Lords of Finance

by Liaquat Ahamed

  451 To the surprise of many: See William Manchester, “The Great Bank Holiday,” Holiday, February 1960; “City Awaits Scrip as Cash Dwindles,” “Harvard Students Aided,” “Divorce Holiday in Reno,” and “Scrip at Princeton,” New York Times, March 7, 1933; “Envoys Lack Cash; Complain to Hull,” New York Times, March 9, 1933; “Michigan,” and “Money and People,” Time, March 13, 1933. The legislation was supplemented: William L., Silber, “Why Did FDR’s Bank Holiday Succeed?”

  455 “all kinds of junk”: Josephson, The Money Lords, 120.

  455 the first of his fireside chats: “The President’s Speech,” New York Times, March 13, 1933.

  455 “Our President took such a dry subject”: “Will Rogers Claps Hands for the President’s Speech,” New York Times, March 14, 1933.

  455 “We had closed in the midst”: Josephson, The Money Lords, 120.

  456 “Capitalism was saved in eight days”: Moley, After Seven Years, 155.

  458 “the white sheep of Wall Street”: Warburg, The Long Road Home, 107.

  459 “Poppycock!”: Schlesinger Jr., The Coming of the New Deal, 195.

  459 His simplistic view was: Wicker, “Roosevelt’s 1933 Monetary Experiment.”

  460 “You paint a barn roof”: “Teachers and Pupils,” Time, November 27, 1933; Brooks, Once in Golconda , 160-63.

  461 “As long as nobody asks me”: Schlesinger Jr., The Coming of the New Deal, 195.

  462 “Well, this is the end of western civilization”: Accounts of that meeting are variously provided by Moley, After Seven Years, 159-61; Feis, 1933: Characters in Crisis, 126-30; Warburg, The Long Road Home, 119-20; James Warburg, Oral History Project, 492-99, quoted in Schwarz, 1933: Roosevelt’s Decision; and Schlesinger, The Coming of the New Deal, 200-201.

  462 “can’t be defended except as mob rule”: Schlesinger Jr., The Coming of the New Deal, 202.

  462 “Your action in going off gold”: Letter from Leffingwell to Roosevelt, October 2, 1933, quoted in Schlesinger, The Coming of the New Deal, p. 202.

  462 dramatic change in sentiment: Temin and Wigmore, “The end of one big deflation,”

  463 “The difficulties are so great”: Gunther, Inside Europe, 287.

  463 “a handsome, fox-bearded gentleman”: “Professor Skinner,” Time, August 29, 1932.

  463 “his affectation of the role”: “Along the Highways of Finance,” New York Times, September 4, 1932.

  464 “Deport the Blighter”: from Press Time: A Book of Post Classics, 310-11.

  465 “whims” “completely in the dark”: Bank of England telephone conversations between Harrison and Norman, April 27, 1933, and May 26, 1933.

  466 He practiced it in his personal life: “Tightwad Up and Out,” Time, January 14, 1935.

  468 “King, I’m glad to meet you.”: Brooks, Once in Golconda, 158; Galbraith, Money, 202-203; Warburg, The Long Road Home, 128-29.

  468 “With Washington committed”: “Disgust,” Time, June 26, 1933.

  470 “he felt as if he had been kicked”: Josephson, The Money Lords, 130.

  471 “President Roosevelt is Magnificently Right”: Keynes, “President Roosevelt is Magnificently Right,” Daily Mail, July 4, 1933, in Collected Writings, 21: 273-77.

  471 “We are entering upon waters”: Warburg, The Long Road Home, 135-36.

  472 “crack-brained” economist: “Teachers and Pupils,” Time, November 27, 1933; Brooks, Once in Golconda, 160-63.

  472 “like asking a sworn teetotaler”: Josephson, The Money Lords, 131.

  473 “hit the ceiling”: Harrison Diary, October 28, 1933, quoted in Brooks, Once in Golconda, 168.

  473 “This is the most terrible thing”: Henry Morgenthau, Jr., “The Morgenthau Diaries: Part V: The Paradox of Poverty and Plenty,” Colliers, October 25, 1947.

  473 “the gold standard on the booze”: Maynard Keynes, “Keynes to Roosevelt: Our Recovery Plan Assailed—An Open Letter,” New York Times, December 31, 1933, in Collected Writings, 21: 289-97.

  474 In the four years after 1933, the value of gold: Romer, “What Ended the Great Depression?” and Meltzer, A History of the Federal Reserve, 573.

  476 “Operated on this morning”: Rhodes, The Making of the Atomic Bomb, 685-86.

  22. THE CARAVANS MOVE ON

  477 If a man will begin: Francis Bacon quote from Bartlett’s Familiar Quotations, 166.

  477 Breaking with the dead hand of the gold standard: Eichengreen and Sachs, “Exchange Rates and Economic Recovery,” and Choudhri and Kochin, “The Exchange Rate and the International Transmission of Business Cycle.”

