Lords of Finance: The Bankers Who Broke the World

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Overview

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 made 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 ...

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Lords of Finance: The Bankers Who Broke the World

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Overview

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 made 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 boomtown 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.

2010 Pulitzer Prize Winner for History
2009 Financial Times/Goldman Sachs Business Book of the Year winner.

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Editorial Reviews

From the Publisher
"Ahamed...easily connects the dots between the economic crises that rocked the world during the years his book covers and the fiscal emergencies that beset us today." —-The New York Times
Janet Maslin
Somehow Mr. Ahamed has been able to peg a many-faceted international economic story to the outsize personalities—one each from the United States, France, Britain and Germany—who made up that rescue team. And he succeeds so well that the potential opacity of his material is easily penetrated. The reader who might not expect to be enthralled by the dangerous mutability of the gold standard, for example, will find it a subject of real fascination. And Mr. Ahamed does a superlative job of explaining the ever-germane way the problems of one shyster, one bank, one treasury or one economy can set off repercussions all around the globe.
—The New York Times
Publishers Weekly

If you think today's economy is scary, check out the Jazz Age horrors chronicled in this financial history of the interwar years and the central bankers who blighted them. Ahamed, an investment manager, surveys the economic upheavals of the 1920s and 1930s, when crushing war debts and reparations from WWI sparked hyperinflation in Germany and a host of lesser eruptions, all of it climaxing in the American stock market crash and the Great Depression. He tells the story through the central bank chiefs of Britain, France, Germany and the United States as they confront unprecedented crises while "shackled" by the "dead hand" of the gold standard, the era's reigning financial orthodoxy (economist John Maynard Keynes, foe of gold and apostle of economic activism, is the book's hero). The author injects unnecessary commentary about the bankers' neuroses and marital difficulties into his coverage of interest rate and currency fluctuations (New York Federal Reserve head Benjamin Strong, he notes, possessed a "large nose that spoke of ruthlessness"). Fortunately, his protagonists' high-wire efforts to stave off national bankruptcies furnish Ahamed with plenty of drama to highlight his engrossing analysis of the complexities of monetary policy. Photos. (Jan.)

Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
New York Times Book Review
A grand, sweeping narrative of immense scope and power…From a literary point of view—let me pause to note that this is a beautifully written book; Ahamed has a gift for phrase-making and storytelling that most full-time writer would envy—the decision to build Lords of Finance around these four men is a brilliant conceit.
—Joe Nocera
Financial Times
Lords of Finance is highly readable . . . That it should appear now, as history threatens to repeat itself, compounds its appeal.
—Niall Ferguson
Library Journal

In this historical study, Ahamed, a professional money manager, sums up the causes of the Great Depression as a series of economic policy blunders that could have been avoided. He cites as causal factors the inflationary financing of World War I by printing money, the insurmountable war debts of Germany and the Allies, Germany's plunge into hyperinflation, and the return of most currencies to the gold standard at excessive and deflationary prewar rates. For example, he explains that when the U.S. stock market bubble burst in 1929 and economic activity collapsed, the central banks were restrained in stimulating the economy for fear of losing their gold reserves. In an epilog, Ahamed draws parallels between the crises of the Great Depression and those in recent times. He keeps his history interesting by highlighting the personalities of the heads of the major central banks, and he employs the economist John Maynard Keynes as a one-man Greek chorus critiquing the bankers' actions. This erudite and exceedingly well-written tale of financial chaos in the 1920s and 1930s is both timely and instructive for today's economic climate. Highly recommended for all academic and most public libraries.
—Lawrence Maxted

