Book Review - "Lords of Finance" by Liaquat Ahamed

This is a fascinating look at the personalities and beliefs of the top central bankers of the US, Britain, France, and Germany from before World War I through the Great Crash and the Great Depression beyond. The personalities shaped the beliefs upon which these bankers acted and more importantly the huge blind spots in their thinking that caused these men to be unable to master the complexities and fundamentals of the Great Depression. Many of their erroneous beliefs have re-surfaced in the modern Republican party's rants against the stimulus and its primitive need to go back to "the ol' time religion" of budget balancing in the face of depressed demand. So the morality tale is hugely relevant to today's economic debate.

The voice of reason out in the wilderness to this tale is that of John Maynard Keynes, who by the end of the book has risen to worldwide preeminence and is a major architect of the worldwide prosperity that followed World War II, the prosperity from which we have all enormously benefitted.

A profile of Keynes early in the book describes his position as one of the most influential figures in the British Treasury during and after World War I. There is a fascinating summary of his thinking: "As the war dragged on, he himself became increasingly disillusioned with its terrible waste, the relentless loss of lives, the refusal of the politicians to contemplate a negotiated settlement, and the steady erosion of Britain's financial standing."

I am utterly fascinated by the wisdom of the Western leaders throwing away the opportunity to negotiate a settlement with Germany in 1916 or 1917 or even early 1918. Keynes made a hugely wise observation about one of history's great missed opportunities. A negotiated peace would have meant that a new equilibrium could have been established. Kaiser's Germany was not Hitler's Germany. A lot of lost lives could have been saved. The Second World War could have been avoided because its underlying driving forces would simply have not been present. That is because World War II did not become some inevitability at Munich in 1938 but rather it became an inevitability in 1919 at the Paris Peace Conference with its Treaty of Versailles. Keynes miraculously prophesied the coming of the Second World War in his book "The Economic Consequences of the Peace," which came out in November 1919.

This will be a book I will blog about again in the future, particularly the rise of French central banker Emile Moreau. And we will come back to Keynes acidic portraits of the Allied leaders meeing in Paris in 1919.