Wheelbarrows, the hot fashion accessory in Weimar Germany for carrying around all that worthless currency.
In the last six months or so, as the worldwide economy has gone through its whirlwind of confusion and doubt, many people have sought to make comparisons between this fall and the Great Depression. As someone who has spent a lot of time reading about the 1930s, I can tell you that the resemblance isn't that close. The movies were a lot better back then.
While reading Liaquat Ahamed's Lords of Finance, though, it is hard not to see some similarity in circumstances that led to both downturns--too easy credit and a bull market that was perhaps too strong to control, for starters--although this one is nowhere near as severe as the one seventy years ago. And if I, one of the world's supreme economic dolts, can understand those things while reading Mr. Ahamed's book, then he is a miracle worker of the first order.
Even the seemingly kind and patient Mr. Ahamed has his limits, though, when it comes to someone like me--despite his best efforts and explanations, there still were sections of this book where I found myself unable to hold onto the state of money in the time being described, the meaning of a term, here and there, or the consequences of some decision. However, I think I came out of it with a better grasp of how economies work than usual--though I'd appreciate it if you didn't ask me to actually explain anything.
Ahamed's book centers around the heads of the world's most important central banks--Montagu Norman in Britain, Emile Moreau in France, Hjalmar Schacht in Germany, and Benjamin Strong in the US--and the decisions they made in the years following World War I. The author's contention seems to be (and I say "seems" because I wouldn't necessarily trust my interpretation of anything on this subject) that the roots of the Depression were planted far earlier than the rise of the US stock market to out-of-control status at the end of the 1920s (to paraphrase Joseph Kennedy circa 1928, "If shoeshine boys are giving stock tips, it's time to get out of the market"). The key decisions were made after the war as the nations struggled with such decisions as whether to go back to the gold standard abandoned during the war, whether to devalue or deflate currency, and how much to punish Germany for its role in starting the war.
This may all sound like very dull stuff but it's really not--centering the story around the four central bankers helps humanize it, and Ahamet has a way with finding just the right anecdote at the right time to make the men behind the banks come to life. They were characters--Norman, a loner who enjoyed hanging out with his bohemian Bloomsbury friends more than the top hat and morning coat crowd; Moreau, who had a tendency to make friends with every man in France involved in some kind of monetary or love scandal; Schacht, brilliant, but a first-class pompous jerk; and Strong, who had problems dealing with the heads of the various US regional banks and problems with marriages and girlfriends. Norman and Strong became very close friends, and their relationship is to some degree the center of the book--not just because of their friendship, but because of the inevitable link between Britain and the US as position of world money power shifted from the former to the latter.
The two main themes of the book, as I see it, are the debate over the viability of the gold standard and war reparations. For Norman, the gold standard was a measure of cultural pride--the British pound's link to gold had helped make it the strongest and steadiest currency in the world, and his attempt to use the gold standard to return to that position in the postward era, perhaps weakened Britain's economy more than helped it. As for the war reparations, the amount originally determined at the Paris Peace Conference, which was (I believe) in the $32 billion range, they came from pure anger, mostly from France. They were meant to not only punish, but cripple Germany, the consequences of doing that bedamned. Some, like British economist John Maynard Keynes, warned that destroying Germany's economy would hurt the rest of Europe as well, but with the whole plan conceived in anger, no one was particularly interested in listening.
(there is no way I didn't get some of the above wrong; I am an idiot)
I enjoyed this book enough--I wasn't always riveted to it, but I appreciated the fact that I was learning something from it. In a way it is fascinating to read this book in these times, with the comparisons between today's situation and the world back then so easily apparent. Obviously Ahamed started writing this long before the current economic deterioration (which, again, is nowhere near as bad this time), but timing is everything, and to find oneself looking into a mirror world while reading about events seventy some years ago is fun in its own weird way. I wonder what it would be like to read this for the first time in twenty years.
I still don't understand much about economics, but I do know that the problem with the science is its inability to account for human behavior. All the models in the world can't calculate the depths of a person's anger and the effect it has on their decisions, or how far greed can push someone, or how pride can be tied up in money. Everything looks logical and wonderful on paper until you throw people into the mix and we are so terribly flawed.