A History of Central Banking in Great Britain and the United States (Studies in Macroeconomic History)

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For those of us who were convinced that wars were only caused by geo-political and perhaps ideological forces, Stephen Mitford Goodson conclusively documents the insidious role of international bankers. I would … recommend this book as a central reference to evolutionary economists (and evolutionary institutionalists, by extension) to make more thoughts on and build analytical models of central banking functions from an evolutionary point of view.” (Burak Erkut, Journal of Evolutionary Economics, July 4, 2020) The 'scam' of the money-lenders is the ability to literally create money from nothing, and then lend and accumulate interest on "credit," and then re-lend that interest for further interest, in perpetuity, that creates pervasive, worldwide debt, from the individual, to the family, to the entire state. Around 600BC Latium came under the control of the Etruscans. This lasted until the last king, Tarquin the Proud, was expelled in 509BC and the Roman Republic was established. The Etruscans, a people of Aryan origin, created one of the most advanced civilisations of that period and built roads, temples and numerous public buildings in Rome. The book, published in 2016, goes to lengths to understand Mr Greenspan’s psychology, not only his adventures in the halls of power. He was once a jazz musician, loves tennis and counts Ayn Rand as a major intellectual influence—Mr Greenspan introduced her to President Gerald Ford. It assesses what Mr Greenspan’s career might tell us about the Fed’s response to the mortgage bubble of the 2000s. Contrary to common perception, he was not married to simple economic models and had no fantasies about “efficient markets” or “rational behaviour”. Instead he had a keen eye for economic data and stressed the importance of finance to the economy before it became vogue after the crisis. His mistake, then, was in miscalculating how risks in the mortgage market could be systemically harmful. The book offers an explanation for this: over his career he had been able to prevent many bubbles from causing widespread harm, such as in the panic of 1987, so he paid less attention to the buildup of risks in the 2000s. However, he was less than decisive in quelling the risks he was aware of. As Mr Mallaby puts it: “Greenspan was the man who knew. He was not the man who acted.” Read a longer review by Martin Wolf published in The Economist.

The solution is simple and self-evident. If we wish to obtain our liberation and sovereignty from the enslavement imposed by the private bankers, we must dismantle their fractional reserve system of banking and supporting central banks, or we ourselves shall be destroyed and consigned to oblivion. Up to 300BC there was an unsurpassed increase in public and private wealth of the Romans. This may be measured in the gain in land. After the conclusion of the Second Latin War in 338BC and the defeat of the Etruscans, the Roman Republic increased in size from 2,135 square miles (5,525 sq km) to 10,350 square miles (26,805 sq km) or 20% of peninsular Italy. In tandem with the expansion of its land area the population rose from about 750,000 to one million with 150,000 persons living in Rome itself.Central banks learned to be lenders of last resort and provide financial stability but the pursuit of “too big to fail” led to the development of fiscally resolved banking crises. The Global Financial Crisis was a major departure from the post–Great Depression experience for many advanced countries, but the lessons learned then prevented another financial crisis in 2020. However, the expansion of banks’ toolkits to include credit policy, a form of fiscal policy, threatens central-bank independence. Money, being naturally barren, to make it breed money is preposterous and a perversion from the end of its institution, which was only to serve the purpose of exchange and not of increase...Men called bankers we shall hate, for they enrich themselves while doing nothing.

Both authors mention that no meetings are ever transcribed or recorded, no agendas and no minutes are taken in the board rooms and meetings of the top banking sector. Both had years of experience in this matter. Both are straight shooters. The cultural and material progress of a civilization will often relate to the degree by which it is free from the influence of debt, and the degradation that results when the money-lenders are permitted to abuse their power. Hence, Goodson shows that both World Wars, the Napoleonic wars, the American Revolution, the rise and fall of Julius Caesar, the regicide of Charles I of England, the overthrow of Gaddafi in Libya and the revolution against Tsar Nicholas, among much else in history relate to this "Hidden Hand". Money Creation in the Modern Economy. By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. Bank of England Quarterly Bulletin. Q1, 2014.

