Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed
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. As yet another period of economic turmoil makes headlines today, Lords of Finance offers a new understanding of the global nature of financial crisis. It is a potent reminder of the enormous impact that the decisions of central bankers can have, their fallibility, and the terrible human consequences that can result when they are wrong.
Liaquat Ahamed has been a professional investment manager for 25 years. He has worked at the World Bank in Washington D.C. and the New York based partnership of Fischer Francis Trees and Watts, where he served as Chief Executive. He is currently an adviser to several hedge fund groups, including the Rock Creek Group and the Rohatyn Group, is a director of Aspen Insurance Co. and is on the board of Trustees of the Brookings Institution. He has degrees in economics from Harvard and Cambridge Universities.
Lords of Finance 3.5 out of 5based on
More than 1 year ago
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.
More than 1 year ago
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
More than 1 year ago
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.
More than 1 year ago
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.
More than 1 year ago
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
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