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on 16 January 2012
Liaquat Ahamed (a NY money manager) won the FT Business Book of the Year Award 2009 with this - his first book - and deservedly so.

There are lots of parallels with the recent financial crisis (although Ahamed actually wrote the book before the crisis broke). Points of interest are:


World War 1 saddled the Europeans with Debt. The Germans owed money to the French and Brits ("reparations") while the Brits and French owned money to the Americans (who kindly lent us money so we could buy weapons from them). These debts soured international relations for 20 years: the French and Brits wouldn't reduce the reparations due from Germany, unless the Americans agreed to reduce their demands on them.
There were 3 different approaches to dealing with the hang-over of debt.
1. Inflation: Germany did this in the 1920s, it led to hyperinflation, but reduced the value of their currency, making the reparations easier to pay (in theory only, because the Allies soon wised up and demanded something of value - e.g. the French invaded the Ruhr district of Germany to get coal).
2. Devaluation: The French devalued their currency against gold: thus reducing the value of their debt obligations. In the 1920s, this was seen as a dishonourable thing to do: tantamount to defaulting on your debt.
3. Deflation: The Brits simply did their best to pay off their debts, viewing the French and German responses as dishonourable.

Currency Wars

The gold-standard took a breather in WW1, but countries rejoined as soon as they could afterwards. The French rejoined at a much lower rate, which allowed them to accumulate huge gold reserves (capital account surplus) and run current account surpluses to try to export their way to growth. Pretty much the current Chinese strategy.
The Brits (largely for the sake of honour, rather than economics) rejoined the gold-standard at their pre-war rate (which was too high, in retrospect), and suffered the results of an overvalued exchange rate: a drain of gold reserves, slow growth, and deflation.
The problems with the French accumulation of gold and undervalued currency soured international relations for a decade or more between the wars: but the French persisted, as they saw accumulation of gold as imperative security for themselves, having been ravaged by WW1.

Policy Response to Banking Crisis and Great Depression.

Keynes' was a lonely voice arguing for fast government reaction to the 1929 crash and subsequent banking failures. The orthodoxy of the day was to let banks go bust (particularly those deemed insolvent), and to try to balance the budget. To bail-out foolish banks and not to balance the books was seen as reckless, ungentlemanly behaviour. The author takes the view (and I think most would agree with the benefit of hindsight) that this policy response made the crisis far worse than it needs to have been - and explains why the response to the 2008 crisis was so vigorous, in contrast to 1929-2932.


By 1944 (now Lord) Keynes' had been proven right on virtually all counts, and he and White (the US lead negotiator, and later discovered to be Soviet-spy) drew up the Bretton-Woods agreement. Keynes wanted a World Bank, and while did not want fixed exchange rates (he was a fierce critic of the UK's return to the gold standard), he wanted a system where current account balances were brought into balance ( ie the French couldn't run persistent surpluses has they had in the 20s). But the Americans, fearing that they would be the runners of persistent current account surpluses after WW2 was over (as they'd be the only ones left standing - which turned out to be true) watered down Keynes' proposals.

All in all, a fascinating book.
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Some seem to think that the recent devastating, greed-induced, brainless financial cock-up at an astronomical cost to the taxpayer, is unlikely to reoccur. They are so, so wrong. During the past century alone, there have been a number of financial disgraces that have impacted on society at large, the hitherto most serious being The Wall Street Crash of 1929, and the subsequent Great Depression of the 1930's. We didn't learn in the medium or long-term from any of these events, and will not do so in the future, as our actions are governed always an equal mixture of ambition, greed, and asininity. There will be another global financial melt down in the future, guaranteed for certain, so lets hope the tax-payers have very deep pockets and short memories because the perpetrators of massive monetary bankruptcies are rarely penalised with loss of liberty or bank balances.

