Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed

PART ONE
THE UNEXPECTED STORM
AUGUST 1914

1. PROLOGUE
   What an extraordinary episode in the economic progress of man that
   age was which came to an end in August 1914!
   —JOHN MAYNARD KEYNES, The Economic Consequences of the Peace
   IN 1914, London stood at the center of an elaborate network of
   international credit, built upon the foundations of the gold standard. The
   system had brought with it a remarkable expansion of trade and
   prosperity across the globe. The previous forty years had seen no big
   wars or great revolutions. The technological advances of the midnineteenth century—railways, steamships, and the telegraph—had spread
   across the world, opening up vast territories to settlement and trade.
   International commerce boomed as European capital flowed freely
   around the globe, financing ports in India, rubber plantations in Malaya,
   cotton in Egypt, factories in Russia, wheat fields in Canada, gold and
   diamond mines in South Africa, cattle ranches in Argentina, the Berlinto-Baghdad Railway, and both the Suez and the Panama canals.
   Although every so often the system was shaken by financial crises and
   banking panics, depressions in trade were short-lived and the world
   economy had always bounced back.
   More than anything else, more even than the belief in free trade, or the
   ideology of low taxation and small government, the gold standard was
   the economic totem of the age. Gold was the lifeblood of the financial
   system. It was the anchor for most currencies, it provided the foundation
   for banks, and in a time of war or panic, it served as a store of safety. For
   the growing middle classes of the world, who provided so much of the
   savings, the gold standard was more than simply an ingenious system for
   regulating the issue of currency. It served to reinforce all those Victorian
   virtues of economy and prudence in public policy. It had, in the words of
   H. G. Wells, “a magnificent stupid honesty” about it. Among bankers,
   whether in London or New York, Paris or Berlin, it was revered with an

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed