‘Death on the Installment Plan’,
Whereby Governor Norman Came to Pace the Damnation of Europe, 1924-1933
‘Twas I did not yet know men. Never more will I believe what they say, what they think. It is of
men and of men alone that one must be afraid, always.
How long will it take for their delirium to end, how long before they just stop exhausted at last,
Louis-Ferdinand Céline, Voyage au bout de la nuit.1
They gorge on God and the world. They do not sow. They just reap. They are the sorcerers in the
flesh [who] make gold over the phone…‘I was sitting in a great waiting-room and its name was
Europe. The train was due to leave in a week. I knew that. But no one could tell me where it was
going or what would become of me. And now we are again seated in the waiting-room, and again
its name is Europe! And again we do not know what will happen! We live provisionally, the crisis
goes on without end!’.
Erich Kästner, Hymn to the Bankers/Fabian.2
The Banking ‘Grid’ and the Rules of the Gold Game
Germany had to be resurrected —that is, rearmed and renovated: the Veblenian prophecy had foretold this much. As seen in the previous chapter, the date marking
Germany’s military re-awakening was April 1922, when the Treaty of Rapallo sealed that seemingly bizarre entente between the generals behind Weimar and Russia’s Red Army.
Then, one had to see to it that the industrial basis of Germany was restructured as well.
Before the German economy might be overhauled, the drafters of Versailles waited until
the hyperinflation annihilated the old mark. That crash had been a facile presumption on
the part of the British experts: forcing the German government, which was mired in a
(war) debt that was twice as large as the country’s income, to pay reparations (in foreign
exchange and gold) to the extent of two and half times the imperial GDP of 1913 without
confiscating that debt, had boiled down to driving the Reich into a corner. In the
strictures of that corner –capital evasion, depreciation of the mark, and tax evasion— the
standard action of the Reich-Reichsbank duo could not but lead to an inflationary
meltdown; there had been no mystery to it, no mistake about it. The only uncertainty had
lain in assessing the time lag required for the completion of this financial burnout. It
would have taken roughly three years to wipe Weimar clean of the old debt incurred to
fight the Great War: i.e., from 1920 to 1923.
In the meantime, the Bank of England found a suitable Governor possessing the
ability to direct the forthcoming German bailout from London with American cash. A
most strange, and intriguing character by the name of Montagu Norman was the chosen
custodian: Norman would be Governor for the extraordinary duration of 24 years (1920-
1944); a case unique in the entire history of the Bank. During the last stages of the
German inflation, Norman initiated the process that would re-anchor Britain and most
industrialized countries to the so-called gold-exchange standard. This operation –grossly
misunderstood by contemporary scholarship—was by no means a sorry attempt bungled
by a few nostalgic gentlemen of leisure to resuscitate the monetary system of yore (pre-
WWI). Rather, it was the peculiar creation of the British Governor, whereby he
enveloped, so to speak, for the length of six years (1925-1931) the banking networks of
the West into a single, highly leveraged and palpably unstable web of payments, which
was in fact designed to self-disintegrate. This too was a game, in which all participating
central banks ‘chipped in’ a given quota in gold. To amass and protect the gold base of
his Bank, Montagu Norman tested in 1920 two fundamental techniques, which he would
employ a decade later to achieve the Empire’s objectives: 1) the pauperization of India by restricting her money supply (i.e., deliberate deflation) with a view to attracting Indian
gold hoards to London, and 2) the encouragement of massive monetary expansion (i.e.,
inflation) in America as a means to lure gold away from New York, and convey it to
sustain a steady flow of investment in Europe. By the mid-Twenties Austria (1922) and
Germany (1924) were the first countries bailed out in this fashion, and the infrastructure
of the latter was turned into a technological jewel. The modernization of Germany was
consummated by unleashing speculative fury in America, whose public rushed to
subscribe en masse reams of German securities between 1924 and 1929. Norman
interrupted this speculative frenzy with the Great Crash of October 1929 to retain control
of the last stages of the German incubation and the anticipated agony of Weimar. When
in March 1931, Austria and Germany announced their common desire to form a customs
union, and thereby a political condominium of sorts which de facto attempted to overcome the overall state of provisional fragmentation established at Versailles,
Norman’s new gold standard suddenly imploded. By having pre-arranged in the late
Twenties the constitution of a so-called ‘sterling-block’, in which London would have
drawn the colonies closer to itself to trade in a compact, self-sufficient core, the Governor
readied Britain and her Dominions in the summer of 1931 to sever themselves financially
from the rest of the world. Following a monumental charade, during which the Bank of
England feigned to be the victim of endemic financial fragility, Britain abandoned the
gold-standard in September 1931; thus she deliberately wrecked the international system
of payments, and financial oxygen was definitively cut off from the Weimar Republic.
Thereafter, while the Republic was easily torn apart by mounting unemployment, street
violence, and social dissolution, the British clubs awaited the tempestuous rise of
Germany’s reactionary and radicalized movement: this was National Socialism, whose
leaders, had indeed begun since the fall of 1931 to circle around the president of the
Reich, Hindenburg, bidding for power. But the civil and humanist forcers of Germany
resisted, and refused to give Hitler an electoral majority for the length of two additional
years, at the cost of unspeakable suffering, until, on January 4th, 1933, the London-New
York axis of high finance, abetted by 1) the duplicitous, yet cryptically pro-British
posturing and meddling of the USSR, 2) the ignoble panic of the Vatican, and 3) the blind
numbness of the SPD (German Social Democrats), cut to the chase by coming out into
the open to pay for Hitler’s accession to the Chancellery of the Reich.
1924-1933: This period witnessed the transition of Nazism from a state of quasiirrelevance
to that of champion of the long awaited German Recovery. Until 1929 it
seemed that Veblen’s forecast was given the lie, and then, suddenly, the dark horse of
Mein Kampf was thrown onto the main stage –thanks to social disorder.
And there is the difficulty. In standard textbooks, the economics behind the rise of
Nazism suffers a dreadful treatment at best, or, most often, is not treated at all, and the
reader is customarily defrauded by being hastily assured that Hitler comes ‘because of the
crisis’, no further explication being forthcoming. What of the crisis? Unless an effort is
made to unveil the mechanics of this spectral collapse, Hitler remains an effect of chance,
the social by-product of a silly financial season gone awry. And such a view is absurd.
For the student, these are difficult years since the phenomenology of this peculiar
phase, which encompasses first and foremost the complexities of 1) the Wall Street
Crash, 2) the banking crises of Austria, Germany, and Britain, 3) the severance from gold
of the British pound, or 4) the open intervention of Anglo-American finance to install
Hitler into power on January 4th 1933, has been meagerly documented, and the chain of
co-responsibility among the political and economic circles involved in these events has
remained in most instances most carefully hidden to this day. Nonetheless, the known
facts are by themselves amply sufficient to incorporate seamlessly into the main narrative
of the Nazi incubation a reinterpretation of the disquieting intermission of 1930-32. A
reinterpretation that still points to the direct and conscious manipulation of financial
aggregates on the part of Britain to obtain specific results in Europe, and especially in
From 1924 until 1933, British financiers led by the Bank of England became the
absolute protagonists of the incubation. Diplomacy took the back seat, and banking
artistry came in to play the lead in an astonishing performance begun in an atmosphere of
deluded hopefulness (1924-25) and ended in utter catastrophe (1930-33). Montagu
Norman was the symbol of this complex, and crucial interlude. Without properly comprehending the functioning of traditional banking systems
and the nature of money the key to Hitler’s rise to power may never be held. And it is the
lack of such comprehension that is chiefly to blame for discarding the decisive passage in
the promotion of Nazism as the fruit of bad luck in times of crisis. Yet in history there is
no such thing as luck –good or bad—and ‘the crisis’ does not belong to the order of
natural catastrophes, but is the mere trough of a cyclical pattern that is generated by the
relatively simple dynamics of money. And to this essential problem we now turn. What
follows is here presented as a necessary introduction to the policies and monetary
vicissitudes that stand in the background of Hitler’s accession to power.
The world is divided between those that create money and those that don’t.
It all began with gold. Precious metals have a virtue, a property above all others,
and that is their imperishability.3 So the blond metal became a medium of exchange,
recognized by all – a token for transactions, which could also be hoarded in uncertain
times, and promptly regain the markets so soon as the skies cleared. A disc of metal that
was a barter unit and means of saving at the same time. Because men would not trust
other men, gold they resolved to call money: it allowed them to petrify wealth into a ware
that transcended the bonds of their community, which they felt was always prone to
collapse. They could bury the coins in the yard.
