Mr Churchills Excercise. British monetary policy, 1924-1931, the Norman conquest of $4.86 #Moggridge


The fourth dispute was much the most interesting, even though it did not spill from the Treasury and the Bank into the Cabinet arena. Nearly all the bien-pensant sources of advice were unanimous that it was
Britain’s interest and duty to return to the Gold Standard (the British led exchange rate system which had broken down under the strains of
the First World War) and to do so at the pre-war parity. On this subject
Churchill’s minutes were masterpieces of pungent questioning whereas
the replies took refuge in a misty higher wisdom. On 29 January 1925
Churchill wrote a minute and circulated it to Montagu Norman
(Governor of the Bank of England from 1920 to 1944), Otto Niemeyer,
R. G. Hawtrey (who in forty-one years in the Treasury made himself
almost more of a legend even than Niemeyer as a pundit of international
finance) and Lord Bradbury. Bradbury, retired and ennobled after being
permanent secretary to the Treasury throughout the First World War,
had recently become chairman of the joint Select Committee of both
Houses of Parliament on Currency and Banking, which was specifically
ip 2 5] Gold and Strikes 399
charged with pronouncing on the wisdom or otherwise of a return to
Gold. The spirit in which this minute was received is well expressed by
its becoming known in the Treasury as ‘Mr Churchill’s exercise’, which
combined a hint of admiration for its strenuousness with more than a hint of impatience at its naivety, and by Bradbury’s comment: ‘The
writer . . . appears to have his spiritual home in the Keynes-McKenna
sanctuary [the Cambridge economist and the ex-Chancellor who had
become Midland Bank chairman were the most prominent anti-Gold
sceptics] but some of the trimmings of his mantle have been furnished
by the Daily Express [that is, Beaverbrook].’ 13 The direct replies to the Churchill minute, as opposed to such
oblique comments, were splendid examples of substituting superior
wisdom for rational argument. Niemeyer said that to dodge the issue
now would be to show that Britain had never really ‘meant business’
about the Gold Standard and that ‘our nerve had failed when the stage
was set’. 14 Norman, the great Governor, was even more sublimely bland.
In the opinion ‘of educated and reasonable men’, he wrote, there was
no alternative to a return to Gold. The Chancellor would no doubt be
attacked whatever he did but: ‘In the former case (Gold) he will be
abused by the ignorant, the gamblers and the antiquated industrialists;
in the latter case (not Gold) he will be abused by the instructed and by
posterity.’ 15 Churchill’s doubts took a lot of subduing. And his combination of
energy and self-confidence made him a formidable fighter of a rearguard
action. Niemeyer’s reply to Churchill’s first memorandum was written
on a Saturday (2 1 February). Churchill in turn replied to this with the
purest milk of expansionary doctrine:

“The Treasury has 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. Obviously if these million and a quarter were
usefully and economically employed, they would produce at least £100 a year a head, instead of costing up at least £50 a head in doles.”


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