In 1928 [Keynes] wrote a rude letter: “Dear Chancellor of the Exchequer, What an imbecile Currency Bill you have introduced!” Churchill replied with his customary courtesy, revealing his continued respect for the wizard economist: “My dear Keynes.... I will read your article enclosed and reflect carefully, as I always do, on all you say.”
In the Winter 2011-12 issue of Finest Hour, a journal of Churchill studies, at pages 21-22, there is an excellent study, by H.W. Arndt, of Churchill's predicament over the restoration of the gold standard as Chancellor of the Exchequer ... and of his relationship with Keynes, entitled The Wizard and the Pragmatist.
It is probably true that “Churchill understood modern no better than old-fashioned economics,” but he had acute intelligence and great power of application. Within weeks of assuming his new office he was presented by Montagu Norman, Governor of the Bank of England, with a plan to prepare for a return to gold at par by the end of 1925. He worried about the domestic implications and wrote a substantial paper, dubbed “Churchill’s Exercise,” setting out his objections to a quick return to gold. This led Sir John Bradbury, head of the Treasury, to observe that Churchill “appears to have his spiritual home in the Keynes-McKenna sanctuary.”
It is not certain whether Churchill was expressing his own view or merely provoking his official advisers into stating their case. If the latter, he was certainly successful, eliciting long and trenchant replies. But there is also no doubt that Churchill was genuinely perplexed and torn. On reading another article by Keynes on “The Return Towards Gold,” Churchill complained in another memorandum:
The Treasury have never, it seems to me, faced the profound significance of what Mr. Keynes calls ‘the paradox of unemployment amidst dearth.’ The Governor shows himself perfectly happy in the spectacle of Britain possessing the finest credit in the world simultaneously with a million and a quarter unemployed.
Attempting to resolve his doubts, Churchill arranged for a dinner on 17 March 1925 to which he invited Bradbury and financial controller Sir Otto Niemeyer for the Treasury and Keynes and McKenna for the opposition. Till midnight and beyond, Keynes and McKenna argued that at prewar parity, sterling would be overvalued by 10%, and adjusting to the higher rate would mean unemployment and industrial unrest. Churchill, “ready to and anxious to be convinced as far as my limited comprehension of these extremely technical matters will permit,” asked McKenna: “...you have been Chancellor...what decision would you take?” McKenna said there was no escape, but “it will be hell.” ... In July, Keynes’s pamphlet, The Economic Consequences of Mr. Churchill, ferociously opposed a return to gold as a fixed exchange-rate system because of its effects on unemployment and the balance of payments. It was not directed at Churchill personally: WSC, he said, had made the decision “partly because he has no intuitive judgment, partly because of the clamourous voices of conventional finance, and, worst of all, because he was gravely misled by the experts.”
Churchill, who almost always rose above the Parliamentary fray, did not resent Keynes’s criticisms. In Parliament, he charged Snowden with inconsistency in first urging an early return to gold, and then attacking the government for taking that course, contrasting this “with the position of Mr. Keynes, who is, I suppose, by far the most distinguished and able exponent of opposition to the return to gold. He is the great advocate of a managed currency, the most powerful and persuasive advocate.” Keynes’s warnings about the economic and social consequences of the return to gold at par were soon borne out by the 1926 General Strike. ...
Keynes had little sympathy with the forceful tone Churchill adopted as editor of the government strike journal, The British Gazette, and indeed with Churchill’s increasingly conservative positions in the last three years of his Chancellorship. In 1928 he wrote a rude letter: “Dear Chancellor of the Exchequer, What an imbecile Currency Bill you have introduced!” Churchill replied with his customary courtesy, revealing his continued respect for the wizard economist: “My dear Keynes.... I will read your article enclosed and reflect carefully, as I always do, on all you say.”
"To ask today’s regulators to save us from tomorrow’s crisis using yesterday’s toolbox is to ask a border collie to catch a frisbee by first applying Newton’s Law of Gravity."
