Churchill: "Here I'm lost and reduced to groping."

President Obama, take note:  how to cause a Depression!  According to Keynes, the recipe is to allow yourself to be "gravely misled by the experts." 

In 1925 Winston Churchill, Chancellor of the Exchequer, resumed the pound sterling's convertibility into gold.  He resumed convertibility at the conversion price prevailing before the war ... even though, due to wartime depreciation, price levels had doubled.  It caused, as Keynes and very few others anticipated it would, the loss of millions of jobs, an ensuing general strike, and Churchill ending up in the political wilderness for almost ten years.

Churchill

Churchill's blunder also helped to tarnish the reputation of the gold standard, a blackening from which it is only now is beginning fully to emerge.

William Manchester, The Last Lion:  Winston Spencer Churchill, Visions of Glory 1874-1932:

The most sensational moment in Churchill's first budget was his dramatic disclosure that Britain, which had left the gold standard during the war, was back on it.  The Times reported that this announcement was greeted with "tremendous cheers."  After the applause had died down he said, "No responsible authority has advocated any other policy.  It has always been a matter of course that we should return to it."  This was simply untrue.  Beaverbrook had been against it; on the evening of Budget Day he wrote Bracken:  "My opinion of Winston has not altered.  I knew from the beginning that he would give in to the bankers on the Gold Standard, which I think, is the biggest sin in this budget."  ...

Beaverbrook and Boothby were among the few Jeremiahs on the issue then; others, and they were almost the only others, were Winston's old colleague Reginald McKenna, a former chancellor; John Maynard Keynes, and Vincent Vickers, who protested the move by resigning from the board of the Bank of England.  Churchill has been blamed for it, and rightly so, because as chancellor he made the decision.  The step was not taken lightly, however, or without learned advice.  Responsibility was collective and bipartisan."  ... Why did they do it, and what did it mean?  British financiers, in the Treasury and in the City, were convinced that England's future prosperity could be assured only if London were reestablished as the financial center of the globe.  This, they held, would be impossible until "the pound can look the dollar in the face." ...  They assumed that the restoration of the pound's parity with the American dollar would reestablish Britain's prewar prosperity.  None seemed to realize that England had squandered its wealth between Sarajevo and Versailles, or that the country's shrunken export trade could no longer provide the surplus needed to reestablish London's fiscal ascendancy over the rest of the world." 

Keynes now emerged.  In the Nation, the Evening Standard, and finally in a pamphlet, "The Economic Consequences of Mr Churchill," he went for Winston's jugular, declaring that the chancellor had acted "partly, perhaps, because he has no instinctive judgment to prevent him from making mistakes; partly, because, lacking this instinctive judgment, he was defeated by the clamorous voice of conventional finance; and most of all, because he was gravely misled by the experts."  (Little, Brown and Company, 1983, pp. 791-793)

 

From Peter L. Bernstein's The Power of Gold: The History of an Obsession...

Between the end of December and the deadline at the end of April, Churchill would spend a miserable four months trying to come to grips with the matter.  'When I held other offices under the Crown, he complained to a friend, 'I could always find out where I was.  Here I'm lost and reduced to groping.'  He also grumbled that "The governor [Norman] shows himself perfectly happy in the spectacle of Britain possessing the finest credit in the world simultaneously with a million and a quarter unemployed.' A senior advisor, Otto Niemeyer of the Treasury, observed that "None of the witch doctors see eye to eye and Winston cannot make up his mind from day to day whether he is a gold bug or a pure inflationist."  p. 246


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The Most Important Thing Holding Up the US Dollar

by Ron Paul

Today’s economic conditions reflect a fiat monetary system held together by many tricks and luck over the past 40 years. The world has been awash in paper money since removal of the last vestige of the gold standard by Richard Nixon when he buried the Bretton Woods agreement — the gold exchange standard — on August 15, 1971.

Since then we’ve been on a worldwide paper dollar standard. Quite possibly we are seeing the beginning of the end of that system. If so, tough times are ahead for the United States and the world economy.

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The new Federal Reserve chairman, Janet Yellen, gave a policy speech today at Chicago, where, in a startling gesture, she mentioned three working individuals by name — Jermaine Brownlee, Vicki Lira, and Doreen Poole. They lost their jobs the Great Recession and have been struggling ever since. It was a refreshing, even affecting demarche by Mrs. Yellen, who has made a return to full employment a public priority. She underscored her sincerity by telephoning Mr. Brownlee and Ms. Lira and Ms. Poole before delivering her speech.

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The Rueffian SynthesisJohn D. Mueller

Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.

By John D. Mueller

Who Was Jacques Rueff?

... Trained in science and mathematics at the Ecole Polytechnique, Rueff devoted his first theoretical work to showing that the same scientific method applies to “moral” or “social” sciences like economics as to the physical sciences (Des Sciences Physiques aux Sciences Morales, 1922). In both cases, he pointed out, individual acts can be “indeterminate,” but the pattern of large numbers of individual acts can be predicted as a matter of probability. And so in economics no less than physics, as he later wrote, “A scientific theory is considered correct only if it makes forecasting possible.”

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Excerpts From:


by Lewis E. Lehrman

"Forerunners of man lived upon the planet several million years ago. But the unique, modern, social order of man – civilization – emerged only four to five thousand years ago. Historical and archaeological evidence suggests that the institution of money evolved coterminously with civilization. From the standpoint of the 100,000-year history of Homo sapiens, civilization and money are but young and fragile reeds. Today their very existence is threatened by financial disorder."

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Hostility toward gold has a long pedigree.  19th century depiction of Pliny the Elder courtesy of the Library of Congress Gaius Plinius Secundus, commonly known as Pliny the Elder, in his The Natural History, Book 33, section 3, writes: Would that gold could have been banished for ever from the earth, accursed by...

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Kathleen Packard  |  Apr 16, 2014
The New York Times’ Jonathan Gilbert reported: “Argentines endured price rises of nearly 30 percent last year, according to an unofficial index published by opposition politicians; the government, which has been accused of manipulating economic data in the past, claims inflation reached only 10.9 percent in 2013. In 2014, inflation...
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Jacques Rueff, a key figure in European economic circles from the 1930s until the 1970s, was, first and foremost, an...
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When hearing or reading excited discussions of ``the new payment technologies'' and...
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Prosperity Through Gold
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