Then, a group of individuals gradually came to be entrusted with the deposit of
such gold stashes and the bankers were born; these realized that the owners of the gold
stashes would claim for their weekly business only a small fraction of the amounts
deposited, which fact enabled the bankers to loan the gold to others, while their
legitimate proprietors assumed it still rested in the vaults of the banks. And soon the
bankers distributed notes instead of shifting the cumbrous metal, and the concept of cover
emerged: so much gold for so much more bank paper; in other words, the gold on deposit
at the bank would always be a fraction of the paper-notes distributed –the smaller the
proportion of gold to the notes, the riskier the banking policy. Against gold the bank
would offer its clients drafts and checkbooks with which to purchase things and leisure.
The banker that lent improvidently would suffer the infamous ‘run’ when rumors about
his insolvency spread amongst the depositors: these would all rush to the bank to
withdraw their moneys in gold, because it was always suspected that the bank never had
sufficient cash at hand to pay everyone. All of this was known: it was known that
traditional banking was erected upon an enormous fraud. For bankers, the trick was 1) to
make people accept the bank notes as if it were gold, 2) possess the metal itself, 3) hide it
in vaults, and 4) gradually withdraw it from circulation.
But banking was never reformed, nor were traditional banks shut down. No,
instead they ramified, fast. And it could not have been otherwise, for once money was
turned into a ware, i.e. gold, and was appropriated, it was capable of wielding an
archetypal force, unlike any other, which found its immediate manifestation in the rate of
This mere percent, which came to rule the lives of empires—what is it? A
insurance fee, a commission? Neither, both of these the banks are wont to charge their
customers separately. The rate of interest is the story itself. It is the price of the goldmoney,
it is the expression of that particular virtue, which gold possesses, and which its
owner, as a rule, employed to embarrass others. It is the power of those (the bankers) that
‘sell’ a medium that does not perish (money) to take advantage of the rest of economy, which is made of producers eager to offer for sale goods that decay –from vegetables to
housing, and tools.
Thereafter, the name of the game was to corner the supply of gold and
monopolize the circulation of money. He who controlled the money, controlled the
system itself: its activity, its politics, its arts and its sciences. Everything. And so the race
began, a fierce one, which coincided with the constitution of the ‘Grid’ –the banking
network. The Grid came to be made of a series of nodes located in the heart of economic
activity, where the accounts were managed by their secretive custodians, the bankers, and
linked by couriers.
Gold, for the most part, disappeared from circulation: it was hidden in the
underground cellars of reserve banks, which gave the economy their paper instead. And
so it was done: the gold had been relegated to whence it came –the paunch of the earth-,
and money assumed the form it should always have taken, that bespeaking its nature: an
intangible symbol. Money began to travel in the form of ciphers through numbered
accounts, while the gold, dense and cumbersome, was duly stowed underground. But this
money –these balances on numbered bank accounts— was never public money. The
money was owned from the start. One could look at it as from behind a screen: but to lay
hold of the cash the banker’s permission was required. If granted, one could employ those
filigreed checkbooks as special passes for navigating what had by the nineteenth century
become an extraordinary tangle of commercial relationships. Therefore, the rate of
interest was (and still is) the price paid for 1) employing a means that was imperishable,
when money, like everything else, should have an expiration date, and 2) for gaining
access to the proprietary Grid of the bankers.
This was merely the beginning. Then, the bankers proceeded to amass the gold,
expand paper-notes bearing their name by a multiple of the gold hoard, charge usurious
rates thereon, and impose their private, corporate monopoly to the national
How did the Grid interact with the economic organism? The underlying principle
was simple: whoever wished to gain access to the Grid –i.e., whoever needed cash—
presented the banker with a promise, a piece of paper, that is, an IOU upon which he
signed his freedom away to the extent of the amount of dollars requested plus the interest.
These were the producers’ (commercial) ‘bills’, debts secured on the producer’s capital
(house, tools, land, future income…), or even the State’s Treasury bills, debts based on
its power to tax the citizens –for the collectivity as a whole was the Grid’s client; both
citizens and State had to pay if they demanded money for daily exchanges. The banker
put money into the economy by mortgaging the life and goods of the economy – it was as
if the banks, by dint of their control of a scarce, imperishable medium of exchange, were
the pawnbrokers of citizens and State .
The promises (IOUs, debts) of parties –public and private—, whose credentials
and name passed muster were then ranged carefully in a large portfolio, which held the
bank’s assets. The banker’s operation was called discount: he took a debt worth 100,
discounted it by, say, 10 (interest), and surrendered 90 in cash. The money market was
nothing but the sum total of the Grid’s appetite for the economy’s paper: domestic or
national stocks, short-term or long-term bonds, public and private debentures of the most
diverse sorts. The more paper-promises the banks purchased from the people and the
municipalities by discount, the more sanguine their expectations of the economy’s vigor,
and the more cheaply did they sell their money: the interest rates decreased.
Decreasing rates, coupled with steady injections of bank-cash, set off the boom,
and a boom was accompanied by rising prices: this was a credit inflation. If the boom
was strong, the going rate of interest would climb to match the price rise –this was the
phenomenon of the hausse: it was an automatic mechanism implemented by banks for
sharing in the windfall profits of abundant money, and for keeping the price rise under
relative control –it also boiled down to rationing credit away from the least profitable
concerns.4 The boom lasted until the earning-capacity of the borrowers covered the
interest; but when, owing to abundance, prices after a while began to decrease, this
differential (rate of profit minus rate of interest) shrank rapidly. Suddenly the economy
recalled that the money it had been given stemmed from debts.
When producers could no longer pay interest, it was the end: the banks said
‘enough’, they recalled the loan, the concerns went bankrupt, workers worked no more,
and the cash retreated in canals of the Grid. The crisis, the misery, the strangulation of
This sort of pervasive paralysis had become a defining trait of modern financial
systems after the several banking oligarchies, each in control of its particular node along
the network, had been prompted to erect a representative body –the Central Bank— to
watch the gold and to fix the rate of interest (i.e., the price of money); of such a Bank the
private concerns partook through share-holding, and to its Court or Directorate they
would send a councilor in order to handle the delicate interaction between the Grid, the
State, and the underlying economy.
And the great societies of the West fell one by one: by the end of the nineteenth
century, each country suffered a Grid of her own, which culminated in a central organ
presiding over a credit structure arranged like an inverted pyramid, the inverted summit
being its hoarded gold. Upon this aboriginal hoard (i.e. the ‘gold cover’), along with the
mortgaged property of the world, were piled the reserves of the member banks held on
deposit at the mother institute, and upon this cover the member banks carried on their
extortionary business. The money of the big banks itself furnished a cover to lesser banks
until such leveraged expansion of check-money reached the peripheral banking branches,
which delimited the base of the pyramid whereon the economy itself was perched most
Thus much could a vein of ochre metal.
By the second half of the nineteenth century, under the famed ‘gold standard’, all
industrialized powers had a currency expressed in gold –a mark, a franc, or a pound was
decreed to be worth so many grams of gold, and notes were declared by law to be
convertible into gold at the given ratio, called the parity. National currencies were
anchored to gold, and the parity linked the several currencies in a grid of cross exchange
rates. For instance, in Britain, under the regime of the gold standard, which prevailed
before the Great War, 77 s. 10 ½ d equaled a standard ounce (11/12 pure gold)*, whereas
in the United States, $ 20.67 equaled a fine ounce (12/12 pure gold), so that the exchange
rate between the two currencies pegged to gold was 1£= $4.86. We shall bear this
particular ‘parity’ in mind.
To compete in this game, governments, supported by their central banks, had to
manage their commercial affairs and financial ventures with a view to protecting, if not
steadily augmenting, their gold stock, which to a degree was a fair indicator of a Power’s
* That is 77 shillings and ten-and-a-half pence, which was equivalent to 3 £ (20 shillings in a pound),
seventeen shilling and 10 ½ pence.
mercantile accomplishment. The valve which regulated a country’s inflows and outflows
of gold was her balance of payments.
