Tuesday, January 11, 2011

Lords of Finance by Liaquat Ahamed

I got an emergency call yesterday from a friend of mine. He insisted that he will not tell me why he wants to meet. When I reached his place, it was big surprise to me because we together went  for a fascinating discussion with Pulitzer Prize-winning author and investment manager Mr.Liaquat Ahamed on the economic bottom up/down climate and his book the "Lords of Finance: Bankers Who Broke the World." Dr.Sanjaya Baru, Editor, Business Standard had conversation with Mr.Ahamed.

Indeed, it was a great opportunity to meet Mr.Ahamed. Some time back I  read first chapter of his book. It is a must read for all the student of finance, because most of them now take granted about the way in which Central Banks behaves world over.  

Points noted from the discussion:

But one thing I kept on myself asking why I don’t like reading Mr Baru’s articles for quite some time now? It was clear to me from his yesterday discussion. He begun by saying “as a student of Keynes”, and “Keynes is my hero etc”. Let me say here a few words about the BS. In less than two years many key/senior journalists have left the BS. The list includes T.C.A Srinivasa Raghavan, Sunil Jain, Surjit Bhalla etc. The reason you know now.

The book gives great details about biography of four central bankers who were crumbling with money printing machine in 1930s, historic picture of financial crisis, economy, and geopolitics.

As Joe Nocera wrote: The lords of finance who constitute the title of this book are the four central bankers who dominated that postwar era: Benjamin Strong of the Federal Reserve Bank of New York; Montagu Norman, the longtime head of the Bank of England; Émile Moreau of the Banque de France; and Hjalmar Schacht, who headed the Reichsbank.

What was interesting to me was the Mr.Ahamed talk. Of course he said that “Keynes was not a hero” but he merely employed his energy to analyze the financial crisis in fresh way of looking at.

Mr.Ahamed clearly said that all financial crises had have happened till now due to the bad decisions taken by men who were in charge of the Central Banks. He also said that these central bankers were ignorance of not only the real economic situation but also their own field of finance. He even said that there was no established economics in the 1930s.

Thereafter, there were all kinds of questions were thrown from audience. I did ask him what is his take on Austrian School of Economics and its ideas on boom and bust cycles.

Mr.Ahamed said that he agree with what Austrian School of Economics have being saying about the unlimited expansion of credits which inflates the instability of financial crisis. However, he feels that the solutions offered by this school is suffering (let them bust attitude) which is something one would not prefer in any case in the modern world.

On the whole, Mr.Ahamed talk showed that he is all that not friendly to neither the State nor the Central Bankers.

Book review in The Economist. 

Also read Dilemmas in Central Bank Communication Some Reflections Based on Recent Experience: Second Business Standard Annual Lecture delivered by Dr. Duvvuri Subbarao, Governor, Reserve Bank of India.

1 comment:

  1. central bankers and their marginal requirements were dominating the debit- credit decisions. How insincere is that, even after pure pre- mature indications of crisis, bankers failed to acknowledge those ignored of which.. This kind of privty needs to be tackled on the forefront, because ultimately 'People are main investment generating machine..'
    Please correct 'bankers' in place of 'bakers' (second stanza), because, 'n' will make the complete change, which is otherwise losted...