Liaquat Ahamed on the Railroad Bubble That Crashed the World | #642

**SPEAKER_1** (0:00)
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**Meb Faber** (0:36)
Welcome to a special series of The Meb Faber Show on the past, present, and future of America. I'm sitting down with some of the most notable historians, thinkers, investors in US financial history, all tied to my new coffee table book, Investing in America, The Rise of a 250-Year Bull Market, out July 4th.

**SPEAKER_3** (0:56)
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

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**Meb Faber** (1:42)
Welcome back everybody. Today we have an awesome episode. I'm so excited. Today's guest is Liaquat Ahamed, the Pulitzer Prize winning author, Lords of Finance, everyone's favorite book, one of the great financial history books ever written. He's out with a new book, 1873, The Rothschilds, the first great depression in the making of the modern world. It's a prequel in many ways to Lords of Finance, the story of the world's first truly global financial crisis. Liaquat, welcome to the show.

**Liaquat Ahamed** (2:12)
Thank you, Meb.

**Meb Faber** (2:13)
Your first book, most investors had kind of heard about the Great Depression.
Not as many people that lived through it still kicking around today. But I feel like that one's steered in the brain. 1873, let's probably name familiarity with it. What was, and you mentioned this is kind of one of the first truly global crisis. Talk to us about why this story, why now?

**Liaquat Ahamed** (2:38)
1873 was truly a global financial crisis. It affected Central Europe, it affected the US.
And it affected what were then emerging markets. It had so much resonance with the modern era because of these multiple financial crises.

**Meb Faber** (3:02)
Before we get into 1873, which we'll spend a lot of time on, I thought it would be interesting to lay the foundation because before the crash, and this is true in many cases over history, there was a boom, right? And if you look at the GDP, the four main economies, I think they almost doubled, world trade grew like fivefold, really in this period leading up to 1873
But also, I don't know many people that have heard about that boom. Maybe talk to us a little bit about what came before, why it's overlooked, and what was the hot AI tech stock. What was it like in the mid-19th century?

**Liaquat Ahamed** (3:39)
Well, first of all, it was the first era of globalization. So, as you said, world trade expanded fivefold, went up two and a half times as a percentage of GDP.
So, it was truly the first global boom. And it was driven by massive capital flows coming out of Britain and France, which went in to developing infrastructure around the world. And it was infrastructure included ports, but most importantly was railroads. And there was a railroad boom in the US., there was a railroad boom in Europe, there was even a railroad boom in places like Argentina, so it was the first era in which a single factor, the railroads and a single source, global capital was driving the economy.

**Meb Faber** (4:51)
Was part of that because a telegraph helped enable the communication or is that kind of ancillary?

**Liaquat Ahamed** (4:58)
That helped, but it really was that in Europe, a new class of savers emerged. And these were upper middle class people whose parents had been entrepreneurs in the early part of the 19th century and had built substantial savings. And one of the consequences of the savings was that real interest rates in Europe declined dramatically. So that if you bought a government bond in a British government bond, a guild, you would only earn 3%.