Penguin BooksProduct DescriptionWinner of the 2010 Pulitzer Prize
"A magisterial work...You can't help thinking about the economic crisis we're living through now." --The New York Times Book Review
It is commonly believed that the Great Depression that began in 1929 resulted from a confluence of events beyond any one person's or government's control. In fact?? as Liaquat Ahamed reveals?? it was the decisions made by a small number of central bankers that were the primary cause of that economic meltdown?? the effects of which set the stage for World War II and reverberated for decades. As yet another period of economic turmoil makes headlines today?? Lords of Finance is a potent reminder of the enormous impact that the decisions of central bankers can have?? their fallibility?? and the terrible human consequences that can result when they are wrong.Amazon.com Review
In December 1930 the great economist Maynard Keynes published an article in which he described the world as living in the shadows of one of the greatest economic catastrophes in modern history. The world was then 18 months into what would become the Great Depression. The stock market was down about 60% profits had fallen in half and unemployed had climbed from 4% to about 10%.
If you take our present situation 16 months into the current recession we're about at the same place. The stock market is down 50 to 60 percent profits are down 50 percent unemployment is up from 4.5% to over 8%.
Over the next 18 months between January 1930 and July 1932 the bottom fell out of the world economy. It did so because the authorities applied the wrong medicine to what was a very sick economy. They let the banking system go under they tried to cut the budget deficit by curbing government expenditure and raising taxes they refused to assist the European banking system and they even raised interest rates. It was no wonder the global economy crumbled.
Luckily with the benefit of those lessons?? we now know what not to do. This time the authorities are applying the right medicine: they have cut interest rates to zero and are keeping them there?? they have saved the banking system from collapse and they have introduced the largest stimulus package in history.
And yet I cannot help worrying that the world economy may yet spiral downwards. There are two areas in particular that keep me up at night.
The first is the U.S. banking system. Back in the fall?? the authorities managed to prevent a financial meltdown. People are not pulling money out of banks anymore?in fact?? they are putting money in. The problem is tha