-- Andrew G Hardane and Vasileios Madouros
So ends the speech by Andrew G Hardane, Executive Director, Financial Stability and member of the Financial Policy Committee and Vasileios Madouros, Economist, Bank of England at the Federal Reserve Bank of Kansas City’s 36th economic policy symposium, “The Changing Policy Landscape”, Jackson Hole, Wyoming on 31 August 2012. Haldane's speech primarily criticized the labyrinthine banking regulations of Basel III.
The implications of Haldane's thinking reach far beyond the critique of expensive (he estimates 70,000 compliance officials must be hired by mid-sized European banks will be required by the regulations) and inefficiently brittle rules. Haldane also draws refreshingly on the need to base policy not on intricate, Rube Goldbergesque systems based on dubious assumptions, but on the real world, frequently referenced by The Lehrman Institute founder and chairman Lewis E. Lehrman as "the laboratory of history" ... "the only laboratory we human beings have available to us: the laboratory of human history.” (from Lehrman's March 17, 2011 testimony at a hearing before the Monetary Policy Subcommittee of the House Financial Services Committee).
The Arabian Nights is one of the world's great compilation of stories. One of the most memorable stories there is that of Ali Baba and the Forty Thieves.
The man who seemed to he the captain presently pushed forward, load on shoulder, through thorns and thickets, till he came up to a certain spot, where he uttered these strange words: "Open, Sesame!" And forthwith appeared a wide doorway in the face of the rock. The robbers went in, and last of all their chief, and then the portal shut of itself.
Long while they stayed within the cave whilst Ali Baba was constrained to abide perched upon the tree, reflecting that if he came down, peradventure the band might issue forth that very moment and seize him and slay him. At last he had determined to mount one of the horses and driving on his asses, to return townward, when suddenly the portal flew open. The robber chief was first to issue forth, then, standing at the entrance, he saw and counted his men as they came out, and lastly he spake the magical words, "Shut, Sesame!" whereat the door closed of itself. When all had passed muster and review, each slung on his saddlebags and bridled his own horse, and as soon as ready they rode off, led by the leader, in the direction whence they came. Ali Baba remained still perched on the tree and watched their departure, nor would he descend until what time they were clean gone out of sight, lest perchance one of them return and look around and descry him.
Then he thought within himself: "I too will try the virtue of those magical words and see if at my bidding the door will open and close." So he called out aloud, "Open, Sesame!" And no sooner had he spoken than straightway the portal flew open and he entered within. He saw a large cavern and a vaulted, in height equaling the stature of a full-grown man, and it was hewn in the live stone and, lighted up with light that came through air holes and bull's-eyes in the upper surface of the rock which formed the roof. He had expected to find naught save outer gloom in this robbers' den, and he was surprised to see the whole room filled with bales of all manner stuffs, and heaped up from sole to ceiling with camelloads of silks and brocades and embroidered cloths and mounds on mounds of varicolored carpetings. Besides which, he espied coins golden and silvern without measure or account, some piled upon the ground and others bound in learthern bags and sacks. Seeing these goods and moneys in such abundance, Ali Bab determined in his mind that not during a few years only but for many generations thieves must have stored their gains and spoils in this place.
When he stood within the cave, its door had closed upon him, yet he was not dismayed, since he had kept in memory the magical words, and he took no heed of the precious stuffs around him, but applied himself only and wholly to the sacks of ashrafis. Of these he carried out as many as he judged sufficient burthen for the beasts, then he loaded them upon his animals, and covered his plunder with sticks and fuel, so n
one might discern the bags but might think that he was carrying home his usual ware. Lastly he called out, "Shut, Sesame!" and forthwith the door closed, for the spell so wrought that whensoever any entered the cave, its portal shut of itself behind him, and as he issued therefrom, the same would neither open nor close again till he had pronounced the words "Shut, Sesame!" Presently, having laden his asses, Ali Baba urged them before him with all speed to the city and reaching home, he drove them into the yard, and, shutting close the outer door, took down first the sticks and fuel and after the bags of gold, which he carried in to his wife.