A balance of payments was a compound prospectus, which comprised a current
account and a capital balance. The current account was a synopsis of the country’s
overall trade achievements; it looked into the mismatch, if any, between imports and
exports of tangible merchandise (that is, the trade balance), and of the so-called
‘invisibles’: shipping leases, insurance premiums, and interest payments. Indeed, the
invisibles had always been the British Empire’s forte. The capital balance, instead,
measured the difference between the influx and efflux of funds into and out of the
nation’s financial center. The chief instrument for the regulation of such flows of money
was the Bank Rate. The Bank might raise it significantly and thus attract foreign moneys
to her banks; 7-10 per cent, they said, could ‘pull money out of the moon’. Conversely,
low rates at home would prompt domestic gold-owners to seek higher retribution for their
idle funds abroad.
The obvious drawback of a policy of ‘high rates’ at home, however, was that it
strangled the domestic economy: it might bring plentiful financial gains to the financial
firms, the banking Grid and the absentee owners, but it harmed everyone else. And
therefore as a policy tool it was safe to use it only sparingly, and never for prolonged
intervals. When money was dear, investment was costly, and thus work was scarce.
As far as the movement of gold was concerned, the action on the Bank Rate was
the one relied upon to bring about the desired effects in the most rapid manner. It was
invoked, unfailingly, as the capital principle of ‘sound finance’ in times of crisis, that is
when a central bank’s cover was imperiled because herds of speculators sought to jettison
the domestic currency and exchange it for gold –i.e. a ‘run’ on the Bank’s reserves.
If a currency fell, and monetary authorities remained passive, speculators were
inclined to borrow additional amounts of that currency, convert it into gold, wait for the
currency to fall further, reconvert the gold in that currency, and gain from the extent of
the fall. And on. A most pronounced raise (e.g., from 3 to 8 per cent) of the interest rate
by the Bank could be counted on to inhibit such a practice (by making the speculators’
loans much more expensive), and, most importantly, it functioned as an instantaneous
summons for additional funds from external investors, with which to replenish the Bank’s
reserves, and for which the Bank stood ready to pay ‘extra’, i.e. the rate differential (5 per
cent in the above example).
When a country ran a deficit on her balance of payments vis-à-vis another, either
because she was buying from abroad far more than she was selling, or because capitals
had been fleeing for some time, or both, she had to settle the balance in gold with her
trading partner. When a country lost gold, the ‘cover’ of the central bank was accordingly
diminished: she would thus have to restrict the amount of credit money in circulation in
order to maintain a given, workable ratio (of gold to bank money). And what did she do?
She raised the Rate to signal that cash availability was reduced, because of the gold
hemorrhage. As a result, the exporters of capitals –all those absentees that had been
investing against the national currency by converting it into gold, and shipping the gold
wherever it might found a more remunerative yield— were discouraged, while foreign
investors found renewed interest in the domestic capital market in light of the heightened
interest. Thus gold could be expected to flow back home, and equilibrium re-established.5
Conversely, a country that found herself fattened by an excessive inflow of gold, which
had been streaming in on the wake of a persistent surplus on her balance of payments
(owing to successful exports of goods, and/or to the offer of enticing investing
opportunities), could afford to lower her rate, and be expected to trigger a massive
expansion of liquidity on her markets, as a consequence of a swelling base of gold. The is
what America would do in the Twenties. An important consideration.
These were the so-called ‘rules of the game’ of the pre-war Gold Standard.
With the outbreak of the World War One, all players, with the exception of the
United States, abandoned the gold anchor. When the European Governments resolved
upon waging war, they pressed the Grid for permission to print much paper money with
which they might outbid all the required resources away from their former employment,
and devote them to the war effort. In view of such massive inflation, which would have
made gold convertibility impossible, the gold figment was given up, but the privilege of
the Grid to sell cash and checks to the War ministries certainly was not. And thus the
patriotic communities of the world came in for another historical round of that prodigious
swindle known as ‘public finance’: the Treasury of each fighting nation printed many a
bond, the Grid discounted them against the provision of credit lines for the purchase of
munitions, the public debt billowed, and the commoners paid taxes to the warring States,
which in turn employed these funds to pay the interest to the absentee clients and
proprietors of the Grid that had loaned them the bank-money in the first place.
On the vestiges of this monumental and savage cult Britain terminated the
incubation of Nazism.
Montagu Norman and the ‘Nationalization o f the Bank’
Montagu Collet Norman was born in 1871 to a family of bankers. His father,
Frederick, was a barrister in a banking house of the City. His paternal grand-father had
long sat on the Court of directors of the Bank of England, and cunningly averted the
promotion to Governor to for the sake of aristocratic phlegm, whereas the father of his
mother, Sir Mark Collet, had been brought to accept the same post (1887-1889), and earn
a modicum of glory in the process. Montagu was sent to Eton, whose regimen he came to
dislike much. And when he reached Cambridge, he found himself out of sorts, and
dropped out of school, not knowing whither to turn. The young man needed advice.
Grand-father Collet was happy to oblige, and directed him at once to his own parish, the
respectable acceptance house of Brown Shipley. Brown Shipley was the London Branch
of the prestigious American bank, Brown Brothers & Co., which had carried on its ships
‘fully 75 percent of the slave cotton from the American South over to British mill
Thus in 1895 Montagu Norman was inducted into the banking brethren of the
Grid. The rest followed: he was brought up to love Imperial England, and her bard,
Kipling, whose Soldiers Three he knew by rote. But the family soon discovered that there
was something wrong with him. Something that had to do with his nerves. Norman would
frequently be preyed upon by sudden fits of harrowing melancholy, seizures of
despondency so unbearable that his nerves would snap, and his delicate frame would
swoosh to the floor like ballast from a shredded pouch. In the darkness of interminable
convalescences he would nurse his nerves and a ‘raging head’7 back to life, and resume
his activities thereafter. Oftentimes, hapless physicians would send him on exotic cruises
to the sunny portions of the world. And these recurrent fugues from madness to faraway
havens would punctuate from early on his tireless ministry for half a century.
At Brown Shipley he cut the figure of a ‘lonely queer man’; he was unhappy
there.8 He found the atmosphere slow and fusty, and disagreement with the partners over
the firm’s management often led to nasty altercations, for which he soon ceased to be
forgiven. Clearly, he had been conceiving a vision of some sort, and whatever it was,
Brown Shipley was too tight an outfit for giving it expression. In 1913, for desperate lack
of a manageable diagnosis he paid C. G. Jung a visit and offered the illustrious
psychiatrist his ‘raging head’ for observation. The diagnosis was issued, and it was so
terrible that Norman would never confide it to anyone. To his acquaintances he delivered
the version that ‘his brain had been found to “work wrong in a mechanical way” and that
there was “an erratic corner in it in which it makes all the trouble”.’9
By 1915, he had spent twenty years with Brown Shipley, cut his teeth with the
company, learned about the Grid –its labyrinthine sub-alleys, its keys, and its many doors
and traps— everything there was to learn, and felt, at forty-four, over-ripe for taking his
leave. And the partners, who could no longer tolerate his presence, somewhat hastened
Norman’s departure in a mood of relieved expectancy. If finally came. The war raged
then, in earnest.
By that time, some of his distinguishing traits were fully formed and appreciable
to an outsider: a ‘restless energy’,10 a ‘secretiveness, sometime of a quite absurd kind’,11
‘a formidable memory, for places, names and facts’,12 a knack for dissimulation and
acting13, ‘a tendency to over-dramatize,…beguile, and bamboozle the whole world’,14
which he could commingle with a fair dose of effusive charm that most could not resist;
and a patent, if intermittent, insanity.
For a time he took almost every job that offered; he consulted and advised in
matters related to Postal Censorship and Aircraft Insurance, until Brian Cockayne,
Deputy Governor of the Bank of England, took pity and brought him to the Court as
some kind of posh secretary without official status. Cockayne lost no time in disabusing
Norman of any hope the latter might have placed on such an invitation, which ‘would not
in any way imply that [he] would be nominated as the next Deputy Governor’.15
How the majority of the directors of the Bank of England really come to be on
the Court…must, except to a few, remain a mystery…There is an inner cabinet
called the Treasury Committee which deals with general policy and the Bank’s
relations with the Government. It is this Committee which really governs the
Bank. It consists of the Governor, Deputy-Governor, and seven other directors.
