our current economic and financial crisis could be said to lie in the decisions made during this time. The author focuses largely on the personalities of the decision-makers involved, which just emphasizes the sometimes-trivial factors that influence international events.Its a great book, but be patient.more
I was looking for a book that described how the Great Depression started and saw this one at the book store. It was exactly what I wanted. Ahamed does a admirable job of making the economics easy to understand while keeping the story lively with the profiles of the four central bankers. Nice job! Recommended!more
This is an awesomely good book, which is easy to read and tells an absorbingly interesting story. It traces the financial history of the world from 1914 to the 1930's. The bankers mentioned in the title are Montagu Norman of the Bank of England, Moreau of the Bamque de France, Schacht of Germany, and Ben Strong of the Federal Reserve Bank of N.Y. Their world crashed in 1929 and the years thereafter, and the events of those years are related, with verve and clarity. One shudders to think what would have happened in 2008-2009 if the urgings of the Neanderthals who said the governments of the world should do nothing had been listened to. And the book shows that the Great Depression of the Hoover years was effectually ended (except as to jobs) by the New Deal. This is one of the best books I have ever read on financial history.more
According to the author, the Depression resulted from a 'perfect storm'. Several crises occurred within a short time (approx. 2 years). Even the best bankers were hampered by their blinkered dogmatism, which led them to endorse the gold standard. By the time the crises started to happen in the late 20's, the best three bankers had been sidelined. The head of the NY Fed, Benjamin Strong, died in 1928. The heads of the Bank of England and the Reichsbank (respectively Montagu Norman and Hjalmar Schacht) presided over institutions that had lost the wherewithal to effect the emergency measures that were (as they recognized) called for. The two central banking systems that could have effected these measures, those of France and the USA, were poorly led and failed to act. Keynes is the hero of Mr. Ahamed's narrative, since Keynes opposed the gold standard as well as reparations and the re-payment of war debts.more
If you want to know why we're in the economic situation that we're in, I suggest reading Lords of Finance. This book gives about 30 years of history and economics-- 1900-1930-- and shows how the four most powerful bankers at that time caused the Great Depression. The author shows the parallels between then and now.more
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