"Give me control of a Nation's money supply, and I care not who makes its laws."
This quote frequently is attributed by conspiracy theorists to Mayer Amschel Rothschild, founder of the Rothschild banking dynasty.
A comparable quote is attributed to his son, Nathan:
I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain's money supply controls the British Empire, and I control the British money supply.
There are some really big problems with these claims.
First, thorough research has uncovered no evidence whatsoever that either Rothschild ever said such a thing.
Skeptoid: Critical Analysis of Pop Phenomena -- an award-winning weekly science podcast -- searched for a primary source and reported:
In fact, that famous quote from Nathan Rothschild about "controlling the British money supply" turns out to be a fabrication. I found no original source for the quote at all, though it's repeated in dozens of conspiracy books and on tens of thousands of conspiracy websites. I did a thorough search of all available newspaper archives from Nathan's lifetime, and had some friends check various university library systems. No such quote appears in the academic literature. After such a thorough search, I feel confident stating that he never made such a statement.
But the quote doesn't appear to be completely made up by the conspiracy theorists. It's most likely a revised and restyled version of this quote attributed to Nathan's father, the original Mayer Rothschild:
"Give me control of a Nation's money supply, and I care not who makes its laws."
But like the longer, more specific quote from Nathan, even this one turns out to be apocryphal. Author G. Edward Griffin did manage to track it down, though. He found that this saying was:
Quoted by Senator Robert L. Owen, former Chairman of the Senate Committee on Banking and Currency and one of the sponsors of the Federal Reserve Act, National Economy and the Banking System, (Washington, D.C.: U.S. Government Printing Office, 1939), p. 99. This quotation could not be verified in a primary reference work. However, when one considers the life and accomplishments of the elder Rothschild, there can be little doubt that this sentiment was, in fact, his outlook and guiding principle
And this is certainly true. In Rothschild's day, before banking regulation and antitrust laws existed, it was indeed possible for small groups to gain controlling interests in enough financial institutions that it could be argued that they "controlled" a nation's money supply. Evidently the Senator made up the quote to support whatever speech he was making, and attributed it to a famous name to give it some clout.
Second, reckless falsehoods play into the hands of the most sinister elements of society. In the case of the Rothschild family itself, Skeptoid reminds its readers that a "1940 German movie called Die Rothschilds Aktien auf Waterloo (was) described as 'the Third Reich's first anti-Semitic manifesto on film.'" "Nazi Germany devastated the Austrian Rothschilds and seized all of their assets. The family members escaped to the United States, but lost their entire fortunes to the Nazis, including a number of palaces and a huge amount of artwork."
The tenor of both apocryphal quotes echoes an authentic, lyrical and deeply discerning observation by Scottish writer, politician, and patriotAndrew Fletcher of Saltoun who wrote, in a letter to the Marquis of Montrose in 1703:
I said I knew a very wise man so much of Sir Christopher's sentiment, that he believed if a man were permitted to make all the ballads he need not care who should make the laws of a nation, and we find that most of the ancient legislators thought that they could not well reform the manners of any city without the help of a lyric, and sometimes of a dramatic poet.
This sentiment has become well known in paraphrased form, "Let me make the ballads of a nation, and I care not who makes its laws." This writer infers that Fletcher's words may have been the inspiration for the malevolently confabulated sinister sentiments attributed to the Rothschilds.
"The Mongol-founded Yuan dynasty (1271–1368) also attempted to use paper currency. Unlike the Song dynasty, they created a unified, national system that was not backed by silver or gold. The currency issued by the Yuan was the world's first fiat currency, known as Chao."
