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Lords of Finance: The Bankers Who Broke the World

From Penguin Press HC, The

Author : Liaquat Ahamed
Binding : Hardcover
DeweyDecimalNumber : 332.10922
Format : Bargain Price
Label : Penguin Press HC, The
Manufacturer : Penguin Press HC, The
NumberOfPages : 576
ProductTypeName : ABIS_BOOK
PublicationDate : 2009-01-22
Publisher : Penguin Press HC, The
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Customer Reviews

Rating:
Summary: Good history, wrong conclusion
Comment: The author does a good job of documenting 30 years of economic history but arrives at the wrong conclusion. He blames the gold standard for the Depression and idolizes Mr. Keynes. The blame lies with World War I and the debt and reparations that came after World War I. It's not surprising that Mr. Keynes was against the gold standard since he was one of the currency speculators who destabilized the world economy by causing wild swings in the exchange rates. The book details the huge swings in the franc/dollar rate and the problems that caused for France.
Rating:
Summary: We came close and didn't realize it
Comment: In reading this extremely well written book about the lead up to the "Great Depression" and the aftermath, it is impossible not to think about how close we came in 2008 to a similar economic meltdown. In 2008 we had the collapse of Lehman Brothers which led to panic in the markets. The decision not to bail out Lehman was similar in many respects to the decision not to bail out the Bank of the United States in 1931 which led to a banking crisis and thousands of bank closures. The political climate was also similar - a cast of political leaders who wanted to led the system collapse and punish the evil doers versus those who saw what would happen if they did that. Presidents who stood by and did nothing (Coolidge) versus those who were late (Hoover) and the ultimate hero FDR who had the capacity to think outside the box and did not really care and economic "cause and effect" He just wanted the problem fixed and was willing to try anything. The book does a good job of explaining just how bad things were in 1931 and how long it took to recover (ten years). For example, before the crash, RCA stock was $90.00 a share. It fell to $ 2.00. The Dow Jones lost 90% of its value. The overall hero of this story is John Maynard Keynes, perhaps the greatest economist of the 20th Century. He not only foretold what was going to happen but how to prevent it from happening again. His theories were not only proved valid, such as the absurdity of the gold standard, but his hands on work at the Bretton Woods conference in 1944 which became the blueprint for the rebuilding of Japan and Germany after World War II. That we had the biggest economic boom of the 20th century after the war was due in no small part to Keynes. In 2008 we came close to the "Second Great Depression". It was prevented by the actions of the Bush White House and the U.S. Congress and the Federal Reserve, and with the cooperation of the two contenders for president in 08, Obama and McCain. There was a lack of cooperation in 1932 between Hoover and FDR which prolonged the banking crisis, and there was much less understanding of how markets, banks, and the real economy co-exist. Keynes helped explain all that to future leaders. The criticism of TARP by conservatives shows a lack of understanding of just how bad things would have gotten had TARP not passed. Fortunately the lessons Keynes taught us were not lost on Ben Beranke and Secretary Paulson and N.Y. Fed Chairman Geithner. Read Lords of Finance and you will get a good perspective on just how close we came to a financial armegeddon.
Rating:
Summary: The Gold Standard and The Great Depression
Comment: Another recent and excellent book on finance, this time the central banker's view from the 1920's and 30's.

The author firmly puts the blame for the Great Depression on central bankers refusal to abandon the gold standard. Liquidity was restrained when it needed to be released, with the central bank heads in Great Britain, France, the United States and Germany fearing the loss of the stable gold "anchor". They didn't trust politicians to act responsibly when printing money, which may be a fair judgement in normal times, but 1) gold was not distributed evenly and was highly restrictive 2) 1929+ was an emergency and the world economy needed a large and quick injection of liquidity.

An alternative view was given by Treasury Secretary Andrew Mellon with regard to the Great Crash, "..... It will purge the rottenness out of the system.... People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." The author gives the quotation but doesn't share the opinion although it could equally have some validity.

A further complication arose from the war reparations that Germany couldn't pay, and which Great Britain and France needed to settle war debts to the United States. He shows how this issue poisoned international relations at a time when positive and constructive attitudes were needed.

Altogether a great book.
Rating:
Summary: Midas Men
Comment: This is a very comprehensive book covering the early central bankers of the world.

But, for someone without a background in economics, some of the passages, like how the gold standard affects lending, interest rates and commodities may be confusing.

Also some of the incidental facts mentioned are humorous as well as thought provoking. Lloyds insured the German merchant fleet before WWI and would have been liable for any tonnage sunk by the Royal Navy. Hmm, quite the unusual reason to avoid war. Another was Rockefeller commenting on J.P. Morgan after learning that his net worth on his death was only $80M: "And I thought he was rich."

The one thing that kept going through my mind as I read some of the passages was that this book could have been written about the last few years. The similarities are striking. Even back in the 1920's, the world's bankers were taking note of the gross materialism and overspending in the US.

A great book on the egos and economic fallacies throughout the world that lead to the great Depression.
Rating:
Summary: Lots of Trees, Not So Much Forest
Comment: After working through this lengthy history of the world's leading central bankers in the period from World War I though the Great Depression, I know a lot more about the world banking system of that period than I used to, and the author delivers the life and times of these men in a clear, well-written style. And that is certainly something. Keynes, of course, towers over the story, but one learns a great deal about the perspectives of France and Germany as well. For this economic non-expert, while the book is completely comprehensible, much of the history amounted to little more than a recitation; the facts did not magically assemble themselves into a deep understanding of how and why it happened, or, especially, how or if it might have been avoided. Indeed, the author's statements on these points stuck me as rather conclusory and oddly disconnected from the detailed description of events he provides. They should have gone off the gold standard sooner; they should have recognized the interdependence of state economies sooner. The economics lessons could certainly have been delivered both more briefly and more substantively. Perhaps though, this book's charm (such as it is) comes in the personal stories surrounding the dismal science and many may find the balance just right.