  480 “If Hitler comes to power”: Gunther, Inside Europe, 99; Mühlen, Schacht: Hitler’s Magician, viii.

  480 “Your movement is carried internally”: Letter from Schacht to Hitler, August 29, 1932, in Office of the Counsel for Prosecution of Axis Criminality, Nazi Conspiracy and Aggression, Vol VII, Washington D.C.: Government Printing Office, 1946, 512-14.

  480 “the only man fit”: “Hitler Holds Back Decision on Cabinet as Aides Disagree,” New York Times, November 23, 1932.

  481 “a man of quite astonishing ability”: Hitler, Hitler’s Secret Conversations, 350.

  481 The recovery was not quite the miracle: This section draws heavily on Tooze, The Wages of Destruction, 37-43, and Evans, The Third Reich in Power, 322-77.

  482 “The whole modern world is crazy”: Dodd and Dodd, Ambassador Dodd’s Diary, 175.

  485 “Don’t forget what desperate straits”: Gilbert, Nuremburg Diary, 153-54.

  485 In the lead-up to the trial: Overy, Interrogations, 73.

  485 “like an angry walrus”: Dos Passos, Tour of Duty, 301.

  485 “twisted in his seat”: West, A Train of Powder, 5.

  487 “They were wrong about reparations”: Kynaston, The City of London: Illusions of Gold, 373-74.

  487 “old gentlemen complaining”: Williams, A Pattern of Rulers, 221.

  488 “Hitler and Schacht”: Memo from Leffingwell to Lamont, July 25, 1934, quoted in Chernow, The House of Morgan, 398.

  488 “If this struggle goes on”: Goodwin, The Fitzgeralds and the Kennedys, 687.

  489 “As I look back”: Boyle, Montagu Norman, 327-28.

  490 During the 1930s, Keynes’s speculative activities: Skousen, “Keynes as a Speculator,” 162, and Moggridge, Maynard Keynes, 585.

  491 “I do enjoy these lunches”: Sayers, The Bank of England, 602.

  492 “the unpleasantest man in Washington”: Skidelsky, John Maynard Keynes: Fighting for Britain, p. 260.

  492 “he has not the faintest conception”: Keynes, Letter to Wilfrid Eady, October 3, 1943, in Collected Writings, Vol. XXV, pp. 352-57.

  494 “The flow of alcohol is appalling”: Cassidy, John .“The New World Disorder,” New Yorker, October 26, 1998, p 198.

  494 “madhouse with most people”: Skidelsky, John Maynard Keynes: Fighting for Britain, p. 347.

  495 “If we can so continue”: Skidelsky, John Maynard Keynes: Fighting for Britain, p 355.

  23: EPILOGUE

  497 I have yet to see any problem: Poul Anderson quote from The Yale Book of Quotations, 19.

  503 “his policies died with him”: U.S. House of Representatives, Banking Act of 1935, Committee on Banking and Currency, 74 Congress, Ist Sess. 1935.

  503 “problems of life”: Keynes, “Preface” in Collected Writings: Essays in Persuasion. 9: xviii.

  503 “trustees, not of civilization”: Harrod, The Life of John Maynard Keynes, 193-94.

  BIBLIOGRAPHY

  The bibliography includes not only works referred to in the text but also a selected list of books and articles on the economic history of the period that I have found useful in my research. The interpretation of the causes of the Great Depression set out here is eclectic. Nevertheless, my thinking has been framed by four books in particular: the classic by Milton Friedman and Anna Schwartz, A Monetary History of the United States 1857-1960, which highlights the dysfunctional policies and decision m
aking at the Fed; the 1973 book by Charles Kindelberger, The World in Depression , one of the early contemporary books to focus on the global dimension of the economic collapse; and the works of Peter Temin and Barry Eichengreen, especially Temin’s Lessons from the Great Depression and Eichengreen’s Golden Fetters, which identify the gold standard as the chief culprit for transmitting depression around the world.

  ACAMPORA, RALPH. The Fourth Mega-Market. New York: Hyperion, 2000.

  ADAM, H. PEARL. Paris Sees It Through: A Diary 1914-1919. London: Hodder and Stoughton, 1919. ADAMTHWAITE, ANTHONY. Grandeur and Misery. London: Arnold, 1995.

  AGUADO, IAGO Gil. “The Creditanstalt Crisis of 1931 and the Failure of the Austro-German Customs Union Project.” The Historical Journal 44 (2001): 199-221.

  ALDCROFT, Derek H. From Versailles to Wall Street. Berkeley: University of California, 1977. _______________ “Currency Stabilization in the 1920s: Success or Failure?” Economic Issues 7 (2002): 83-102.

