Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed

Lords of FinanceLords of Finance: 1929, The Great Depression, and the Bankers who Broke the World by Liaquat Ahamed won the Financial Times Business Book of the Year Award in 2009.

In Lords of Finance, Liaquat Ahamed illustrates with a compelling narrative, accessible economics and vivid insights that the Great Depression was not the result of mysterious forces that governments were powerless to resist, but by a failure of intellectual will and a lack of understanding about how the economy operated.

The principal characters of Ahamed’s book are the world’s four most important central bankers, “who broke the world“. These recognised that the Paris peace conference at the end of the first world war was a political misstep, which burdened economies still devastated by war with an unimaginable international debt, poisoning international relations.

They were also responsible for the second fundamental error of economic policy – the decision to return to the gold standard, at the wrong time and the wrong rate. The Bank of England’s Montagu Norman saw a return to the gold standard at the prewar rate as a matter of national pride and his close friend Benjamin Strong of the US Federal Reserve supported him. Making up the quartet of central bankers were Hjalmar Schacht of Germany and Emile Moreau of France.

The price was an economic catastrophe – first in Britain and then more generally. The world’s gold reserves were inadequate to take the strain.

In Lords of Finance, Liaquat Ahamed suggests that there are at least 5 lessons for today from what followed:

  1. To act decisively when the trouble starts, and to co-operate internationally.
  2. To do whatever it takes to stem the flood tides.
  3. To keep capital flowing across borders to wherever it is most needed.
  4. Currency competition was another major contributor to the disaster.
  5. It’s vital to fix the capital imbalances.

Today’s policymakers have learned from these dreadful mistakes, but they seem to need to read The Lords of Finance to restore economic stability and bring down unemployment.

Title Lords of Finance: The Bankers Who Broke the World
Author Liaquat Ahamed
Published  January 22nd, 2009
Publisher Penguin Press
ISBN 159420182X
Language English
Characters Hjalmar Schacht, Montagu Norman, 1st Baron Norman, Benjamin Strong
Literary Awards Pulitzer Prize for History (2010), Financial Times and McKinsey Business Book of the Year (2009), Arthur Ross Book Award for Gold Medal (2010), Samuel Johnson Prize for Non-Fiction Nominee (2009)
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