1873: The Rothschilds, the First Great Depression, and the Making of the Modern World by Pulitzer Prize-winning historian Liaquat Ahamed expands on the themes of global financial fragility introduced in his acclaimed Lords of Finance. It is a compelling story that most economists who focus on economic history since the Great Depression have largely forgotten.
The key takeaway is how a normal recession became a major upheaval based on changes in the financial system. The shift from many countries using a bimetallic (gold-and-silver) monetary system to a gold standard significantly reduced the money supply in the global economy. The shortage of money and credit exacerbated the financial crisis. The implications were significant: a decline in the Ottoman Empire, an intervention in Egypt, a period of deflation, a rise in anti-Semitism, and an extended recession that some may call the first global depression.
Unfortunately, the author wanted to focus on personalities like the Rothschild banking families. Still, the real story was policy mismanagement driven by a lack of understanding of credit markets and money.
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