  ALLEN, FREDERICK L. Only Yesterday: An Informal History of the Nineteen-Twenties. New York: Harper and Row, 1931.

  ______________The Lords of Creation. New York: Harper and Brothers, 1935.

  ALLEN, ROBERT S. Washington Merry-Go-Round. New York: Horace Liveright. 1931.

  Amery, Leo. The Leo Amery Diaries, Volume 1: 1896-1929. Edited by John Barnes and David Nicholson. London: Hutchinson, 1980.

  ANGELL, NORMAN. The Great Illusion. New York: G. P. Putnam, 1912.

  ANONYMOUS. High Low Washington. Philadelphia: J. B. Lipincott, 1932.

  ASQUITH, H. H. Letters to Venetia Stanley. Edited by Michael Brock and Eleanor Brock. Oxford: Oxford University Press, 1982.

  AULD, George P.. The Dawes Plan and the New Economics. Garden City, NJ: Doubleday, 1927.

  BACEVICH, ANDREW J. “Family Matters: American Civilian and Military Elites in the Progressive Era.” Armed Forces and Society 8 (1982): 405-418.

  BAGEHOT, WALTER. The Collected Works of Walter Bagehot. Volume 1: Literary Essays. Edited by Norman St. John-Stevas. London: The Economist, 1978.

  _____________ The Collected Works of Walter Bagehot. Volume 9: Lombard Street. Edited by Norman St. John-Stevas, London: The Economist, 1978.

  BALDERSTON, THEO. “The beginnings of the depression in Germany: investment and the capital market.” Economic History Review 36 (1983): 395-415.

  ______________ “War Finance and Inflation in Britain and Germany, 1914-1918.” Economic History Review 42 (1989): 222-244.

  ______________ The Origins and Course of the German Economic Crisis: November 1923 to May 1932. Berlin: Halder and Spener, 1993.

  _____________ Economics and Politics in the Weimar Republic. Cambridge: Cambridge University Press, 2002.

  BANQUE De FRANCE. Le Patrimonie de la Banque de France. Paris: Flohic Édition, 2001. ___________ Treasures of the Banque de France. Paris: Éditions Hervas, 1993.

  BARTLETT, JOHN, Bartlett’s Familiar Quotations. Edited by Justin Kaplan. New York: Little Brown, 2002.

  BARUCH, BERNARD. The Public Years: My Own Story. New York: Holt, Reinhart and Winston, 1960.

  Bell, Clive. Old Friends: Personal Recollections. New York: Harcourt Brace, 1957.

  Bell, ELLIOTT V. “Crash: An Account of the Stock Market Crash of 1929,” in We Saw It Happen: The News Behind the News That’s Fit to Print. New York: Simon and Schuster, 1938.

  BENNETT, EDWARD W. Germany and The Diplomacy of the Financial Crisis: 1931. Cambridge, MA.: Harvard University Press, 1962.

  BERENSON, EDWARD. The Trial of Madame Caillaux. Berkeley: University of California, 1992.

  BERGMAN, CARL. The History of Reparations. New York: Houghton Mifflin, 1927.

  BERNANKE, BEN S. “The World on a Cross of Gold.” Journal of Monetary Economics 31 (1993): 251-267.

  _____________Essays on the Great Depression. Princeton, New Jersey: Princeton University Press, 2000.

  BERNSTEIN, PETER L.. The Power of Gold: The History of an Obsession. New York: John Wiley and Sons, 2000.

  BIERMAN, HAROLD. The Great Myths of 1929 and the Lessons to Be Learned. Westport, Connecticut: Glenwood Press, 1991.

  ____________ The Causes of the 1929 Stock Market Crash. Westport, Connecticut: Glenwood Press, 1998.

  BINION, RUDOLPH. Defeated Leaders: The Political Fate of Caillaux, Jouvenel, and Tardieu. New York: Columbia University Press, 1960.

  BLAINEY, Geoffrey. The Causes of War. New York: The Free Press, 1988.

  BLAKE, ROBERT. The Unknown Prime Minister: The Life and Times of Andrew Bonar Law, 1858-1923. London: Eyre and Spottiswoode, 1955.

  BONN, MORITZ J. Wandering Scholar. New York: The John Day Co., 1948.

  BONNET, George. Vingt Ans de Vie Politique 1918-1938: de Clemenceau à Daladier. Paris: Fayard, 1969.

  BOOTHBY, ROBERT. Recollections of a Rebel. London: Hutchinson and Co., 1978.

  BORDO, MICHAEL D. , EHSAN U. CHOUDHRI, and ANNA J. SCHWARTZ: “Was Expansionary Monetary Policy Feasible During the Great Contraction? An Examination of the Gold Standard Constraint.” Explorations in Economic History, 39 (2002): 1-28.

