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Lords of Finance: The Bankers Who Broke the World (2008)

by Liaquat Ahamed

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1,2153311,356 (4.03)53
With penetrating insights for today, this vital history of the world economic collapse of the late 1920s offers unforgettable portraits of four men--Montagu Norman, Amile Moreau, Hjalmar Schacht, and Benjamin Strong--whose personal and professional actions as heads of their respective central banks changed the course of the twentieth century.… (more)
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Very interesting and relevant to today. Seeing the separate events of the 1921-1923 hyperinflation, 1929 Stockmarket crash on Wall Street, and 1931 bankruptcy of Germany. Seeing how they were linked by a gradual tightening of liquidity. How this could lead to 30% drops in GDP and the collapse of democracy. Also how Roosevelt, economically uneducated, leaving the gold standard against all advice. ( )
  wildfry | Feb 20, 2019 |
A fascinating book. I knew a little about the period (pre WW1 through the Great Depression) but not a great deal. This traced the history of four people (one American, one British, one French and one German) and their influence on events of the time. I knew WW1 was expensive but hadn't really thought about how it must have been financed by debt nor about how nations would have done that given the gold standard in effect then. I knew a little about how changes in the money supply (and unrealistic reparations from WW1) influenced the depression but this provided a lot more information. The sequence of events at times read almost like a thriller but one with devastating real consequences for a lot of people. A worthwhile read. ( )
  TanyaRead | Jan 23, 2019 |
A very interesting analysis of a theory that mistakes made by some of the key central bank players in Germany, England, France and the US led to the Great Depression. The author is pretty convincing in his argument, though it must be said that economic theory was at that point still developing (one of the sub-threads in the book is the emergence of John Maynard Keynes). Well-stocked with good details, and observations of the people involved. Spotted here and there with very minor errors (like identifying the USS Indianapolis as a destroyer), but on the whole, well worth reading. As a side note, I was very surprised to see the author cite Harry Dexter White as a Soviet agent; in spite of the Venona decrypts, this fact is still challenged by some, though Ahamed states it straight up. Very unusual. ( )
  EricCostello | May 7, 2018 |
This is a good book, but likely not for all. You don't have to understand a great deal of finance, but it helps to grasp the ideas of the gold standard, inflation, and deflation because the important events between the bankers of the world evolve around these concepts. What works in this book is how well the four central bankers (characters almost) interact with one another. Each man is so much a reflection of his country and to, almost a lesser degree, himself. The key German banker is incredibly self-assured, prideful, and not particularly interested in human interactions. The French banker is also a proud individual with a high degree of sensitivity to how other countries views his. This is a good way to understand world history on the whole...follow the money. What impressed me is how -despite the terrible attacks of the Germans- there was an understanding that it wouldn't be in the best interest of the world to completely crush the country after WWI. There's also the U.S.'s self-serving behavior where rather than support Britain and France directly with money in WWI, we held back and then offered loans. Worth reading if you're remotely interested in world banking affairs. It's not really that far removed from today's practices either. ( )
  RalphLagana | Jan 23, 2016 |
Even given his opening epigraph claiming that biography was the only way to understand history, Ahamed spends surprisingly little time describing each of the bankers as people. Sure, there are the vivid descriptions of their personalities and the expected personal details that helps to explain some of their behavior, but more important to the story is the unique situations each of them faced in their respective home countries: Moreau in France, Schacht in Germany, Norman in England, and Strong in the United States.

Those three European countries ended World War I financially devastated—not just in terms of direct casualties from the war, but also from the loans needed to finance it. The United States, on the other hand, was on the other side of those loans; removed from most of the financial and human effects of the war, after cessation of hostilities the US found itself newly-elevated in the world order.

But beyond the mere balance-book debts and deficits was a deeper issue: their common reliance on the gold standard. All four had suspended matching their currency to the gold available during the war, but afterwards, desperately wanted to get back on the system for perceived stability.

But then they encountered the first crisis: what should they peg their currencies to now? The money supply had grown in all countries as the government pumped out bills to finance their militaries, and on top of that, their gold reserves had drastically changed as well. While the United States' gold reserves had newly-swelled due to their loans, all three European countries found their reserves drastically diminished.

It's fair to say that the gold standard—in all its allure and limitations—forms the central driver of the book. Each struggled to decide when to go back on the system, and stubborn domestic politics complicated acceptance of a devalued currency for most of the European nations. Their ties to gold sharply limited their available actions during the tumultous decade that followed, and sealed their fate with the catastrophic crash. It continues to be astonishing that there exists a faction of Americans—national politicians, even—who advocate for a return to the gold standard and ignore all history that says otherwise.

And then there were the reparations. Under threat of resuming hostilities, the Allies pried a stiff price out of defeated Germany. Not only was land ceded to France and others, and not just there army largely stood-down, but Germany found itself owing billions to France, the US, and the UK. Again, internal politics played a strong role here; the US argued for lower reparations in the interests of the world economy (and because they wanted to disengage with Europe at the time), while the UK and France wanted to squeeze Germany dry, extracting as many kilograms of flesh as they could.

All these tensions recur throughout the book, and it adds a shocking level of detail to what I previously knew about the crash. Again, while Ahamed claims his project is a four-fold biography of these lead bankers, his actual aims are far more grand: a well-written, accessible look at how and why the financial system failed. Unlike his presumptive thesis that hubris and personal factors led to the crash (as his title and other paratext would have you believe), the book's verdict is far more nuanced and damning. Given the financial systems at play and the political situations at the time, it's hard to imagine how any combination of personalities could navigated the troubles.

But that's not to say the book is entirely fatalist; there is one lone speck of light in the darkness, and his name was John Maynard Keynes. While he doesn't get as much attention as the four main characters, he acts as a hectoring marginalia to most of the decisions of the time. Keynes was utterly prescient, and has rightfully seen a resurrection after the crash of 2008. But he is the Cassandra of his tale, predicting the coming crash, and unable to do much more than step out of the way. ( )
  gregorybrown | Oct 18, 2015 |
Showing 1-5 of 31 (next | show all)
A grand, sweeping narrative of immense scope and power, the book describes a world that long ago receded from memory: the West after World War I, a time of economic fragility, of bubbles followed by busts and of a cascading series of events that led to the Great Depression.

added by mikeg2 | editNew York Times, Joe Nocera (Feb 13, 2009)
With penetrating insights for today, this vital history of the world economic collapse of the late 1920s offers unforgettable portraits of four men--Montagu Norman, Amile Moreau, Hjalmar Schacht, and Benjamin Strong--whose personal and professional actions as heads of their respective central banks changed the course of the twentieth century.

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