The 1920s and 1930s seem by far the most appropriate period in history to offer lessons about the state of the economy today. Liaquat Ahamed's Lords of Finance was written before the Crash of 2008 but its insight into the role of central banks during a financial depression could not be more appropriate for our own times.

This is a marvellously well-written book, and the economics and finance are slipped effortlessly into a gripping narrative of the period from the end of the first world war to the start of the second. The tale is told through the personae of the governors of the Bank of England, the New York Fed, the Banque de France and the Reichsbank. Other personalities help bring history to life. Keynes features strongly, for example.

Some threads run through the analysis. The huge error of the punitive reparations imposed on Germany after the first world war is one. (One that should give us pause thinking about Iceland, as the ever-wonderful John Kay has written.) A second is the dire impact of America's isolationist instincts on the rest of the world.

I particularly like the author's willingness to comment rather acidly on the story he tells. Describing the governance of the Bank of England in the early 20th century, a matter of eminent City dignitaries each taking a turn, he writes:

“It was a strange, even eccentric way of doing things – for the most important institution in Britain, in fact in the world, to be in the hand of a group of amateurs, men who would generally have preferred to be doing something else but who viewed the years they devoted to steering the Bank as a form of civic duty.”

Montagu Norman, the Bank of England governor – and anti-hero – of this tale broke the mould in many ways but not as it turned out in his views about the need for Britain to return to the gold standard at its pre-war rate. It was a fateful decision.

Or another example:

“Senators and congressmen are rarely informed enough to be persuasive advocates for changes in monetary policy.”

There are lovely vignettes as well. Describing the contraction in economic activity in the late 1920s as countries stayed tied to the gold standard even though all the gold was flowing into US assets, Ahamed notes that what actually happened was that workmen moved some gold bars from one part of the Bank of England's vaults to another, changing the label attached to show they now belonged to the Federal Reserve Bank. What a bizarre way for the most serious depression in modern economic history to unfold.

This is the best kind of history, combining the big picture with the small details which bring it to life and remind us that what happens is partly a matter of the grand sweep of events, and partly the accidents of personality and chance. All in all, a well-deserved winner of the FT book of the year last time around. Its 500 pages zipped past.