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The Rothschilds, the First Great Depression, and the Making of the Modern World
by Liaquat AhamedFrom the author of the Pulitzer Prize–winning Lords of Finance, a magnificent and timely reckoning with the first truly global financial calamity and the famous banking family at the center of the whirlwind.
Over the course of the 1850s and 1860s, during the first era of globalization, the world experienced an unprecedented economic boom. Fueling this expansion was an explosion in the global bond market, at the hub of which stood one family—the Rothschilds, arguably the wealthiest banking family in history. While the giant sums of capital provided through the bond market built the railroads, the century's most transformative investments, the money raised also unleashed a frenzy of speculation, massive overinvestment, and wasteful borrowing by governments.
With excessive euphoria leading to disappointed expectations, in the early 1870s the bubble burst. Stock markets from Vienna to New York crashed, and dozens of railroads and many governments defaulted. Financial officials responded by blundering into a precipitous remaking of the global currency system—exacerbating the ensuing economic collapse and setting the stage for decades of a punitive deflation that sparked waves of anti-globalist populism. As Liaquat Ahamed shows us in this enthralling history, the crisis of 1873 was, among other things, a death blow to Reconstruction in the United States and the proximate cause of the Ottoman Empire's slow death spiral. Ironically, though the Rothschilds had presciently kept a low profile during the bubble, when the deluge came, they were viciously scapegoated as part of a wider hatred directed at "Jewish finance," a strain of antisemitism that would come to full evil flower during the twentieth century.
1873 is a bird's-eye reckoning with the full dimension of the crisis, from its buildup to its long aftermath. The Rothschilds and a cast of other witnesses give us the human perspective. And we have a brilliant financial historian's grasp of the larger forces at play, resulting in a global narrative with thrilling explanatory power.
1.
In Bonds We Trust
As the 1860s ended, the world's economy had never appeared in better shape. Few events were more emblematic of its health than the successful completion, within a few months of one an-other, of three monumental and iconic infrastructure projects that promised to remake global commerce.
On May 10, 1869, several hundred luminaries and railroad workers gathered on the windswept plateau of Utah's Promontory Summit, north of the Great Salt Lake. They were there to witness the linking of the Central Pacific and Union Pacific Railroads, marked by the ceremonial driving of an eighteen karat gold spike into the tracks. The moment signaled the realization of the first transcontinental railroad across the United States, collapsing the New York–San Francisco journey from six months to a mere six days. It had taken seven years to build at an estimated cost of $70 million.
Scarcely six months later, in November 1869, a more extravagant ceremony unfolded halfway around the ...
Martin Wolf, author of The Crisis of Democratic Capitalism
Liaquat Ahamed has a unique ability to bring financial and monetary history to life. In this superb book, he weaves together the people, forces, and events that led to the global financial crisis of 1873 and then shaped its dire long-term consequences. Not least, he shows how a huge boom-and-bust cycle combined with the decision to make gold the sole monetary anchor, to create a first global 'great depression.' Rana Foroohar, author of Homecoming and Don't Be Evil
Pendulum shifts in the political economy happen slowly—and then all at once. In this fantastically readable history, Liaquat Ahamed shows us how frothy real estate markets, a burgeoning middle class, failing autocrats, a dodgy bond market, and other seemingly disparate forces eventually came together to produce the first global financial crisis of the modern era. It's a book that has all too much to tell us about our own time period; indeed, it provides both a warning and a roadmap for what might come next.
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Two ambitious writers in 1960s LA face betrayal when one writes a novel based on the other's life.
