?I am much better on the past than the future.? And indeed he is. His debut, Lords of Finance: The Bankers Who Broke the World, won him the 2010 Pulitzer Prize for history and the 2010 Spear?s Book Award (Financial History Book of the Year). Liaquat Ahamed, who always fantasised about becoming a writer ever since he was in college is finally living his dream after doing his rounds as an investment banker. ?I love telling stories.? And it?s been quite a dream run. So did he ever anticipate this kind of success? ?Obviously not. A book about central bankers is not the stuff that makes for a best seller. But I was lucky, the timing was good. I submitted the manuscript the week before Lehman collapsed.? So was it all about the timing and not the effort? ?It?s an element of both. Clearly, timing played a very important part in getting the book noticed, as it was about another financial crisis and a lot of the parallels were already similar, and that captured people?s imagination.? And it?s going to be business history for now for Ahamed, as the second one is in the works already. ?It?s called Bank Wars for the moment and it is the story of Washington versus Wall Street of 1830s and has got certain similarities to the current book, with big personalities.? It?s the story of Andrew Jackson getting into fight with the premiere banker of the time Nicholas Biddle and the banker?s personality conflict with the president. ?I get fascinated by personalities and if I can, bring the whole era and characters to life.? Added expectations after the phenomenal success of the debut? ?I am not starting out my career, so everything more is a blessing. Maybe I subconsciously do or I should, but I don?t feel much pressure. I became a writer purely because this was something I always wanted to do and that is why I am writing the next one.? Ahamed?s all-time favourite reads are Barbara Tuchman?s The Guns of August and David Halberstam?s The Best and the Brightest. So does Ahamed try and emulate them? ?Their way of weaving multiple personalities into their stories is absolutely brilliant. Barbara Tuchman had a cinematographic approach to writing history where she would always focus on the details and that?s why she would always read primary material and would look for those telling details. I try to model some of my writing on the way she wrote. By the way, she wrote her first book at the age of 50!? Sarika Malhotra is all ears as the bestselling author, who chronicled the Great Depression, explains that the world has learnt well how to deal with financial crises. ?We will almost always have crises, as we really don?t know how to keep the global economy from having excesses. We know how to prevent crises now. But we do not know how to restore it back.? Excerpts:

Although separated by seven decades, a cycle of greed and fear is common to both the economic crises. How does this eerie and vicious cycle play out?

The 2000s were very similar to 1920s. You had same economic parallels?global imbalances, easy credit, too much borrowing, bubbles. The social atmosphere was also similar?a heady materialistic time, decline in moral standards with the most shoddy business practices on Wall Street. There are some fundamental psychological factors that drive these financial booms and busts. It is probably compounding that underlying factor is mismanagement by the people incharge, and to some degree, they get caught up in the heady atmosphere. Central bankers should have been saying, ?investment bankers are going crazy, we have to be adults and manage the situation.? Central bankers should take the punchbowl away once the party gets going. The problem is the social and political pressures on them to keep the party going. Greed and fear are clearly the primary forces, how central bankers go about managing and channeling those forces is part of the problem. This time, during the greed portion, they did a bad job. During the panic portion, they did a very good job. The political imperatives at a time of panic are much more immediate and coincide with the interest of central bankers, whereas during the greed phase they are required to become unpopular and it?s hard for them to go against the political winds.

Like today, the 1920s were an era when central bankers were invested with unusual power and extraordinary prestige. Is it right for the global financial order?

There is a mystique attached to the whole business of central banking because they have enormous power over the economy?s operations in spite of not being elected but appointed. They have technical expertise in an esoteric area and even a lot of economists do not understand how central banks operate. This power-mystique combination can go to their heads. In central banking?s infancy in the 1920s, central bankers believed that they understood the economy better than politicians, and had complete control. They felt that their sole responsibility was to preserve the value of the currency and had no responsibility for the wider economy. And we saw the consequences. Then, the pendulum swung completely the other way. Central bankers became purely government functionaries and their prestige collapsed. Governments took the reigns of power that resulted in an opposite problem of inflation in the 70s, resulting in reestablishing central bank independence. Probably, this time, the pendulum swung too far in favour of central bank independence. Take what happened to Alan Greenspan, he was believed to be invested with a mystique that I think even he was embarrassed of. We thought of central bankers as wise men who understood the secrets of the financial machine and it turned out that they didn?t as well. Now the pendulum is going to swing back a little more as we much more intensely question what they do. I draw an analogy between central bankers and generals. Generals should not be political figures; at the same time they should be attuned to the wider social context in which they are operating, as they need political support to conduct military operation. Central bankers have to be in the same position, they should have independence, but there should be an element of accountability.

You have been critical of the role of economists, where do you think they missed the bus?

Economists seduce themselves into thinking that they understood the economy better than they did. In particular, they underestimated the instability. The reason is that they viewed it much like a machine and failed to recognise the intangibles?the psychological factors such as greed, fear, confidence. These play a critical part in the economy. Economists should not think of themselves as engineers. Psychologists are modest and tend to be very careful about promising cures. Economists should take a leaf from their book, as they are dealing with a very complicated organism where there are a lot of connections that we don?t understand. They should be willing to accept the limitations of their knowledge.

When the world is talking about a double dip, India and China are on way to double-digit growth. Doesn?t it seem to be too good to be true? Is there something brimming underneath that we are missing?

When real estate prices or stock prices go up too much too quickly and are not matched by increase in earnings, then it?s a bubble. Bubble occurs when asset prices go up too much and people start buying asset prices, not because they think they have any value, but because they think they can sell it at an even higher price. I suspect that real estate in China is somewhat of a bubble. While stock prices in India have gone up a lot, but so have earnings, so there is an underlined justification for this. But stock prices in China are not even close to what they got to in 2008. So that leaves us with a real estate bubble in China. In India, real estate prices are incredibly high and I don?t understand whether it is about shortage of real estate or regulations that cause a scarcity of apartments. Recently, I read an article that compared India to the US in the 1870s, pointing at an economy that is growing rapidly, a vibrant democracy and massive concentration of wealth. In India, billionaires control a larger percentage of the economy than billionaires in any other economy, apart from Russia. One of the interesting things that came out back then was that in the US, it enabled the progressive movement?whereby both Republicans and Democrats competed to clean up politics and reduce the power of the Robber Barons. I would be interested to know whether that will happen here; if it creates political forces that try to control the power of money and politics and big business.

So do you see it happening?

You know, I am much better on the past than the future…