Chinese currency, the valuation of which has come in for pointed criticism both from the Obama administration and rival candidate Mitt Romney, has appreciated to its highest level in almost two decades, reports the Wall Street Journal:
SHANGHAI—China guided the yuan higher against the U.S. dollar to the strongest in almost two decades, suggesting Beijing may be offering a conciliatory gesture to Washington just weeks ahead of the U.S. presidential election.
The 0.2% gain Friday also comes as money rushes into China and other emerging markets following the latest round of U.S. quantitative easing aimed at lowering Treasury yields.
The yuan's pace of appreciation has been accelerating all week, and despite the increased appetite for higher-yielding Chinese assets, with Chinese stocks also at a four-week high, it has still caught some investors by surprise. A slew of Chinese data is expected over the next few days, widely expected to show the world's second-largest economy slowed further in the third quarter.
The People's Bank of China set the central parity level, the morning daily reference rate around which the currency can fluctuate each day, at 6.3264 yuan per dollar. The yuan then gained throughout the day, and finished at 6.2672 per dollar, compared with 6.2770 at the end of Thursday.
The currency pair touched 6.2640 during the afternoon, the highest level for the yuan against the dollar since the launch of the modern Chinese currency-trading system in 1994. A smaller figure for the dollar translates into a stronger yuan.
The long and colorful history of Chinese monetary policy, as detailed by the Wikipedia,-- demonstrates many episodes of falling, rather than rising, value:
As part of the Unification of China, Qin Shi Huang (Huáng, 260 BC – 210 BC) abolished all other forms of local currency and introduced a national uniform copper coin based on the coins previously used by Qin. These coins were round with a square hole in the middle which was the common design for most Chinese copper coins until the 20th century. Due to the low value of an individual coin, the Chinese have traditionally strung a nominal thousand copper coins onto a piece of string. However government taxes were levied in both coins and in products such as rolls of silk. Salaries were also paid in both the Qin Dynasty and Han dynasties in "stones" (dàn) of grain.
During the early Song dynasty (Chinese: ?, 960–1279), China again reunited the currency system displacing coinages from ten or so independent states. Among pre-Song coins, the northern states tended to prefer copper coins. The southern states tended to use lead or iron coins with Sichuan using its own heavy iron coins which continued to circulate for a short period into the Song dynasty. By 1000, unification was complete and China experienced a period of rapid economic growth. This was reflected in the growth of coining. In 1073, the peak year for minting coins in the Northern Song, the government produced an estimated six million strings containing a thousand copper coins each. The Northern Song is thought to have minted over two hundred million strings of coins which were often exported to Inner Asia, Japan, and South-East Asia, where they often formed the dominant form of coinage. Song merchants rapidly adopted forms of paper currency starting with promissory notes in Sichuan called "flying money" (feiqian). These proved so useful the state took over production of this form of paper money with the first state-backed printing in 1024. By the 12th century, various forms of paper money had become the dominant forms of currency in China and were known by a variety of names such as jiaozi, qianyin, kuaizi, or guanzi.
The Mongol-founded Yuan dynasty (1271–1368) also attempted to use paper currency. Unlike the Song dynasty, they created a unified, national system that was not backed by silver or gold. The currency issued by the Yuan was the world's first fiat currency, known as Chao. The Yuan government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government. Inflation in 1260 caused the government to replace the existing paper currency with a new paper currency in 1287, but inflation caused by undisciplined printing remained a problem for the Yuan court until the end of the Dynasty.
The early Ming dynasty (1368–1644) also attempted to use paper currency in the early re-unification period. This currency also experienced rapid inflation and issues were suspended in 1450 although notes remained in circulation until 1573. It was only in the very last years of the Ming dynasty when Li Zicheng threatened Beijing in 1643 and 1644 that printing took place again. For most of the Ming China had a purely private system of currency for all important transactions. Silver, which flowed in from overseas, began to be used as a currency in the Far South province of Guangdong where it spread to the lower Yangzi region by 1423 when it became legal tender for payment of taxes.