Lords of Finance: The Bankers Who Broke the World

Liaquat Ahamed, in Lords of Finance, describes the period of the Great Depression through the lens of the chiefs of the heads of the central banks of Britain, France, Germany, and the United States. Extremely broad in scope and detail, Ahamed unveils the curiously parochial and cosmopolitan world of banking and finance during, before, and after the Great War into the 1920s and 30s. The main characters, Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve, Emile Moreau of the Banque de France, and Hjalmar Schacht of the Reichsbank, all played pivotal roles in shaping global finance.

Two main concerns hovered over the postwar period: the Gold Standard and German reparations. During the war, most nations had abandoned the Gold Standard in order to finance the war, yet the contemporary thinking was that a return to gold was necessary following the war, as the global economies would be less stable without gold. The state of German finances following the war had cascading effects for the global economy. As the United States receded into isolationism, global lending halted and the Deutschemark experienced hyperinflation. This prevented Germany from repaying its debts, and generally froze credit within continental Europe. Through a number of steps, decisions were made that allowed for European lending and market activity to reemerge, but underlying problems, including the undervalued franc, were essential to the collapse in 1929. In this vein, Ahamed essentially argues an accumulation of decisions, such as Britain reverting to the gold standard and wide-spread speculation within Wall-Street, caused the Great Depression. The problems were systemic, meaning that the financial system and corresponding policy decisions were at fault.

The essential strength of this book can also be considered a great weakness. The quote which precedes the introduction, “Read no history, nothing but biography, for that is life without theory,” attributed to Benjamin Disraeli, accurately depicts the vantage point of Ahamed’s work. Lords of Finance is a decidedly descriptive work, recounting the major decisions made by the world’s bankers with great intimacy and familiarity. On one hand, this is a major strength, as Ahamed provides an unbiased and accurate account of the events. However, the “amalgamation of decisions” argument can leave a bit to be desired. Perhaps my social science background begs for a more explicit causal flow, but it seems that Ahamed focuses too heavily on the historical aspect of his account, and not the financial and theoretical aspect of the Great Depression.

Overall, Lords of Finance is a captivating read that presents a clash between an old world order and an emerging one. Ahamed features as the guide, bringing the reader into a world of smoke-filled rooms where political and financial decisions were made in exclusive clubs. This account of the Great Depression in its depth, and provides unique insights into one of the most troubled times in modern history.