The Hidden Origins of the Bank of England ...all great events have been distorted, most of the important causes concealed…If the history of England is ever written by one who has the knowledge and the courage, the world would be astonished. - Benjamin Disraeli, Prime Minister of Great Britain Stephen Mitford Goodson recently passed away and something about his eulogy inspired me to find this book. Rudyard Kipling’s poem If was included in the eulogy at his funeral and it immediately triggered my curiosity. The discussion blends a history of events that reflect the growing importance of central banks in the global economy together with the history of thought about the balance between public and private roles in carrying out central banking functions. As a result, private banks and their connection with monetary authorities play an important role in the depiction of the evolution of central banking. For example, we see how the emergence of clearinghouses led to the creation of “conventional” central banks via the centralization of this function at the public level. Hence, this function is treated as a “natural monopoly.” The same is true of the evolution of many of the other functions examined. Nevertheless, the author is careful to highlight how in some countries, such as the United States, the tension between a role for government versus a preference for a strong role by the private sector in carrying out certain financial functions can explain certain cross-country differences in how central banks evolved when viewed through the lens of the functional approach. It may also be noted in passing that the experiences of Venice and Naples figure prominently in the discussion. The early Roman silver coin was known as the drachma and was modelled on a coin used in the Greek south of the peninsula. It was later replaced with the smaller and lighter denarius. There was also a half denarius, called the quinarius and a quarter unit called the sestertius. Still later the system was supplemented with the victoriatus, somewhat lighter than the denarius and probably intended to facilitate trade with Rome’s Greek neighbours. The truth is money is fake, people will trade with whatever medium of exchange the perceived authority wants them to, and as long as this authority borrows money only from itself debt can be cleared without issue, and the nation can remain independent, answerable only to itself, and with a population entitled to a share of what the whole can provide.

Three other elements about the functional approach adopted by Ugolini are also worth mentioning. First, the discussion is overwhelmingly centered on the European, British, and American experiences. The book is silent about how central banking functions evolved in Canada, Asia, or Australasia. Second, the chapter on the issuance of money does not discuss how history, or the history of thought, might inform the current debate about the digitization of money. Finally, the discussion of the monetary policy function glosses over the evolution of policy regimes, such as exchange rate or inflation targeting, preferring instead to focus on its role as a means of regulating and taxing the public to ensure something called monetary stability. Unfortunately, the latter expression is never sufficiently clearly explained. Nevertheless, Ugolini is correct to underscore the importance of examining how monetary and fiscal policy interact. After all, this is an issue that is very much at the center of the debate about the future of central banking. If you wish to have a real understanding of history - look for the influence of the bankers. This is the key to understanding the past, the present and the future. For any nation/state/society/community to have full sovereignty and independence in its affairs, absolute control over the means it employs to exchange goods and services must reside with the organs which represent the people, and must not be delegated to private individuals. The foundations of the Great Moderation were undercut at the beginning of the twenty-first century by fears of a Japan-style deflation and of being trapped in the zero lower bound. This set the stage for the Global Financial Crisis. The crisis was triggered by the collapse of a major credit-driven housing boom in the US and Europe, fostered by financial innovation, lax financial regulation, and loose monetary policy. It was allayed by enhanced lender-of-last-resort and credit policies and aggressive monetary and fiscal policies. A consequence of the crisis is that some central banks extended their financial stability mandate from lender of last resort to the prevention of credit-driven asset price booms (“leaning against the wind” policy)—which has not been proven to be successful ( Svensson, 2017) and to the use of preventative macro prudential policy. The Fed and others continued to worry about the zero lower bound and followed quantitative easing and forward-guidance policies with limited success in reaching their 2 percent inflation targets. So yes, it is an informative, yet contentious book to read, but well worth the time. I do not agree with everything in the book and for this reason am indulging in the rebel-rouser, Yanis Varoufakis's, books as well. However, I expected some big differences, but I only encountered remarkable agreements between two authors who never met. But I'm still digging.Financial stability. While early central banks helped fund the government’s debt, they were also private entities that engaged in banking activities. Because they held the deposits of other banks they came to serve as a banker’s bank, facilitating transactions between banks. They became the repository for most banks in the banking system because of their large reserves and extensive networks of correspondent banks. These factors eventually allowed them to become a lender of last resort in the face of a banking panic. A later wave of central banks, e.g., the Federal Reserve in 1913 and the Swiss National Bank in 1907, were founded explicitly to provide financial stability.