Lords of Finance: 1929, The Great Depression, and the Bankers who Broke the World

by Liaquat Ahamed

Though the WASPs were, like so many people in those days, casually anti-Semitic, the two groups treated each other with a wary respect. They were all, however, snobs who looked down on interlopers. It was a society that could be smug and complacent, indifferent to the problems of unemployment or poverty. Only in Germany—and that is part of this story—did those undercurrents of prejudice eventually become truly malevolent.

the money supply in Britain doubled, in France it tripled, and in Germany, the worst culprit, it quadrupled. Though the U.S. money supply also doubled, this was less because of inflationary war finance, which it relied upon to a much smaller extent than the Europeans, and more because of the massive influx of gold. This set the pattern of the next decade: Europe struggling with the legacies and burdens of the past, the United States wrestling with the excess bonuses of its good fortune.

The plan was to introduce a totally new currency, the Rentenmark, to be backed not by gold but by land. The bank issuing the new currency was granted a “mortgage” on all agricultural and industrial property, on which it could impose an annual levy of 5 percent—in effect, a tax on commercial real estate.

Whereas in Germany, a demobilized army officer might find his calling in a right-wing death squad, his counterpart in Britain had plunged into commercial life—it was said that most of the fleets of motor buses that jammed the streets of London were owned and operated by syndicates of former army officers.

When a journalist even raised the question at a press conference there of whether Britain could or should remain on a gold standard that had become unworkable, required Britain to borrow gigantic amounts of money to sustain it, and was imposing intolerable sacrifices on the great mass of people, Sir Warren Fisher, head of the civil service and permanent secretary to the treasury, “rose to his feet, his eyes flashing691, his face flushed with passion,” and berated the journalists as if he had caught them “exchanging obscenities.” “Gentlemen, I hope no one will repeat such sentiments outside this room,” he scolded. “I am sure all those of you who know the British people will agree with me that to make such a suggestion is an affront to the national honor and would be felt as a attack on their personal honor by every man and woman in the country. It is quite unthinkable.” Meanwhile, the flight from sterling continued unabated.

That weekend Churchill had the star of The Gold Rush, Charlie Chaplin, as a guest at Chartwell695, his country house in Kent—they had met in Hollywood when Churchill was visiting the United States in October 1929 at the time of the crash. Over dinner Chaplin opened the conversation by saying, “You made a great mistake when you went back to the gold standard at the wrong parity of exchange in 1925.” Churchill was somewhat taken aback. As the film star proceeded to hold forth at length about the subject with a great deal of knowledge, Churchill, who hated to be reminded of past mistakes, sank into a morose silence, a mood broken only when the comedian picked up two rolls of bread, put two forks in them and did the famous dance from the movie.