Who those other directors are is not disclosed. The Bank is really directed by a
Secret Council. 16
But then, it is not known precisely how –possibly owing to his keen
understanding of the American financial realities, which the war had brought on a path
naturally convergent to Britain’s interests—, Norman so put his knowledge and
experience to good use that he managed to make himself ‘indispensable’. The custom at
the Bank was to select among the directors a Deputy-Governor for two years and then to
elect him Governor for the ensuing two years. The circumstances of the Great War
caused an exception to be made and Walter Cunliffe, who was Governor when the war
broke out, retained that office for five years –1913 to 1918.17 And when Cunliffe bowed
out, Cockayne succeeded him, with Norman as his Deputy in 1918. Cunliffe, a difficult
man who had by no means left amongst the colleagues a pleasant memory of his tenure,
began nonetheless to voice to close relations a deep fear of his that had taken on the guise
of an obsession.
‘Montagu Norman’ he said, ‘is far and away the best person they have at the
Bank. He’ll be the next Governor. There’s nobody else in sight. But his brilliant
neurotic personality is certain to cause trouble. I feel my responsibility now for
having put him and the Bank in a very dangerous position’…‘He needs the
power just to keep going and he won’t give up until it’s too late…What I’m
really afraid of is that the Bank of England will be nationalised in Norman’s
lifetime, and my only consolation is that I shan’t be here to see it’.18
Virtually nothing is known of the important dialogue that must have intensified
among the Bank, the Clubs and the Foreign Office at war’s end, especially in view of the
financial action that needed to be taken in post-war Europe. Considering the monetary
complexity of the process that had been set afoot at Versailles, it could have no longer
been a matter of semi-indifference to the Empire what sort of professional the banking
dynasty of London was going to crown Governor. Cunliffe had spoken intriguing words.
He had confusedly sensed that what he and most of his predecessors had always viewed
as the representative collegium of an exclusive guild, could, in the capable hands of
another banking priest, more imaginative than they, be imperceptibly rearranged so as to
fulfill aims and duties, which were not going to be those selectively dictated by the inner
circle of such a guild. Not only was the Empire, because of the war, enjoining the Bank to
stand firm behind it, but it also seemed to look favorably upon the selection of a
Governor who could successfully harness the banking network of the commonwealth to
Britain’s new, far more intrusive imperial directives, without bringing excessive
disruption to the daily business of the banking community. This was most probably what
Cunliffe intended by ‘nationalization’.
On March 31, 1920, what Cunliffe dreaded came to pass: Montagu Norman was
elected Governor of the Bank of England. ‘For no more than two years’, they
immediately captioned, ‘just as prescribed by the old statute’.
With sufficiency, the doges of the Court had let him in from the back door. And
he stayed on. In five years he was consecrated pontiff of the Bank. And acclaimed,
biennium after biennium, he would come to officiate his duties as Governor for the length
of twenty-four years. The oak had found its druid, and vice-versa.
And though, at first, he was resisted –certain quarters of the City complained that
they ‘didn’t know the man’19—, he proceeded without wasting an instant to refit the ship
in keeping with the exigencies of the post-war era.
Allies: above all Norman cultivated the connection to the mandarinate of the
American Grid: J. P Morgan & Co. Of that clan, first and foremost of his trumps was the
Governor of the Federal Reserve Bank of New York (FRBNY), Benjamin Strong, whom
Norman had come to know and like in the last two years of the war.20 Strong, who
became Governor in 1914 ‘as the joint nominee of J. P. Morgan and Kuhn, Loeb and
Company’,21 was allegedly the first of a long series of preys that surrendered to the
charisma of Norman, so much so that the American banker would later be accused by the
U. S. President, Herbert Hoover, of being a ‘mental annex’ of Europe and Norman.
Style and mystique:
The reputation for mysterious god-like aloofness and for tantalizing omniscience,
which transformed the name of Montagu Norman into a legend well before the
end of the nineteen-twenties, was one which the Governor deliberately and
carefully sought…Open conflicts, …even private disagreements, were crude
methods which he abhorred…Norman developed refined techniques of his own
to impose on the City of London, [which] as a whole quickly succumbed to the
almost superstitious awe inspired by the uncanny reputation he acquired for
simultaneously knowing his own mind and everyone else’s intentions. His first
and greatest talent lay in bending to his own ideas and purposes those friends and
colleagues who had already fallen under the spell of his personal charm…Like a
human spider, he chose to spin a finely meshed web of private contacts radiating
from his office into every nook and cranny of the City…Nothing new or
significant could happen without Norman’s coming to hear of it at once…He
would then…approve or disapprove,…support or condemn. His sources of
information were unrivalled and usually accurate. He was…astoundingly wellinformed.
And with a remarkable display of condescending apologia, Norman’s biographer
achieved this esquisse of the ‘human spider’ with a bold reflection, which is a fair
instance of a long ‘scholarly’ tradition of omission and complicit muddling surrounding
the record of Norman and the Bank of England in the inter-war period :
And what was Norman if not a long-frustrated understudy destined at last to play
a major part in the drama of public life? Sure enough of his lines, he was less
sure of the plot.22
One may wonder: how can a consummate arch-priest of the Grid endure a twentyfour-
year long pontificate as the treasurer of the world’s Empire, in coincidence with the
most critical juncture of western history, without being ‘sure of the plot?’
The plot, in fact, had begun to unfold at Versailles, and Veblen’s prophecy
concluded the first act. The second act, set in Germany, was a crescendo of putschist
shenanigans that culminated through the apotheosis of national bankruptcy in Hitler’s
Beerhall coup. Presently the action had shifted to the world markets, while the German
experiment was left to simmer in a pool of unknowns. And the Bank of England had not
lain idle in the meanwhile. Norman had watched everything studiously, and paid especial
heed for some time to the deeds of his friend Ben Strong across the Atlantic.
Right at the time of Versailles, in June 1919, the United States was experiencing
her first post-war boom, an extraordinary credit inflation that had been sparked
throughout the world conflict by the massive orders for foodstuffs and supplies on the
part of the Allies. Given a plentiful gold reserve, a swelling credit base, surging prices,
and low unemployment, America’s additional credit-money had set off a feverish stock
exchange and real estate speculation, which reached its height in November 1919.23 The
gambling mania on the exchanges drove the rates for ‘money on call’* to phenomenal
heights –20 percent and higher. In London, as in other financial centers, no sooner were
such quotes available than balances were drawn from the City, and conveyed along the
banking network to Wall Street, to fetch the higher rates. In other terms, capital was
exported at once, and as the transfer persisted (British investors selling pounds to
* Loans repayable at the option of the lender or the borrower within a twenty-four hours’ notice.
purchase dollars), the pound sterling weakened vis-à-vis the dollar, which was the only
currency anchored to gold in 1919: to lose versus the dollar was to lose versus gold.
Considering that the chief objective of Britain after the ‘return to normalcy’ was
indeed to re-anchor her currency to gold, such an escape of capital and the consequential
drop of the exchange posed a serious problem. Why was it imperative to re-anchor the
currency to gold? ‘Prestige!’, replied the constables. But that was a lie, and a big one.
The Bank was in fact readying herself to plan a game of strategy so complex, and
potentially so dangerous that it required the greatest prudence and on the part of the clubs
privy to its nature. And these knew what mien to deport when it came to parry impudent
inquiries from the public into their activities: they simply would ‘never explain, never
excuse’. A maxim of which ‘Norman was inordinately fond’.24
To go back on gold, Britain gave herself five years —till the end of 1925.25 But
first, she had to tackle a few problems in her colonies.
India, whose Grid was rather rudimentary, had a proverbial hunger for noble
metals, with which debts were settled on an ordinary basis. Her contribution to England’s
war exertion had been such that, from September 1919 to February 1920, she demanded
to be satisfied in gold for her conspicuous trade surplus vis-à-vis the imperial center, thus
bringing tremendous pressure to bear upon London. And that, what with the pull from the
speculative craze from Wall Street, further enfeebled the sterling. India had tried to
secure gold during the war, but she had been sourly rebuffed. She thus had to content
herself with either silver or sterling balances.26 Of the latter India wanted no more, and so
since gold could not be had from London, she drew on her sterling balances in London to
purchase silver from the Americans. But that too, lamented the British Treasury,
weakened the pound (versus the dollar). It was time for the financial stewards of the
Empire to intervene; and here is what they did.
They conducted a two-pronged maneuver against their Indian colony. First they
struck at the silver market. They unilaterally decreed in 1920 that the silver coinage of
England was going to be reduced from a standard of .925 fine to a basic fineness of .500,
which is to say that the content of alloy in each silver coin was about to become double of
what it used to be. ‘Australia, New Zealand and later most of the principal countries of
Europe and South America followed suit’.27 So Britain, withdrew her good (fine) silver
coins from circulation and sold them on the markets at the stellar quotes of 1920. The
movement brought about immediately a precipitous fall in the price of silver. Thus the
steep depreciation of the white metal alleviated the strain exerted on sterling,* and in the
long run would altogether dispose of one channel through which India imperiled Britain’s
restocking of gold.
Simultaneously the stewards assailed the gold front. On February 1920, they
decreed unilaterally that the rupee was to be pegged at 2s, two gold shillings. In other
words, the British financial officers rendered the rupee enormously expensive in terms of
gold, deliberately. The semi-coercive measure was introduced by blandishing India with
the deceptive prospect of her buying silver, or anything else she wished around the world,
at bargain prices. And so Indian imports, boosted by an artificially strong currency, did
boom, while naturally her exports suffered a disastrous decline, which abruptly reversed
the trade balance with Britain.28 Farmers dependent upon exports suffered as they
witnessed their prices plummet to match the world level, and as a consequence their
* For far fewer pounds were now needed to purchase silver with dollars on the American market; thus the
sterling was relieved.
income sagged. The final blow was struck by way of the capital account: those absentees
in India who could afford to do so, realizing the blatant overvaluation of the rupee and its
inevitable fall, moved at once to convert their rupees into pounds, and then convert the
pounds into gold. Such capital flight (towards England to buy gold) automatically
diminished the gold-standard reserve, which the Indian government maintained in
London. To restore this reserve, sterling securities (the standard form of banking
collateral), which formed the ‘cover’ of the Indian paper-money circulation, had to be
withdrawn from Bombay and remitted to London, and thus, to compensate for the
transfer, credit in India had to be restricted. 29
Smitten once with an overvalued currency, which by depressing prices struck at
their livelihood, and smitten twice with a credit crunch, Indians were at last bereft of any
means wherewith to demand gold. Not only that: the Empire’s stewards were also
shockingly pleased to notice that their scheme had prodded a vast segment of the
colony’s population to unearth its silver and gold hoards to pay for a debt burden
exacerbated by the artificial dearness of the rupee. Indeed, it had caused some gold to
come out of the Indian soil, reach the government offices, and ultimately find its way to
London in repayment of the adverse balance of payments.30 By October 1920, India
emerged as a net exporter of gold and remained one until the last quarter of 1921.It has
been lamented that the Government of India ‘was, at best, a mute witness in this sordid
Rather devilish than sordid, the tactic succeeded splendidly. The solution was yet
provisional, and Norman had had no central part in it, though he must have known every
inside detail of the operation, which had begun shortly before he took over at the Bank,
and of which, given that India was one of his ‘most important financial interests’,32 he
impressed a capillary image in his vast memory. Norman certainly had a part, however,
and the chief one at that, in the resolution of the first post-war American boom, which
truly marked the beginning of his financial regency, and stood as the initial, crucial
instance of the stratagems he would have employed a decade later to achieve his, and the
Empire’s far-reaching goals.
From graph 1 (on p. 131), which depicts the evolution of the cost of money in
Britain and the United States, it may be seen that so soon as Norman was elected
Governor, the rate in London jumped from a high level of 6 per cent to a heady 7 per cent
–one full point above New York. This was the gambit of a policy coordinated in tandem
with the Federal Reserve in New York, which would be replicated in 1929.
When Norman smothered Britain with a Rate of 7 per cent, ‘sending
unemployment above the one million mark’,33 Strong followed suit, and the rates were
kept at that level for an entire year, so that by the spring of 1921 both countries had come
to live through one of their all-time severest depressions: in the 1920-21 biennium,
unemployment in the United States increased by 6.5 per cent; industrial production,
agricultural production and GNP decreased respectively by 19.3, 6.1, and 2.3 percent,34
while a vertiginous drop in prices of 44 per cent inscribed itself as the sharpest price
decline in the whole history of the country.
Norman justified his move by stating in his first official speech of 15 July, 1920:
‘We are striving to return to…the gold standard. A debtor nation cannot expect lower
rates than those of a creditor nation, and our rates are now below those in America’.35 So,
the swiftest means by which gold might be recaptured and preserved was to up a Bank
Rate that was already high above the rate prevailing in the ‘competing’ marketplace of
New York. ‘The unemployed’, Norman would argue in general, ‘were unemployable’.36
In Britain, under Norman, one out of ten workers would remain idle throughout the inter
Norman always affirmed quite rightly that joblessness was not his affair, but that
of the government; his task was to attend to the financial welfare of the Empire, and he
did: with the collusion of Strong, he killed the stock market boom in Wall Street,
shattered America’s real estate prices and bankrupted her farmsteads, and all that,
indeed, to check the dispersion of British money to Wall Street. The important question
that remained was why would the American banking elite go along with this British
policy of economic strangulation?
When the two governors met in December, 1920, they were pleased to concur that
the policy of making money dearer, though somewhat precipitate, had been ‘wonderfully
successful’.38 What they meant by ‘successful’ could be seen in Graph 2, which portrays
the rate of exchange between sterling and dollar. It is clearly visible that since the
accession of Norman (March 1920), England was attempting tenaciously to regain the
gold standard at the old, pre-war parity of $4.86 for the pound. Governor Strong at the
Federal Reserve was not only looking forward to that event, but he was also satisfied to
have terminated the abnormal growth of the US money supply, which since June 1919 of
post-June 1919 had been allowed in 1920 to reach unprecedented levels.39 Many have
wondered why the Federal Reserve, which had been incorporated at the end of 1913 with
the avowed goal to dampen the wild fluctuations of the cycle and prevent a generalized
state of insolvency of the domestic economy, failed so miserably its first serious test as
America’s financial watchdog in the aftermath of the war: the 1920-21 recession
appeared abrupt, brutal, inexplicable. Again, why had the rate been kept so high, so long?
In 1920 as well as in 1929, and indeed throughout the inter-war years, American
monetary policy is incomprehensible if taken out of the context of European politics, and
specifically of Britain’s agenda.
The truth was that after 1920, Strong, the American Governor, consciously
restricted credit at home to reduce significantly the volume of cheap credit to Europe.
Indeed, the stewards at the Fed coordinated with London a rate increase to 7 per cent,
which allowed both countries to pile up gold: it was in fact between 1921 and 1924 that
America underwent one of her great waves of gold accumulation, and of all European
countries England was the only one that accumulated gold after 1920.40 So then, why did
the Federal Reserve decide to store up metal at this time? What was it anticipating?
For years it had been a commonplace of monetary discussion in the United States
that the gold which came in just after the war would return to Europe when it was
again needed to support gold-standard currencies in Europe…41
The hike of the interest rate in the US was the clear indication that the time to
invest in Germany and surroundings had not yet arrived and had thus been postponed.
Norman and Strong were preparing the terrain for the great German bailout, and the
concurrent return to gold by Britain, which were going to take a few years to engineer.
Graph 1 illustrates this pantomimed chase of the Rates, in which each governor feigned
in public to saddle on the other the responsibility for the tightening. And whatever the
bankers did, which the public never comprehended, these punctually justified their
actions by blaming ‘the fear of inflation’: oracular nonsense that was seldom, if ever
questioned. And so it went: Norman upped the rate in April 1920, Strong followed in
May, and after a year of ‘wonderful success’ in attracting gold to their respective cellars,
Norman again took the lead in ‘easing the markets’ by pulling the cost of money
downwards, and New York followed.
Thus far the experience of Norman had been to re-live one of the fundamental
teachings of the old gold standard, namely, that England always had to strengthen herself
to govern between India and the United States42 –her two gold-hungry colonies; and that,
when it came to protecting and adding to the gold treasure of the Bank of England, the
most incisive impact might be achieved by causing ‘money famine’ in India (deflation),
and monetary abundance in the United States (inflation)43: i.e., by forcing the ryots to
dis-hoard their metal, and encouraging a boom in America while keeping London’s rate
above New York’s. When Germany would be cleared of her war debt, this policy would
be implemented to the full as London would succeed in staying above New York for a
protracted period of time (i.e., the duration of the five-year bail out; see graph 1).
Thus, between 1919 and 1920, the Bank of England managed to shield the
sterling exchange, and increase her gold stocks by £50 million, reaching a total figure of
£128 million (ca. 865 metric tons). 44 This amount was slightly less than what would
become the statutory cover of the Bank upon her return to gold in April 1925: £150
million (8 per cent of the total world reserves).45 In short, by late 1920 Britain’s gold
hoard had been reconstituted. Where were these additional ingots, presently in Norman’s
vaults, being shipped from? Stenographic sources mentioned South Africa, and Russia.46
Were they then a chunk of Kolchak’s treasure trove?
From this time on, the markets expected the pound sterling to become convertible
into gold. The anticipation is discernible in the ascending path of the sterling/dollar
exchange, whose initial point (the first quarter of 1920), coincides with Norman’s
appointment to the governorship (Graph 2). The ascent of the pound was interrupted
three times: in the second half of 1920, in mid-1921, and throughout the controversy on
reparations and the Ruhr Crisis, from the summer of 1922 till the end of 1923. The war
between Russia an Poland, and a sizable reparations payment remitted in dollars through
London accounted for the first two troughs in the curve,47 thereafter the fate of the pound
appeared to hinge on that of Germany: unless the latter was cleansed of her war debt,
Britain’s plan could not be set in train.
Therefore, between 1922 and 1924, the Bank of England adopted a ‘policy of
waiting’48: trade was stagnant, and hiding behind a bank rate of 3 per cent – up to 1 ½
percentage points below New York (Graph 1)—, which did not rock the British economy,
Norman kept an eye on the Reich, and let America swallow more gold, confident that in
time he would be able to lure the Yankees into expanding credit, lower their rates, and
therefore relinquish some of their copious gold. Because in these years, though Norman’s
grip on Strong was potent, the latter, acting as the Anglophile mediator between Britain’s
imperatives and Wall Street, had been incapable of prodding US bankers to launch
another inflationary boom for the sake ‘international cooperation’:49 at this time the
American financiers failed to see what they would stand to gain from pumping in new
money to invest in Europe’s uncertain environment.
Germany, as Norman well knew, was the key with which he would unlock the
So, in the meantime, while in 1922 the American Grid momentarily recoiled,
Norman, the ‘human spider’ ventured in a peripheral experiment around the German
unknown: using all his persuasiveness on Dutch, Swiss and American bankers, he
secured a jumbo loan for Austria. Thanks to it, inflation was halted, the currency
stabilized, and the economy of a former enemy country restored with exemplary rapidity.
The Chancellor of Austria… dropped a remark, which reached his ears in due
course: ‘I’d like to erect a statue of gold to the remarkable Mr. Norman.’50
Norman thus established a precedent that he would later apply to the pièce de
résistance of the plan: Germany.
By the end of 1923, three of Britain’s chief financial stratagems had been
rewardingly rehearsed under Norman’s direction: 1) a concerted (with the FRBNY),
stepwise, tightening of Bank Rates to deflate a speculative bubble and swallow gold,
followed by acute depression; 2) the overvaluation of the rupee coupled with mass sales
of silver, by means of which the scourging of Indian peasant-farmers might be relied
upon to suck into London their gold hoards; 3) a small-scale bailout, with which a former
hostile country, Austria, was shored up with foreign credits, and was thus rendered prone
to crashing violently upon the withdrawal of such Allied financial props.
In November 1923, the Reich was being purged of its debt; diplomatic prisoner,
cosmopolitan whorehouse, financial hostage and Nazi hothouse, the Weimar Republic
was presently scheduled for a great jamboree, a Five-Year-blowout at the American
manger, catered by the governor of the Bank of England. This would be the most
spectacular bailout of the twentieth century, followed by the bitterest harvest of history:
the Dawes Plan of 1924 – generally recognized as Montagu Norman’s ‘masterpiece’.51
Credits lines would be shot out from the Allied Grid, to hook onto Germany’s
brand new monetary network like grappling irons. And before the transfusion might
begin, a native adjutant issued from the great banking brethren would be specially
ordained to vigil over the harness.
The Dawes Bailout and the Hierodule Schacht
Hjalmar Horace Greeley Schacht was born in 1877 in Schleswig-Holstein. His
father William harbored a passion for America. One year before Hjalmar was born,
William Schacht had returned to Schleswig-Holstein with a basket of failures, a
membership to a Free-Masonic Lodge and the acquaintance of The New York Tribune’s
powerful editor, whom he revered, Horace Greeley –a vocal anti-slavery advocate in
Lincoln’s epoch. Of these three meager spoils, Hjalmar bore the mark of the third (in his
name), inherited the seed of second (free-masonry), and would want to have nothing of
the first (failures).
As a youth Hjalmar felt called on to ‘great things’ and his attraction to the
mysteries of the Grid, which in Germany had developed by the late nineteenth century
into a voluptuous embrace between heavy industry and cosmopolitan merchant banking,
was immediate and intense. His apprenticeship, which lasted thirteen years (1903-1915),
was completed within the halls of the Dresdner Bank, one of the great Berlin banks,
where, like Norman at Brown Shipley, he acquainted himself with every aspect of the
business. Then the war came, and he served briefly (October 1914-July 1915) as a
steward of the banking administration in occupied Belgium.52
The problem he was hired to solve was how to induce the Belgians to remit the
occupation costs in cash.53 The method Schacht applied in Belgium was a standard
banking routine, which he would systematically perform in the course of his professional
career, in Weimar as well as under the Third Reich, to squeeze money out of the Grid.
Schacht suggested using a loan. He proposed that the Belgian municipalities
issued bonds. Bonds which would be purchased by the wealthy Belgians. The cash thus
collected would go to the German soldiers via the occupied municipalities, and the
Belgian people would be counted on to: 1) ‘sell’ goods to the German armies, and 2) pay
taxes wherewith the Belgian authorities were to repay the Belgian rich. The scheme,
which was clever, would not work, however, because the Prussian generals, rapacious as
ever, had no patience, and decided to print money instead, crassly. The Belgian stint did
not have a graceful ending for Schacht: upon his return to Berlin, the banker was accused
of favoritism and embezzlement for having provided his employer, the Dresdner Bank,
with a great deal of those ‘Belgian notes of occupation’ at a significant discount. He
defended himself, lying his way out of the snag, with the complicity of many, highlyplaced
others. Case closed: ‘à la guerre comme à la guerre’.
At war’s end, along with Rathenau, he was one of the founders of the German
Democratic Party, but unlike Rathenau, he was not too discriminating in finding the
proper vehicle for his inhuman pride –provided it was the winning number, anything
would do, be it Weimar’s, the Allies’, or later, the Nazis’ bandwagon.
And so, under Weimar, he discreetly added to his ‘interests’ that of ‘a minor
official of the Allied-created German banking authority’.54 On 22 March 1922, he
submitted a memorandum to John Foster Dulles, the resourceful lawyer of the Wall Street
firm Sullivan & Cromwell that had fashioned at Versailles the cavil thanks to which the
cost for defraying Allied war pensions had been most dishonorably added to the final
reparations bill. A midwife of the German ‘re-awakening’ all along, Dulles presently
oversaw in Berlin, among many other things, the overhaul of the German Grid.
In his proposal, Schacht envisaged ‘a solution of the reparations problem’ – a
visionary draft whereby the Allies rather than loaning money to the profligate ministries
of Weimar, would extend it to a cluster of giant conglomerates specially created for the
purpose. Schacht contemplated the formation of giant industrial cartels, which would
become the recipients of American cash-credits, as well as of special exporting licenses
from the Weimar authorities that would enable them in, say, a decade to repay the
original loan, and re-launch the German economy.
It was science fiction: a plausible scenario (the cartels) constructed on unripe
fantasies (the concreteness of the reparations). And it made Dulles jubilant: it seemed as
if the Anglo-American clubs had finally found ‘their man’. Dulles forwarded the memo
instantly to Thomas Lamont, a top fiduciary of J.P. Morgan & Co. with his plaudits: ‘Dr.
Schacht is one of the ablest and most progressive of the young German bankers, and it
seems to me that his plan may contain some thoughts which may have some merit’. And
two weeks later Dulles responded enthusiastically to Schacht’s proposal: ‘If a period of
political stability could be assured, I have no doubt that bonds issued by such
monopolistic corporations as you mention would command the confidence of the
Now that Germany had blasted her currency, Schacht might be brought in to lead
the ‘reconstruction’. Out of thin air and five days after Hitler’s putsch, on 13 November
1923, he was catapulted on the public stage as Germany’s new Commissioner for the
National Currency. His task was to bridge Weimar over the transition from the old,
murdered Reichmark to the new, captive one.
Sitting behind a bare desk, and endowed with but a telephone, he called around
his brethren of the Grid day and night for a week. Finally, by refusing to grant credits to
speculators in a provisional currency devised for the transition, he signed the death
certificate of the old mark, fixing its final purchase price at 4.2 trillion for a dollar. Thus
the mark came to be stabilized at that fateful gold peg, 1$ = 4.2 gold-mark, with a net
erasure of twelve zeroes.
…The 20th of November contributed a milestone in the history of the stabilization
of the mark…56
On that very day Reichsbankspräsident Rudolf Havenstein, the governor that had
spurned the Kappists, lost to the inflation half of the bank’s gold, and succumbed
miserably before the rout of his currency, died of a heart attack. Norman had met him
earlier that year, when the German had come crawling to him for compassion, and the
human spider had found him ‘a very attractive man: but so sad’.57
But the directorate of the Reichsbank, an inbred and ‘malicious fronde of motheaten
pashas’,58 were hardly bedazzled by Schacht’s financial hokey-pokey, and had
taken no liking to him. They wanted good old Helfferich, the Nationalist stalwart,
former Imperial vice-Chancellor and Finance Minister, and chief Reichstag slanderer of
Erzberger and Rathenau –a true, perfidiously impenitent column of the old order. Yet in
Weimar, it was not the Germans that decided, but the Anglo-American clubs. Dulles
recommended Schacht to Morgan & Co., Morgan & Co. to Norman, and Norman to
Weimar’s incumbent figureheads.
During the summer and autumn of [1923, Norman] had first heard of Dr. Hjalmar
Schacht as a rising German financier with a paradoxical mind and a will of his
On December 22, 1923, Hjalmar Schacht was elected governor of Germany’s
Central Bank. And Helfferich had, by the bye, only a handful of moons left to enjoy: he
would die in a train crash in April of the following year. Decidedly, even the gods were
for Dr. Schacht. Norman could not wait to meet him; he confided to his entourage: ‘I
want to get on well with him’.60 So well, that on New Year’s Eve, 1923, he summoned
the German without ado to call at his office in the Bank on the following day, at 11:00
am; ‘I hope we shall be friends’, he told Schacht before hanging up.61 They met and
became more than friends; they became and came to be referred to as ‘twins’.
…Schacht was only a useful instrument, the means to a greater end, yet one so
necessary that Norman went out of his way to cultivate him for the good points
he might possess.62
The November 1923 stabilization at 4.2 was merely the preface to the great
Weimar bailout that would bestow upon German five years of ‘synthetic prosperity’63 –
her so called ‘Golden Years’ (1924-1929). John Foster Dulles had mentioned in 1922 the
need for ‘political stability’. And that presently signified putting an end to ‘French
madness’ –for that was how Norman viewed the French occupation of the Ruhr.64
In March 1924, the clubs, via Morgan & Co., launched a massive speculative
attack against the French currency. The clubs’ agents, posted in the several nodes of the
European Grid, gathered francs and, coordinating the tempo with one another, dumped
them on the exchanges.65 The franc plummeted; the Bank of France found herself
impotent before the raid: she did not possess sufficient means (foreign cash) with which
to absorb the dumped francs and prop up their value. After having dealt the blow,
Morgan & Co. came forth with the medicament: they offered France a $100 million
credit for six months gaged on the French gold. In late April, the U.S. Ambassador to
Berlin Alanson Houghton, wrote in his diary: ‘England and America have the franc in
their control and can probably do with it what they want’.66
On April 9 the Dawes Plan was announced. It bore the name of yet another one of
those American ‘great nobodies’ of the Morgan era: replaceable, mediocre souls with
average talents and a hard frame, itching to give History a nervous bite. Banker,
Comptroller of the Currency under President McKinley, and former chief intendant of the
American Expeditionary forces during WWI (a post he owed to his old-time buddy,
Commander-in-Chief General John J. Pershing), Charles G. Dawes offered, in the
capacity of American representative of the Reparations Commission, a foretaste of what
was coming on January 15, 1924, at a meeting in Paris.
The first step which we should take, it seems to me, is to devise a system for
stabilizing Germany’s currency, so that we can get some water to run through the
budget’s mill. Let us build the mill after we find the stream to turn its wheels.67
It bore Dawes’s name, but it wasn’t his plan –it actually ‘made him sick’, out of
modesty, to hear it said afterwards that he did it alone.68 No, in fact, the Dawes Plan was
‘largely a J. P. Morgan production’,69 directed by Norman, who proceeded at this critical
stage, by the proxy of his American colleagues, to blackmail the French. If these wished
to see their $100 million loan renewed, Morgan & Co. warned them, they had better
adopt a ‘peaceful foreign policy’ peremptorily. Which meant that France had to accede
to: 1) the hollowing out of the Reparations Commissions of any power; 2) the transfer of
all such power to a special Reparations Agent, soon-to be impersonated by S. Parker
Gilbert, a once graying bureaucrat parked at the U.S. Treasury, subsequently risen to
better fortune under the wing of Morgan & Co.; and 3) the immediate evacuation of the
In spite of its gratuitous brutality, the French impromptu in the Ruhr would be
Europe’s last semi-conscious revolt against the encirclement by the Sea Powers. When in
1924, France gave in, it was definitively over for Europe: England finally held the
continent solidly in her grip.71
As to the ‘building of the mill’, the ‘new’ Reichsbank was entrusted to a General
Council of fourteen members, half of whom were drawn from Allied countries. And by
limiting, statutorily, the Bank’s advances to the Reich to 100 million marks,* the
mechanism for transforming the State’s bills into worthless cash was dismantled.72 Next
time, if fall she would, Germany was bound to suffer the penury, rather than the
depreciation of money –which was even worse.
The gold hoard. Norman’s cherished hope was to fill the German cash-box with
English pounds, which would afford him the complete and exclusive control of the
country, but the Americans demurred: this was their ‘deal’. And Norman acquiesced
benevolently; he would explain in a letter to his mother:
The Dawes machine, while nominally international, is in practice dominated by
Americans. This suits me well…Europe is the ‘promised land’ to America; to be
possessed even without competition!73
In the end, it was agreed, Schacht’s hoard would consist of a loan of $190 million
dollars, one half of it to be floated in New York, the other half, for the most part, in
London. For that, Germany agreed to pay 7.75 per cent –2 points above the world
average. Of the Wall Street syndicate appointed to float the American tranche of the
Dawes loan, Morgan & Co. realized $865.000 in mere commissions (53 per cent of the
total).74 The money thus raised was distilled into English pounds for ¼, and gold for the
remaining ¾, that is U.S. dollars, thus reflecting the financial power ratio between the
two Powers in control of the German prey. This borrowed money would ‘cover’ the
forthcoming issues of new, post-inflation marks to the extent of 40 per cent. In August
1924, the old mark was replaced by the new Reichsmark, 2,790 of which might buy 1kg
of fine gold –this was the old parity—, and all capital controls were removed.75
The United States, who had not even signed the Treaty of Versailles, unleashed
now packs of accountants to appraise the value of the creeks, industries, forests and
meadows of Germany before mortgaging the whole country: all her bounties had at last
become collateral for the jumbo Morgan loan.76
And the reparations. The keystone of the Dawes-bailout, ratified on August 30,
1924, was the new agreement on the reparation payments. The plan lightened
considerably the obligations of Germany. Without determining their number, the
annuities were established as moderate in the beginning and becoming fixed, from 1928-
29, at a figure that was susceptible to increase later, according to a certain indicator of
prosperity.77 This plan did not supersede the German reparation obligations as established
in 1921, and the difference between the Dawes payments and the payments due on the
London Schedule were added to the total reparations debt. Thus Germany would pay
reparations for five years (1924-29) ending up owing more at the end than she did at the
The pivot of the entire contraption was the role of the Agent General, who could
at all times invoke from Berlin the so-called ‘transfer clause’, whereby the annual
reparation installment might be suspended if the strain against the mark should have
become too strong. The clause thus worked as a ‘breaker switch’,79 which was designed
to protect a steady flow of foreign investment into Germany from any interference that
might be caused by the cash transfers of the reparations. If the Agent deemed that any
* Raised by law to 400 million marks in 1926.
such transfer might have weakened the mark, he might stop the payment: clearly, the
clubs had engineered a system which minimized the risk of capital flight internally, and
thus ensured for a number of years the remittance of the American funds earmarked for
Germany’s preliminary rearmament and industrial renovation.
The final touch. To crown it all, 25 per cent of Germany’s public employees were
sacked in 1924 –unemployment would number 2 million individuals in 1926—, the
absentees were invited with little success to repatriate their exported capitals, and the rest
of the economy was inevitably subjected to a Kreditstopp.
