This book follows central bankers at the Federal Reserve in America, the Bank of England, and the European Central Bank, in particular Ben Bernanke, Mervyn King and Claude Trichet, respectively. It details their decision-making, actions (or lack thereof in the case of the UK), and processes as they try to get the world’s financial system under control. It begins with a short history of the banking system – how it came about in its current form and, particularly, the decisions and mistakes made during economic crises in the past, such as the great depression of the 1930s. This thread runs throughout, however, as the weight of past mistakes and history affects current decision-making. It then moves through the current crisis, across Europe and the U.S., as well as little on the situation in other parts of the world.
Central bankers have a huge amount of power, as much as many governments, but are generally a tight-knit, mysterious group to others. The Alchemists offers an inside look into how they got that power and how they use it.
If you only have a passing interest in economics, particularly in the recent financial crisis, then I don’t think this book is for you. It’s long and, at times, feels it. Its power is in the sheer amount of detail about different banking systems’ decision-making and meeting processes, for example, that we usually aren’t privy to. However, at times, this also makes it drag (the food and activities at global meetings does add something in terms of the lifestyle of bankers, but there’s too much). The section in the last third on the European crisis drags a bit, but I think that’s just a reflection of the reality – a lack of decisive action and lots of back and forth.
Many of the broad points made in this book are unsurprising, but do offer more detail into how and why. For example, how central banking and government/politics are supposed to be kept separate, but inevitably do intertwine and crossover. Or how psychology, particularly investor confidence, can make as much of a difference as what you’re actually doing, and that what you’re actually doing is about that confidence. Or how economics (and the choices made by those in charge of it) can vastly affect the very functioning of society. I think most people who pick this book up will already know these things, but it’s interesting seeing what, and who, is behind it.
Recommended if you want to know why central bankers did what they did (and are doing what they’re doing), and what other bankers thought of it. As a UK reader, the chapters on Mervyn King (who doesn’t come across well at all) and the current government’s response to the crisis is particularly interesting. But if you’re looking for just an overview of the crisis, perhaps look elsewhere.
I received a free copy of The Alchemists from Headline in exchange for an honest review.