We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.”
So wrote the great economic iconoclast John Maynard Keynes, in an essay titled “The Great Slump of 1930,” published in December of that year. Thirteen months had passed since the crash of 1929; the world was living, in Keynes’s words, in “the shadow of one of the greatest economic catastrophes of modern history.” Keynes comes off well in this story, by the way.
The lords of finance who constitute the title of this book are the four central bankers who dominated that postwar era: Benjamin Strong of the Federal Reserve Bank of New York, Montagu Norman, the longtime head of the Bank of England, Émile Moreau of the Banque de France, and Hjalmar Schacht, who headed the Reichsbank. Ahamed says he got the idea for this book when he read a 1999 Time magazine cover story headlined “The Committee to Save the World,” about Alan Greenspan (then the Federal Reserve chairman), Robert Rubin (Bill Clinton’s Treasury Secretary) and Lawrence Summers (Rubin’s No. 2). He realized that in the 1920s, the four top central bankers had acquired a similar mystique and fame. They were sometimes described as “the most exclusive club in the world.” He decided to tell the story of “the descent from the roaring boom of the ’20s into the Great Depression” by “looking over the shoulders” of these four men. And so rather than bemoan our modern tragedy, Ahamed, a hedge fund manager, decided to write this cautionary tale, where we know both the beginning and the end of the story.
I am not a big fan of non-fiction books, but from a literary point of view this is a beautifully written book. Ahamed has a gift for storytelling that many a full-time author would envy — the decision to build “Lords of Finance” around these four men was brilliant, and he carried it off well. Each of them was a powerful personality, with the full range of strengths and weaknesses, insights and eccentricities. Because much of the book concerns decisions, for instance, to raise or lower interest rates, you need great characters to pull the story along, and Ahamed not only has them but also knows how to make them come alive. Strong is the domineering American; Schacht the arrogant, headstrong German; Norman and Moreau the prideful Europeans. Strong and Norman became close friends, and their letters to each other are a rich source of material.
I am no finance whiz. I probably could balance my check book but I do not. This book was remarkable in it’s ability to pull one of my ilk along with the story. I am sure there were many details in the book that I failed to understand the importance of, but this book made understandable financial concepts and the interconnectedness of the world even a century ago–the world was pretty dang flat before Thomas Freidman declared it so. If you read only one non-fiction book this year, let it be this one.