So to "Lords Of Finance", it is commonly believed that the Great Depression that began in 1929 resulted from a sequence of events beyond any one person's or governments 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, that set the scene for the terrible downward spiral leading to unruly markets and the manifestations of the very worse of human behaviour. All seems a bit familiar doesn't it?

In "Lords Of Finance", we meet the neurotic and enigmatic Montague Norman of the Bank of England, the xenophobic and suspicious Emile 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. The steps that they took to reconstruct the the world of international finance after the First World War, namely the return to the gold standard, seemed to work at first but fairly soon cracks appeared beneath the veneer of boom prosperity, and the world economy began to plummet into that period known as the Great Depression and the rest, as they say, is history.

The book was awarded the 2010 Pulitzer Prize for history and has received a welter of acclaim for providing a compelling and convincing narrative of bungling, tortured bankers, vainly trying to reconcile conflicting personal, national and global ambitions and duties. On September 2, 2010, Chairman of the Federal Reserve Ben Bernanke was asked by the Financial Crisis Inquiry what books or academic papers he would recommend to understand the financial crisis of 2007-2010. The only book that Bernanke recommended was"Lords Of Finance".

A superb, highly engrossing, easy to follow, thought provoking book, that alas will have little or no effect in staving off another bout of financial madness, and another, and another........

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on 11 August 2014
A good book. Not excellent but good. Rather than going on about the positive aspects I will list my main quarrels. The author looks at the figures as benevolent bankers, does not draw any conclusions, does not make links between events, has not looked into the BIS in enough detail, has not examined the roots and the funding of the Nazi party nor has examined other private clubs to which these bankers belong to nor has he tried to draw conclusions from their social lives but rather they are all described as a bunch of benevolent actors who are well wishers on the world. This is akin to arguing that Lehman acquisition of toxic mortgage products after the fact that they were aware of their insolvency was to save the American people from those losses...nonsense we all know not to be true. Even those for whom the author acknowledges profited in illegal manners by utilizing insider knowledge, private connections and by muddling private and public office are not exposed in much detail by the author...apart from perhaps the French. The Melons, Morgans and even Schachts etc however are presented as household heroes...people we should admire, the omissions of this kind are almost criminal...this at best should be taken with a spoon full of salt and tossed on the pile with other descriptive works lacking any real analytic substance.
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on 24 August 2010
.. a lack of understanding about how the economy operated.'

Looking back at the Great Depression of the 1930s and its consequences, it's easy to believe that the causes were beyond the control of individuals or government. Liaquat Ahamed contends that this was not the case, and makes a case that the decisions taken (or perhaps not taken) by a small number of central bankers were the primary cause. These men were the members of `the most exclusive Club in the world': Montagu Norman of the Bank of England; Benjamin Strong of the New York Federal Reserve Bank; Hjalmar Schacht of the Reichsbank; and Émile Moreau of the Banque de France. Each of these men had his own distinctive style and personality, each has his own strengths and weaknesses. Much of this book provides biographical detail about each of these men and John Maynard Keynes, with briefer sketches of other key figures. This detail, together with the relevant history, political and economic commentary, is important in understanding what actions were taken, and why.

The book starts in 1914 and provides a global financial history which covers the financing of World War One; the protracted arguments over war reparations; Weimar Germany's hyperinflation; discussion of the gold standard and related problems; the 1929 stock market crash; serial bank panics and the responses to each by governments and central banks. And, of course, the economic thinking of John Maynard Keynes.

My main interest in reading this book was twofold: to revisit 20th century history in the period between the World Wars; and to read more about the causes of the Great Depression. While I'm not convinced that Keynesian economics holds all of the answers, it certainly seems that economists, bankers and governments have not applied all of the learning that should have been gleaned from the events of the 1920s and 1930s, and which may have lessened the impact of the events which started in 2007.

Jennifer Cameron-Smith
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on 24 April 2009
This book is an absolute model of economic history writing. It makes its central characters come disarmingly alive, it presents a well structured narrative woven around a cogent core theme, it makes its arguments eloquently and persuasively without getting bogged down in mundane detail, and above all, it will genuinely illuminate the reader not only on the period it is describing but on a vast number of aspects of international economics and finance.

