The bankers who broke the world economically

Whenever I sit down to write about banks and bankers, one uncomfortable question returns with force: are bankers guardians of the global economy, or its most sophisticated saboteurs? History, when read carefully, does not offer a flattering answer.
The Great Depression of 1929-1932 stands as the most devastating proof. In Lords of Finance, Liaquat Ahamed dismantles the comforting myth that the Depression was an unavoidable accident of capitalism. Instead, he shows that it was, to a large extent, a policy-made disaster — engineered by a small circle of powerful central bankers who believed they were saving the world while, in reality, suffocating it.
At the centre of this tragedy stood four men who controlled the monetary arteries of the global economy: Montagu Norman of the Bank of England, Benjamin Strong of the Federal Reserve Bank of New York, Hjalmar Schacht of Germany’s Reichsbank and Émile Moreau of the Banque de France. These were not ordinary bankers. They were monetary emperors, operating with minimal political oversight, bound together by personal friendships, private correspondence and a near-religious faith in the gold standard.
Their shared belief was simple and fatal: currencies must be defended at all costs, even if economies collapse and societies suffer. Gold, not employment or growth, became the ultimate policy objective. Central banking, as practised then, was not about stabilising economies — it was about disciplining them.
Norman, eccentric and autocratic, ruled the Bank of England like a private club. He pushed Britain back onto the gold standard in 1925 at an overvalued exchange rate, ignoring warnings from economists like John Maynard Keynes. The result was predictable: deflation, falling wages, industrial decline and mass unemployment. Yet Norman refused to abandon gold until the damage became unbearable.
Across the Atlantic, Strong initially acted as the system’s stabiliser. As governor of the Federal Reserve Bank of New York, he used monetary easing in the mid-1920s to support Europe and keep the fragile international system afloat. But after his death in 1928, the US Federal Reserve lost its most pragmatic voice. The remaining Federal Reserve leadership chose contraction over flexibility, raising interest rates to curb stock market speculation and later refusing to expand liquidity after the 1929 crash. Bank failures multiplied, credit evaporated and deflation deepened — by policy choice, not fate.
France played a quieter but equally destructive role. Under Moreau, the Banque de France accumulated vast amounts of gold and deliberately “sterilised” it — hoarding reserves without expanding domestic credit. This sucked liquidity out of the global system at precisely the moment it was needed most. France protected its balance sheet while exporting deflation to the rest of the world.
Germany’s case was even more tragic. Schacht, often praised for his brilliance, operated under the crushing constraints of war reparations and political instability. Yet his tight monetary stance, imposed to defend the mark and appease foreign creditors, deepened economic misery. The collapse of German banking and industry did not occur in a vacuum; it was the monetary consequence of an international system designed to punish rather than stabilise.
What Lords of Finance exposes is not incompetence but a dangerous form of intelligence — bankers who were brilliant within their own narrow frameworks and blind outside them. They understood balance sheets better than societies, currencies better than people. Their loyalty was not to economic welfare but to financial orthodoxy and institutional prestige.
Were bankers smart? Undoubtedly. But smart for whom? Not for workers standing in breadlines. Not for businesses strangled by credit shortages. Not for nations pushed into political extremism by economic despair. Banking policy in the interwar period maximised balance-sheet discipline while destroying real economies.
The Great Depression was not merely a market failure; it was a failure of central banking philosophy. The insistence on fixed exchange rates, the refusal to act as lenders of last resort and the obsession with gold transformed a financial correction into a global catastrophe.
The lesson is uncomfortable but essential: when bankers operate without accountability, when monetary policy is detached from economic reality, and when financial stability is defined narrowly as currency defence, bankers do not save the world — they break it. And history has already recorded the cost.