Lords of finance
With penetrating insights for today, this vital history of the world economic collapse of the late 1920s offers unforgettable portraits of the four men whose personal and professional actions as heads of their respective central banks changed the course of the twentieth centuryIt 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.In Lords of Finance, we meet the neurotic and enigmatic Montagu 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, whose facade of energy and drive masked a deeply wounded and overburdened man. After the First World War, these central bankers attempted to reconstruct the world of international finance. Despite their differences, they were united by a common fear—that the greatest threat to capitalism was inflation— and by a common vision that the solution was to turn back the clock and return the world to the gold standard.For a brief period in the mid-1920s they appeared to have succeeded.
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29mentions
21people
2010–2026years
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- Gosh, have we in the West forgotten so much of our history already?
Much of the gold was moved out of Europe prior to and during WWI. Partly out of fears of German aggression b ut also because throughout the war, European countries bought massive amounts of materiel from America, which increased the flow of money out of European and into American coffers.
But gold itself is very heavy and thus cumbersome to transport. It doesn't make sense to run transatlantic gold shipments every time a few bars change hands. So central banks tended to keep the gold more or less in one big vault and just sort of move the bricks between one country's pile and another. So there would be, in essence, a large stack of gold in the US Federal Reserve, and that gold belonged to France, or whomever. When the war ended, European countries were devastated and needed goods from somewhere that didn't have depleted industrial capacity and whose farmlands weren't littered with UXO.
This situation more or less cemented America's position as the world's creditor, and so it simply was more convenient to keep a large portion of one's gold reserves in the country with whom you were doing a lot of business. For some countries, repatriating gold is a matter of sovereignty, and e.g. France started repatriating its gold reserves in the 1960s.
Now that Americans have decided they like being a military, economic, and cultural superpower less than they like electing a dementia-ridden child rapist, other countries have correctly realized that America's decline cannot be stopped, only slowed. After all, it's Americans themselves who are the root of the problem, and Trump is but a symptom. This instability is not going to stop when he leaves office. Better get your gold off the sinking ship, but do it slowly so as to not accelerate the sinking before you can get it all out.
Re: the gold situation after WWI, if you're interested I encourage you to read Liaquat Ahamed's excellent Lords of Finance, which won the Pulitzer, IIRC.
- Try reading, Lords of Finance: The Bankers Who Broke the World. It won the 2010 Pulitzer Prize for History, among other accolades. I certainly enjoyed it, though I read it on the heels of the 2008 financial crisis, which may have made it feel especially salient.
- The most interesting biography I've read is "Lords of Finance" by Liaquat Ahamed, a biography of the four men who headed the New York Fed and the English, French and German central banks in the period between WWI and WWII. While you could argue it is a little light on biographical content, it gives a really excellent insight into the economic history of Europe between the wars, and how the economic fallout of WWI and the adherence to the gold standard ultimately contributed to the Great Depression.
In a similar vein, "The Man Who Knew" is a biography of Alan Greenspan, the chairman of the Federal Reserve from 1987 to 2006. This book goes a bit more into the private life of the central banker but also examines how his monetary policies contributed to the 2008 financial crisis. It's a good read, though perhaps a little less critical of Greenspan than it could be.
- Book recommendation:
Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed. It is more interesting than the title, I think. It covers WW I, great depression, and the beginning of WW II, with a focus on monetary policy (gold standard, etc.), but also gives general political and economic background.
My main take-aways:
1. Things were slower. The Governor of the Bank of England wanted to confer with his counterpart in the US. So, he'd board a boat to the US anonymously, travel there over the course of several weeks, chat with his pal for a few weeks, and travel back for a few weeks.
2. Things are hard to predict (market collapse, inflation, fascists taking over your country). In particular, by the time it becomes clear that the threat is real, it is too late to protect yourself against it.
- > The difference between corporate debt and government debt is corporate debt is backed by assets, which is not inflationary.
If this were true corporations would never become insolvent. The role of CDOs and CDSs in the 2008 crisis made it abundantly clear how corporate debt can be inflationary. But we knew that beforehand from previous crises in the 19th and early 20th century when unwinding corporate debt and restoring liquidity was handled (if at all) almost entirely in the smokey parlors of the private sector by titans like J. P. Morgan. See, e.g., https://en.wikipedia.org/wiki/Panic_of_1907 More generally, see Lords of Finance (https://en.wikipedia.org/wiki/Lords_of_Finance), an historical account of early 20th century international banking which swept up numerous history and economics awards. (It was coincidence that it was published amidst the 2008 crisis. IIRC nothing in the book mentions it except possibly a foreword.)
- I’m not the OP, but there’s a whole book on the topic. Fascinating read if you ever get the chance.
A Keystone Cops level of professionalism displayed by the central bankers at the time.
Lords of Finance - https://www.amazon.com/Lords-Finance-Bankers-Broke-World/dp/...
