Finance
by Liaquat Ahamed
Who broke the world's economy?
Between 1929 and 1933 the world economy fell apart. Liaquat Ahamed tells the story through the four men who ran the central banks of Britain, America, France and Germany. He argues that their choices did far more damage than the Wall Street crash.
Hear a sample · read by Laura
Montagu Norman of the Bank of England was secretive and highly strung. Benjamin Strong of the New York Fed was forceful, and ill with tuberculosis. Émile Moreau of the Banque de France distrusted the British. Hjalmar Schacht of the Reichsbank was brilliant and arrogant.
Under the gold standard each currency was worth a fixed amount of gold. A country losing gold had to raise interest rates, even in a slump. By the end of the 1920s most of the world's gold sat in America and France, and everyone else was squeezed.
Germany owed reparations to Britain and France, and they owed war debts to America. For a while American loans to Germany kept the circle turning. When that lending dried up at the end of the decade, the whole arrangement began to seize.
Benjamin Strong died in 1928, before the crash. Ahamed suggests he might have had the standing and the instinct to pour money into the system once banks began to fail. Without him, the Federal Reserve dithered while thousands of American banks went under.
Four men
After the First World War, four central bankers in London, New York, Paris and Berlin ran the world's money.
War debts
Germany's reparations and the Allies' war debts left a pile of IOUs nobody could really pay.
Gold
The central bankers' faith in the gold standard tied their hands just when the world needed more money.
Old rate
Britain went back to gold in 1925 at the pre-war rate, leaving the pound too strong for its own industry.
Strong's death
When Benjamin Strong died in 1928, the Fed lost its most capable leader at the worst moment.
A story from the book
In 1925 Winston Churchill, then Chancellor, put Britain back on gold at the old pre-war rate, with Montagu Norman urging him on. Keynes warned that the pound would be overvalued and British industry would pay for it. Britain spent the rest of the decade with high unemployment.
Hot take · true or myth?
The 1929 Wall Street crash was the main cause of the Great Depression.
Myth. Ahamed treats the crash as one blow among several. The deeper damage came from central banks keeping money tight to protect their gold while banks failed across America and Europe.
One thing to try
Pick one money rule you live by, such as a savings target or a way of splitting the bills. Ask when you set it, and whether your life still fits it. Ahamed's bankers kept trying to rebuild the world of 1913 long after it had gone.
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. Lords of Finance comes with a Hot Take round to make it stick.
Get the whole book on KnotdOpen in the appWho broke the world's economy? Between 1929 and 1933 the world economy fell apart. Liaquat Ahamed tells the story through the four men who ran the central banks of Britain, America, France and Germany. He argues that their choices did far more damage than the Wall Street crash.
Four men, four temperaments; Chained to gold; A circle of debts; The man who wasn't there.
Pick one money rule you live by, such as a savings target or a way of splitting the bills. Ask when you set it, and whether your life still fits it. Ahamed's bankers kept trying to rebuild the world of 1913 long after it had gone.
Yes. Knotd has the key ideas from Lords of Finance in a few minutes, in plain words, plus a Hot Take round to test them. It's one of 250+ non-fiction books in the app.
