Lords of Finance
Lords of Finance: The Bankers Who Broke the World is a nonfiction book by Liaquat Ahamed about events leading up to and culminating in the Great Depression as told through the personal histories of the heads of the Central Banks of the world's four major economies at the time: Benjamin Strong Jr. of the New York Federal Reserve, Montagu Norman of the Bank of England, Émile Moreau of the Banque de France, and Hjalmar Schacht of the Reichsbank. The text was published on January 22, 2009 by Penguin Press. The book was generally well received by critics and won the 2010 Pulitzer Prize for History. Because the book was published during the midst of the financial crisis of 2007–2010, the book subject matter was seen as very relevant to current financial events. Plot summary The book discusses the personal histories of the four heads of the Central Banks of the United States, Great Britain, France, and Germany, and their efforts to steer the world economy from the period during the First World War until the Great Depression. The book also discusses at length the career of the British economist John Maynard Keynes who criticized many of the policies of the heads of the Central Banks during this time. Themes One of the main themes of the book is the role played by the central bankers' insistence to adhere to the gold standard "even in the face of total catastrophe." As Joe Nocera, a book reviewer at the New York Times, stated, "the central bankers were prisoners of the economic orthodoxy of their time: the powerful belief that sound monetary policy had to revolve around the gold standard...Again and again, this straitjacket caused the central bankers — especially Norman, gold’s most fervent advocate — to make moves, like raising interest rates, that would allow their countries to hold on to their dwindling gold supplies, even though the larger economy desperately needed help in the form of lower interest rates." Another theme that runs through the book is how difficult it was to forecast the financial future and how the events would influence world events. "Mr. Ahamed’s opinions are made very clear (the Paris Peace Conference’s plan for Germany to pay war reparations is presented as a great blunder), but his overriding idea is that blame cannot be easily assigned: not even the most sophisticated economists of the era could accurately predict disaster, let alone guard against it. The effects of a public herd mentality at the time of the 1929 stock market crash are depicted, all too recognizably, as unstoppable." Production Liaquat Ahamed, a hedge fund manager and Brookings Institution trustee, first got the idea to write the book when he read the 1999 Time story “The Committee to Save the World,” which discussed Alan Greenspan (then the Federal Reserve chairman), Robert Rubin (Bill Clinton’s Treasury Secretary) and Lawrence Summers (Rubin’s No. 2). Ahamed realized that a similar story could be told in the 1920s about the heads of the four