Kirkus Reviews
Erudite, entertaining macroeconomic history of the lead-up to the Great Depression as seen through the careers of the West's principal bankers. Investment manager Ahamed sets the stage for his story with Toynbeean sweep. The gold standard, to which the major currencies of the world were tied, was thrown into tumult by World War I. France, Britain and Germany found themselves depleted of gold reserves. The United States, a new economic power holding the bulk of the world's gold bullion, demanded repayment of loans made to its allies; this forced large, untenable reparation payments on Germany. The main characters of this unfolding drama were a quartet of bankers who saw themselves as "elite tribunes, standing above the fray of politics, national resentments, and amateur nostrums," and who wielded astonishing, autonomous authority over monetary policy. Eccentric, aristocratic Montagu Norman of the Bank of England dealt with the problem of inadequate gold reserves to support the overvalued pound sterling by convincing Benjamin Strong, head of the Federal Reserve Bank of New York, to lower interest rates in America to encourage the flow of gold back to Europe. This directly fueled the U.S. stock-market bubble, Ahamed argues. The crash of 1929 and the worldwide depression that followed were the inevitable results. Other catalysts included the Reichsbank's irascible, unpredictable Hjalmar Schacht, whose obsession with eliminating reparations led Germany to the brink of default, and vindictive Emile Moreau, whose policy at the Banque de France aimed to destabilize the British pound. Ahamed compares these bankers to the Greek mythological character Sisyphus, condemned to eternal, endless effort."Their goal is a strong economy and stable prices," he writes. "This is, however, the very environment that breeds the sort of overoptimism and speculation that eventually ends up destabilizing the economy." Ahamed soberingly suggests that, "bubbles and crises seem to be deep-rooted in human nature and inherent to the capitalist system."Spellbinding, insightful and, perhaps most important, timely. Author events in New York and Washington, D.C.
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Product Details

  • ISBN-13: 9781400141791
  • Publisher: Tantor Media, Inc.
  • Publication date: 4/1/2009
  • Format: CD
  • Edition description: Library - Unabridged CD
  • Product dimensions: 7.00 (w) x 7.00 (h) x 1.80 (d)

Meet the Author

Liaquat Ahamed has been a professional investment manager for twenty-five years and is currently an adviser to several hedge fund groups, including the Rock Creek Group and the Rohatyn Group.

Stephen Hoye has won more than a dozen AudioFile Earphones Awards and two prestigious APA Audie Awards, including one for Rich Dad, Poor Dad by Robert T. Kiyosaki. He has recorded many other notable titles, such as Every Second Counts by Lance Armstrong and The Google Story by David A. Vise and Mark Malseed.

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Table of Contents

Introduction 1

Part 1 The Unexpected Storm August 1914

1 Prologue 19

2 A Strange and Lonely Man 23

3 The Young Wizard 35

4 A Safe Pair of Hands 45

5 L'Inspecteur Des Finances 61

6 Money Generals 73

Part 2 After The Deluge 1919-23

7 Demented Inspirations 99

8 Uncle Shylock 130

9 A Barbarous Relic 155

Part 3 Sowing A New Wind 1923-28

10 A Bridge between Chaos and Hope 179

11 The Dawes Opening 193

12 The Golden Chancellor 217

13 La Bataille 241

14 The First Squalls 270

15 Un Petit Coup De Whisky 291

Part 4 Reaping Another Whirlwind 1928-33

16 Into the Vortex 107

17 Purging the Rottenness 347

18 Magneto Trouble 374

19 A Loose Cannon on The Deck of The World 393

20 Gold Fetters 422

Part 5 Aftermath 1933-44

21 Gold Standard on the Booze 451

22 The Caravans Move on 477

23 Epilogue 497

Acknowledgments 506

Notes 509

Bibliography 533

Index 545

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Customer Reviews

Average Rating 3.5
( 65 )
Rating Distribution

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See All Sort by: Showing 1 – 20 of 65 Customer Reviews
  • Posted April 20, 2009

    more from this reviewer

    Gripping account of Depression-era economics

    Who knew that a study of central bankers could be a page-turner? Investment manager Liaquat Ahamed spins a fast-moving yarn about central bankers' disastrous monetary policy decisions in the 1920s and early 1930s. The story itself yields little suspense - you already know how it ends, but Ahamed uses thorough research and gripping detail to paint a complete picture of how the world economy collapsed. The Great Depression preceded today's credit default swaps, collateralized mortgage obligations and arcane derivatives, so the book's lessons for the modern crisis are mostly as referential cautions. getAbstract recommends this absorbing book to readers who want a deeper understanding of the gold standard, and the events that led to - and out of - the biggest economic crisis of the 20th century.

    10 out of 10 people found this review helpful.

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  • Anonymous

    Posted April 14, 2009

    The Failure of Gold and the Great Depression

    An interesting and intrigiung account of the great depression of 1929-1933 based upon the actions of the four central bankers who tried to stop it. It is particularly relevant considering the current world wide financial chaos over the last year and the failure of world bankers and political leaders to deal with it. it is especially interesting if one is already somewhat familiar with the leading actors such as Churchill; Norman; Hoover; FDR; and Hitler

    8 out of 8 people found this review helpful.

