The focus of this book are four central banks and their respective bankers. The decisions of central banks of U.S.A., England, France, and Germany are presented from 1914 until mainly 1933. Going from war reparations to the gold standard and the stock market were given reasons why certain decisions were made rather than their alternatives. The psychology of nations and the ideology of the bankers themselves were present in making the decisions. Circumstances may have made some decisions more pronounced than others, but what is made clear is the indecision due to uncertainty of theory and practice. Ahamed presents a wonderful history of uncertainty about monetary policy.

Due to the economic interconnection, it seemed implausible that any country would be willing to start a war. Only problem with this view is the revealing history of wars which occurred even if not backed by gold to fight the war. The aftermath of WWI had two consequences, war reparations and shifting power. WWI was very beneficial to the U.S. due to the loans and demand for supplies.

The first of the three major decisions to be made was about Germany’s war reparation to the Allies. The amount was debated for years and did not have much to do with economic policy but guess work on Germany’s ability to pay. Germany’s ability to reparations were diminished due to high tax areas being taken by the Allied countries. Keynes made the point that the size of the reparations would require the Allies would require to purchase more products from Germany than selling products which would cripple Allied industries. Eventually, the Bank of International Settlements would commercialize on the reparations, a process which is the now known as securitization.

The second major decision regards the Gold Standard. When on the Gold Standard, the gold reserve dictates the cost of credit. More gold makes cheaper credit via lower interest rates while less gold increases interest rates. As gold prices depended on the supply of the metal, gold was a way to prevent government debasing the currency for political gains at the expense of the citizens. Without the Gold Standard, a country can debase the currency via inflation much like Germany did to pay for reparations. The astronomical inflation caused a massive daily life change with prior savings being worthless and any income becoming valueless every hour. The Gold Standard carried with it a world view of honor and independence from government at the cost of being depended on the supply of the metal. The nations went of the Gold Standard during the war and made a decision in the aftermath to return to the Gold Standard causing massive economic problems shortly after.

The third major decision to be taken related to the stock market. The Federal Reserve decided not to act on the booming stock market due to the stock market psychology and underlying uncertainty. As Ahamed points out, the Fed did not want to be the arbiter of equity prices. Another reason was due to inability to be able to maintain conflicting goals. Many banks were depended on the stock market as they held call loan as reserve. A collapse of the stock market would lead to a run on the system. A vicious cycle would ensue as when the safety of the banks was questioned, that would lead to further withdraw of liquidity making the situation worse.

The initial central bakers did not actually know much about economics or monetary policy. Evolution on how the monetary policy changed is subtle, but present. From trying to bail out only solvent banks to altering the way money flows in the system. The book also describes the banker’s major junctures and how they dealt with publicity. Either trying to keep their lives privately or living in the public light, every action caused media and market speculation. Each central banker had different ways of organizing the way monetary decisions are held. ( )

This book is my first real in depth look at the role of national banking policies in the spiral from the end of WW1 to the depression and the economic rise of Nazi Germany. Americans, British, French, and German financial leaders made astonishingly bad decisions compounded by worse decisions by their political taskmasters. The gold standard appears to be the root of many of the problems they faced, but even that skims the surface of deepseated problems in the nature of money and how government manipulates it to improve employment, economy, and international advantage. ( )

All about the roaring 20s, lead up to the depression and then the crash. focuses on the 4 big bankers from us, uk, france and Germany. very pro-Keynes and anti-gold standard. I am not knowledgeable enough to know if this is "biased" or not... good story, too much biography. ( )

Long and not very convincing

This is a good overview about the causes and consequences of the Great Depression.

But it has some problems.

First, it focuses on the life of 4 men that, back then, were the central bankers of the 4 most influential countries on Earth. But, despite the author's effort, these were not really very interesting people.

Second, the author's thesis is that these 4 bankers were responsible for the crash because they failed to respond adequately to the successive crisis. But the author himself exhaustively describes the economic difficulties the western war faced after the World and how the governments of the US, Britain, France and Germany were unable to work together to solve them. So, at the end, these 4 bankers weren't as central to the Crisis as the author suggest (which makes focusing on them even more irrelevant). ( )

The Lords of Finance covers the economists and bankers of the four major nation in the early decades of the 1900's, and how their decisions may have contributed to the Great Depression in the U.S. and worldwide. It was interesting to see how much was not understood, and how the post WWI policies and war reparations impacted Germany leading up to WWII. ( )