I read this book for a university course covering the Gold Standard era and found it hugely helpful in this regard, but would have absolutely no hesitations in recommending it as a leasure read to anybody with even the remotest interest in the Great Depression, the economic consequences of World War 1, or the lives of statesmen and policy makers during the 1920s and early 30s. These topics are often served bland, but Ahamed's wonderful prose keeps the book consistently engaging and makes it a true literary pleasure.
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on 20 October 2016
Vigorous narrative history - I'm glad to see others agree!
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on 7 February 2010
This is one of the best works of economic history I have read in a long time and the parallels to today's financial crisis bind boggling. Though central bankers and politicians may have learnt a lot since then, one cannot help but be left asking the question: What haven't we learnt and how much more do we need to learn to avert a depression of the magnitude experienced immediately prior to World War II.

The book is extremely insightful, full of warmth, humour, sympathy for the characters it follows and brilliantly portrays the financial community from 1914 through 1933. The four main characters, Governors of the Federal reserve, Bank of England, Reichsbank and Banque de France are followed closely as they attempt to come to terms with the economic tensions that followed WWI, the ill fated belief in the gold standard and the financial imbalances that arose as a result of some countries accumulating excess reserves of gold. The attempts to deal with this, get the world economy on a stable footing and a return to stable growth are described in terms where you by no stretch of the imagination need to be an economist to follow the storyline.

The most scary perspective in this book is the parallels to today's financial crisis. Though today is very different, it is almost as if history is repeating itself. If one replaces the accumulation of gold with the accumulation of currency reserves (imbalances between creditor nations and debtor nations), the infatuation with fixed currencies (the Euro) with the gold standard and the leverage of the financial system then one cannot help asking, to which extent history is repeating itself and whether we learnt all we needed to the fist time around.
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on 27 September 2010
Mr Ahamed takes a different route to studying the economic catastrophe of the GD in Europe and the US. As mentioned in the quote at the start of the book, the book is more biography than a more traditional summary of events. It works well, choosing 2 dominant characters in shaping their country's policies (Norman and Schacht), while 2 seemed slightly less important (Moreau at the BoF and Strong at the newly-created Fed) in terms of their overall influence of their respective country's economic decision-making.

This book would satisfy finance/economists more than the general reader, given its perspective from the eyes of the various central bankers. Wider issues are discussed or mentioned, but often are cut off abruptly. Certainly, as an informative view on the start of the importance of central bankers in modern economies, it is very interesting. As the book starts, the Fed has yet to be created, while the BoE is the only one of the four institutions that already has gravitas and weight in international markets.

A great read for a more specialised view, but clearly not a "classic" in terms of the histories of the GD. Galbraith's work and others should be preferred for a more sweeping panaroma.
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TOP 1000 REVIEWERon 9 November 2012
Eat your hearts out Irving Fisher, John Kenneth Galbraith, Charles Kindelberger, Milton Friedman, Richard Koo and Ben Bernanke. An amateur has written the definitive narrative of the Great Depression.

I have no idea if the author is right about everything he says here. I looked in vain for Smoot-Hawley and could not find any mention. But I don't care. If this book was fiction it would still be a strong candidate for the best book I've ever read. The fact that it takes you through the history of the Great Depression through the lives of arguably four of its biggest protagonists (the heads of the four most important central banks) is a nice bonus.

I went through this doorstop of a tome in less than three days. As an added bonus I found out what happened in the Great Depression in the view of an author who may not be a celebrated economist but is clearly totally engrossed by his subject. I was so excited about it, I sat down my poor dad to tell him the story. That bit did not go so well, he stopped me an hour into my trance.

But I digress. This book is AWESOME.

Makes you want to ask for a sixth star.
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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.
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