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  • Posted July 19, 2009

    If you wish to learn how the four leading bankers in the US, UK, France, and Germany worked to avert the financial disaster of 1929 - 1933; this is an excellent book for that. It covers a period from approximately 1913-1934.

    This is a good book; and concentrates on the leading banker in the US, UK, France, and Germany in early 20th centruy times. It details both the economic and social history of these bankers and their countries. The period covered is before WWI through about 1934. The historical events of WWI, the gold standard, inflation, trade and trade barriers, politics, badly leveraged nations' debt, and the great financial collapse are all interlaced. The book has a few dry spells, but it is very readable. At times you will wonder if you are reading fiction or non-fiction. If you like financial history, this book is for you. It also offers parallels to our present world wide financial crisis; and this time we are one of the countries with too much debt everywhere.

    6 out of 6 people found this review helpful.

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  • Posted March 25, 2010

    World Finance Explored

    Lords of Finance is a very informative book of finance by telling the story of the economic difficulties of Europe following World War I. The book centers on the three main victors (England, France, and America) and the main loser (Germany) of WWI. All of whom happened to be economic powerhouses before the war but only America would remain so afterwards.

    The harsh reparations placed on Germany during the Treaty of Versailles are detailed. They lost major production centers of their country annexed to France and Poland. They were forced to pay reparations eight times their Gross Domestic Product. The unfair mismanagement of this Treaty is extremely well detailed in the book "Paris 1919" as well as this book.

    The European countries economies were tied to the gold standard. As the result of the War gold was moved out of Europe and into the safety of America. When the War ended America wound up with an abundance and Europe with too little gold to back up its currency. The cost of the war caused a much harder burden on the victors. Both England and France borrowed heavily from America to cover war costs. This severely weakened England and France's economy. Germany however spun into disarray.

    France solution to its economic problems was to collect their due reparations from Germany. But Germany could not afford to pay. Germany did all they could to try to negotiate a new payment schedule, only to fail. Germany's finance minister had larger problems than paying England and France. With a lack of gold and currency their Finance minister Rudolph Havenstein decides to print money, lots of money. This caused hyperinflation which made the German mark virtually worthless. As a result, the cost of everything skyrocketed. The solution to inflation is to raise interest rates in order to pull money out of the system. However, Havenstein would not do this because it would cause employment loss and he believed this would result in uncontrollable chaos in the country.

    Due to the bad conditions Havenstein is forced into retirement. His replacement is Hjalmar Schacht. Schacht develops a brilliant plan to solve Germany's economic problems. What he does is create a new currency called the renti-mark. He then pegs it to the dollar. This stabilizes Germany's currency and the inflated mark ceases its existence. The German economy revives although it still feels the negative effects of reparations. So Germany continues to fight for reformation. It has a lot of sympathetic ears including Mantuga Norman, England's Finance minister, and Benjamin Strong the head of New York's Federal Reserve.
    At the same time America was demanding that England and France pay back their war loans to American banks. England and France claimed that they could not repay their loan without being paid by Germany first.

    As a result the French decide to occupy the Ruhr of Germany in retaliation for Germany's default. This causes tensions rise in Europe. So, a plan is developed which would be later called the Dawes Plan. The Dawes plan lessened reparation payments and brought foreign investment into Germany.

    Although Gold was being shipped to America during World War I somehow France had managed to capture a large gold reserve. Since all major economies at the time were backed by Gold the lack of gold held by other countries hurt their economies. The American economy however grew due to Europe's need of American goods and its stable currency. England's economy declin

    4 out of 5 people found this review helpful.

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  • Posted September 6, 2010

    more from this reviewer

    Surprising details behind the coming of the great depression

    The book presents what was to me a surprising story of the coming of the Great Depression. Told through the lives of the four central bankers--U.S., England, France and Germany--this story shows how monetary policy at least contributed if not caused the depression. I found the book surprising in that "commonly understood" causes are not portrayed as the central. I come away with an understanding that the depression was not an outcome of a failure of capitalism requiring regulation but the result of poor monetary policy caused in part by the political failure of the countries' leaders.

    3 out of 3 people found this review helpful.

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  • Anonymous

    Posted May 9, 2009

    Just "OK"

    It was "OK" - nothing great.

    0 out of 11 people found this review helpful.

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