Continued….
Liaquat Ahamed, in his book, referred to the four bankers as the “Lords of finance”. Ahamed, in his book, describes the four as bungling tortured bankers vainly trying to reconcile their conflicting duties to their countries and to the global economy.
Ahamed makes reference to the plight of Germany after the war, which was burdened with unsustainable debt in the form of reparations and corresponding amounts owed to the USA by Britain and France.
While the bankers may have had an impossible task their mismanagement was to have a catastrophic effect.
Norman reintroduced the gold standard with sterling at too high an exchange rate, which effectively crippled the British economy. Conversely, France returned to the gold standard at a relatively low rate, which gave France a very unfair advantage for its exporters.
Schacht made the mistake of trying to encourage overseas lending to Germany in the hope that new lenders would engineer a reduction in the reparation debt. In the USA, in the late 1920’s, interest rates were kept artificially low, partly to reduce pressure on an economically weakened Europe to raise interest rates.
The ramifications of Strong’s ‘low rate policy’ was to increase the Wall street bubble, which sucked in precious capital from Europe to be followed by the well known Wall Street crash.
Despite the USA being a much larger economy than the UK sterling became the world’s pre-eminent currency and the City of London the chief financier of world trade.
The new American president Franklin Delano Roosevelt inexplicably devalued the dollar resulting in a run on the pound. In an attempt to limit the damage, Norman had no option but to drop the gold standard. Norman died a broken man and wrote before his death: “As I look back, it now seems that, with all the good intentions, which we provided, we achieved absolutely nothing… Nothing that I did and very little that old Ben Strong did internationally produced any good effect at all except that we collected money from a lot of poor devils and gave it over to the four winds.”
The great British economist of the time John Maynard Keynes is referenced to have seen the dangers to the economy brought about by the actions of the four bankers.
Unfortunately he largely went ignored. Keynes was eventually invited to be a member of the Court of the Bank of England, where he regularly dined with Norman. “I do enjoy these lunches at the bank.” Said Keynes. “Montague Norman always absolutely charming, always absolutely wrong.”
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