Seeds of Disaster and Lords of Finance @ BYOB Party in April 2017 (Part 2)

Ralph found yet another academic book called Seeds of Disaster, Roots of Response: How Private Action Can Reduce Public Vulnerability edited by Philip E. Auerswald. The book is the first systematic attempt to make sense of how private leadership can provide critical services during bad times. The book stresses the importance of both the public and private sectors joining hands as a prerequisite to accountability in society. The book presents multiple perspectives and draws on experts from various disciplines. Ralph drew on his observations of crises in India and the fallacy of resilience as a tool to mitigate disaster.

One book Mandar was particularly inspired by was Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed, a writer of Pakistani origin. The book was shortlisted for the Samuel Johnson Prize in 2009. The book delves into the economic recession of the 1930s that led to WWII. He speaks of the four central bankers of the premier banks of the world who mismanaged the crises since the 1920s which ultimately led to the Great Depression. He also mentions how John Maynard Keynes’ economic predictions were conveniently ignored for the sake of short-term interests. Mandar mused about how there are many lessons in this book for dealing with the current economic crises, though as is usually the case, history tends to repeat itself. Mandar read out an interesting passage from the book about remonetization:

“The task of keeping Germany adequately supplied with currency notes became a major logistical operation involving ‘133 printing works with 1783 machines . . . and more than 30 paper mills.’  By 1923, the inflation had acquired a momentum of its own, creating an ever-accelerating appetite for currency that the Reichsbank, even after conscripting private printers, could not meet. In a country already flooded with paper, there were even complaints of a shortage of money in municipalities, so towns and private companies began to print their own notes. Over the next few months, Germany ex-perienced the single greatest destruction of monetary value in human history. By August 1923, a dollar was worth 620,000 marks and by early November 1923, 630 billion.

Basic necessities were now priced in the billions—a kilo of butter cost 250 billion; a kilo of bacon 180 billion; a simple ride on a Berlin street car, which had cost 1 mark before the war, was now set at 15 billion. Even though currency notes were available in denominations of up to 100 billion marks, it took whole sheaves to pay for anything. The country was awash with currency notes, carried around in bags, in wheelbarrows, in laundry baskets and hampers, even in baby carriages.”

Ralph mentioned another financial story called Fault Line: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan (Governor of the Reserve Bank of India between September 2013 and September 2016) who warned about the impending financial crises before it occurred. Raghuram exposed not just the central bankers but the chinks in the economy and spending habits that could lead to such crises. This is the first time that we have had such an extensive discussion of financial books at the BYOB Party and it opened up the need to understand the economy better. A sick economy once nurtured Nazism and could only be cured by the ensuing destruction of a World War and now the financial crises that plague the world reflect directly in a realpolitik and the rise of populism world over. Food for thought.

More books in Part 3.

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