  Boyce, ROBERT W. British Capitalism at the Crossroads 1919-1932. Cambridge: Cambridge University Press, 1987.

  Boyle, ANDREW. Montagu Norman. London: Cassell, 1967.

  BRAUN, OTTO. Von Weimar zu Hitler. New York: Europa Verlag, 1940.

  BRENDON, Piers. Eminent Edwardians. London: Seeker and Warburg, 1979.

  __________ The Dark Valley. London: Jonathan Cape, 2000.

  BROGAN, D. W. France Under the Republic. New York: Harper and Brothers, 1940.

  BROOKS, JOHN. Once in Golconda. New York: John Wiley and Sons, 1999.

  BRYAN, WILLIAM J. The First Battle: A Story of the Campaign of 1896. Chicago: W. B. Conkey Company, 1896.

  CALMORIS, CHARLES W. “Financial Factors in the Great Depression.” The Journal of Economic Perspectives, 7 (1993): 61-85.

  CANNADINE, DAVID. Aspects of Aristocracy. New Haven: Yale University Press, 1994.

  _____________ The Decline and Fall of the British Aristocracy. New York: Vintage Books, 1999. _____________ Mellon: An American Life. New York: Alfred A Knopf, 2006.

  CASSEL, GUSTAV. The Downfall of the Gold Standard. Oxford: Clarendon Press, 1936.

  Cecco, MARCELLO De. The International Gold Standard: Money and Empire. 1984.

  CECCCHETTI, STEPHEN G. “Understanding The Great Deflation: Lessons for Current Policy.” in The Economics of the Great Depression. Edited by Mark Wheeler. Michigan: W.P. Upjohn Institute, 1998.

  CHANDLER, LESTER V. Benjamin Strong: Central Banker. Washington D.C.: The Brookings Institution, 1958.

  ______________ American Monetary Policy: 1928-1941. New York: Harper and Row, 1971.

  CHAPMAN, Guy. The Dreyfus Trials. New York: Stein and Day, 1972.

  CHERNOW, RON. The House of Morgan. New York: Atlantic Monthly Press, 1990. ___________ The Warburgs. New York: Random House, 1993.

  CHOUDHRI, EHSAN U., and Levis A. KOCHIN. “The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression.” Journal of Money, Credit and Banking, 12 (1980): 565-574.

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  ______________The Reconstruction of the International Monetary System: The Attempts of 1922 and 1933. Princeton, New Jersey: Princeton University Press, 1973.

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  DAWES, CHARLES. A Journal of Reparations. London: Macmillan and Co., 1939.

  DAWES, Rufus. The Dawes Plan in the Making. Indianapolis: Bobbs-Merrill Company, 1927.

  DISRAELI, BENJAMIN. Contarini Fleming: A Psychological Romance. London: M. Wally-Dinner, 1904.

  DODD, MARTHA. Through Embassy Eyes. New York: Harcourt Brace, 1939.

  DODD, W. E. Jr. and MARTHA DODD. Ambassador Dodd’s Diary. New York: Harcourt Brace, 1941

  Dos PASSOS, JOHN. Tour of Duty. Boston: Houghton Mifflin, 1946.

  EDGE, WALTER. A Jerseyman’s Journal: Fifty Years of American Business and Politics. Princeton: Princeton University Press. 1948

  EICHENGREEN, BARRY and PETER TERMIN. “The Gold Standard and The Great Depression.” Contemporary European History, 9 (2000): 183-207.

  EICHENGREEN, BARRY and Jeffrey SACHS. “Exchange Rates and Economic Recovery in the 1930s.” The Journal of Economic History, 45 (1985): 925-946.

  EICHENGREEN, BARRY. “Did Speculation Destabilize the French Franc in the 1920s.” Explorations in Economic History 19 (1982): 71-100.

  _______________ “Did International Forces Cause the Great Depression?” Contemporary Policy Issuses 6 (1988): 90-114.

  _______________ “The Bank of France and The Sterilization of Gold: 1926-1932.” Elusive Stability: Essays in the History of International Finance: 1919-1939. Cambridge: Cambridge University Press, 1990.

  ________________ “The Origins and the Nature of the Great Slump Revisited.” Economic History Review 45 (1992): 213-239.

  _______________ Golden Fetters. New York: Oxford University Press, 1992.

  _______________ Globalizing Capital. Princeton: Princeton University Press, 1996. ______________ The Gold Standard in Theory and History. London: Routledge, 1997.

  EINZIG, PAUL. Behind The Scenes of International Finance. London: Macmillan and Co., 1932.

  ELIOT, T. S. Collected Poems: 1909-1962. New York: Harcourt Brace, 1963.