Lords of Finance: The Bankers Who Broke the World

by Liaquat Ahamed

But as 1928 progressed, his portfolio began to unravel. He sustained substantial losses in April when rubber prices collapsed by 50 percent as the world cartel broke down, forcing him to liquidate large holdings at a loss to meet margin requirements. The Fed’s tightening of early 1928 to cap the stock market took Keynes by surprise. After all, he argued, U.S. prices were stable and there was “nothing which can be called inflation yet in sight.” In September 1928, with the Dow at 240, he circulated a short note among friends titled “Is there Inflation in the U.S.?” which predicted that “stocks would not slump severely [that is,] . . . unless the market was discounting a business depression,” which the Fed “would do all in its power to avoid.”