The truth was that $190 million scarcely sufficed to jump-start the German
economy; ten years earlier, in 1913, the gold reserves of the Reichsbank had amounted to
$280 million. On April 7, 1924, not to endanger his hoard and the ‘cover’, Schacht had
no choice but to turn off the spigots. He wished he could have raised the rate of discount,
but having the latter being put out of commission because of the hyperinflation –it stood
at 100 per cent–, he could only distribute the new bank notes by rationing them on a
discretionary basis. So he gave them to the sound concerns and let the unsound ones,
along with a hefty slice of the population, go bankrupt: in the spring of 1924, business
failures increased by 450 per cent.80 But the stringency was not imposed for the sake of
harshness: there just was not enough borrowed money to re-start the economy. So, where
was the rest going to come from? The Kreditstopp was indeed decisive for it opened ‘the
door to the internationalization of the German monetary supply’: whatever was not
provided in the first installment would come by way of additional foreign loans. 81 Not a
single drop of Germany’s circulatory system was to be hers; throughout the ‘golden
bailout’ she would breathe on borrowed blood. Now that the mill was achieved, Germany
would live off ‘the stream’, as Dawes had metaphorized in his Parisian allocution.
In 1925, as a token of gratitude for his financial embassy, the clubs elected
Charles Gates Dawes vice President of the United States.
I. G. Farben and Germany’s First Five-Year Plan
And then the American blood came gushing in.
…The experts found the ship itself to be quite sound, and so reported. All that
was necessary was to float it again on a tide of confidence. Once afloat it could
bear a reparations debt burden of $625 million a year…That was the Dawes Plan,
and on the undertaking to make it work the German government borrowed $200
million gold from Great Britain, France and the United States to begin a policy of
Swarms of brokers, soliciting on behalf of the American banks, were suddenly
seen buzzing in every nook of the German establishment. Rates in Berlin were high – 9
per cent on average throughout the ‘golden years’; Morgan & Co. with their mouth
watering, packed bundles of German bonds with a view to selling them to the ‘American
public’. And these cohorts of middle-class gulls, avidly wishing to see their money ‘work
for them’ in the bank, parted with their savings to buy the German paper-promises.
It was to the American public that the bulk of the German reparations were to be
sold, and to accomplish this purpose a systematic falsification of historical,
financial, and economic fact was necessary in order to create in America a state
of mind that would make the sale of the bonds successful.83
Up until 1930, some $28 billion flowed into Germany, 50 per cent of which as
short-term credits; the Unites States accounted for one half of the total. Only $10.3 billion
was used for reparations, the rest went into many different, and interesting, directions.
Which is to say that after 1923 Germany never paid a cent for reparations out of her own
Finally, when Germany resumed to pay France the reparations, pacifying her, as it
were, with an American-bred bone to gnaw at, the Franco-Belgian troops abandoned the
Ruhr.* This initiated Weimar’s absurd cycle of the ‘golden years’: the gold that Germany
had paid as tribute after the war, sold, pawned and lost during the inflation to the United
States was sent in the form of Dawes loans back to Germany, who then remitted it to
France and Britain, who shipped it as payment for the war debts to the United States, who
channeled it once again, burdened with an additional layer of interest, to Germany, and so
In Germany, everyone and everything borrowed: the Reich, banks, municipalities,
counties, businesses and households. The money was spent on housing, industrial
machines, and public works. Weimar erected cathedrals of steel and glass, planetariums,
stadiums, velodromes, fancy aerodromes, amusement parks, modernistic morgues,
skyscrapers, titanic swimming pools and suspended bridges. Yet the world, and even the
lenders at home, inquired with their politicians: ‘why is Germany being boosted thus?’
‘She is our ally against Communism’, they replied, and the Weimar clerks hastened to
echo the party line.86 It is difficult to guess who must have been more nauseated by the
telling of this lie, whether the Allies, or the Germans themselves. Be all this as it may, the
money kept pouring in, and no one anywhere did anything to stop it. Germany was being
turned into a veritable colony of Wall Street.87
It did not take much to realize that the arrangement was a house of cards: the
moment Wall Street decided to recall its loans, Germany would plunge in complete,
irremediable bankruptcy. What next? Nobody wished to give the prospect a careful
thought. Only the fall was certain. It was a matter of time.
The whole country, politically and economically is falling more and more into
the hands of foreigners…A pin prick and the whole thing will blow up. If once
the money is recalled in large quantities, we shall go broke –the banks, the
municipalities, the joint-stock companies, and the Reich.88
But there was no tomorrow in ‘Golden Weimar’: as it gave bread and work,
money was good, wherever it came form; the SPD and the trade-unions, all led by solid
Marxists, were enthusiastic supporters of the Dawes loans.89
As for the ‘interesting’ uses of the foreign money, a substantial quantum thereof
was sold by the Reichsbank in exchange for gold to the Russian Communists themselves
–with whom the secret rearmament plans were proceeding apace—, thus affording the
Soviets access to the western market for purchases.90
* The last troops left in July 1925.
But far more significant at this time was the re-organization of the I. G. Farben
concern into one of those giant conglomerates imagined by Schacht in his draft to John
Foster Dulles in 1922.
The story of I. G. had begun, in the early 1900s, with colors (Farben, in German).
The dyestuff industry had consisted then of a nucleus of venturesome combines that had
invested heavily in the quest for color and pigment. BASF, the boldest of the group, and
‘a trademark surrounded by awe in the corporate realm, mastered early on reds and
yellows. But unlocking the secret of synthetic blues was more troublesome’.91
Eventually, after the mystery of synthetic indigoes had been solved, and added to a long
list of ground-breaking discoveries, featuring, among others, Fritz Haber’s fixation of
nitrogen and lethal experiments with chlorine, which had also been funded with BASF
grants*, the so-called Big Three, BASF, Bayer and Hoechst, joined by a few other
satellites of Germany’s intimidating chemical pole, had merged into a cartel in 1916.
They had formed thereby a loose, but sweeping amalgamation congruent with Rathenau’s
office for war resources, which drew therefrom its leading assistants.92 ‘The structure
came to be known simply as I. G.’: Interessen Gemeinschaft (community of interests).93
It stood as ‘an industrial colossus…that dominated the chemical business of the
world…Few universities could match the profusion of Nobel Prizes earned by its
At war’s end the drafters of Versailles had instructed the Allied inspectors to
leave I.G. in peace.
Unlike the French, the Americans and the British were careful not unduly to
upset the I. G. officials. Assurances were given that the investigators would not
‘pry into the secrets of commercial value in times of peace’. No technology
would have to be revealed nor questions answered unless they concerned
weapons or military applications. ‘This reassurance’, reported a U. S. Chemical
Warfare Service officer, ‘established a more or less cordial relationship between
Indeed, when the questions touched on military patents, not only did the Anglo-
Americans not reveal anything either, but they even actively collaborated with the
German princes of alchemy.
Thanks to the bailout and the ‘capital liberalization’ of the Dawes intermission,
the six concerns of the I. G. cartel, desirous to increase market share in the world
markets, finally resolved to coalesce into a single pool of know-how and financial might.
‘The fusion took place on December 9, 1925. The companies were merged to become
Internationale Gesellschaft Farbenindustrie A.G. —or I. G. Farben, for short’.96 The
monstrous consolidation followed from the dream of its leader, Carl Bosch, to liberate
Germany from depending on foreign oil wells.
Were these not the days when the great cannon-maker, Krupp, whose assembly
lines in the Urals and near Leningrad were clangoring at full throttle, rented discreetly a
suite in Berlin around the corner from the Defense Ministry? A suite where his best
engineers might design in tranquility the weapons of mass destruction of the future, while
the top brass living next door draft mobilization plans that called for a sixty-three division
* See Chapter 1, p. 34.
army? 97 It was thus a certainty: ‘in the mechanized war of the future the need for liquid
fuel was going to be astronomical’.98
For the purpose, the alchemists of I.G., concocted a marvelous process, called
hydrogenation, whereby coal, of which Germany held abundant supplies, might be
mutated into oil. At this time, BASF had performed the transformation up to half the
weight in coal. Therefor Bosch would be awarded the Nobel Prize, ‘the first engineer so
The only way to make the dream come true, Bosch reasoned, was to draw
America’s top petroleum trust, Standard oil, into some type of alliance, with which the
great corporation from New Jersey might be made to shoulder the cost of Farben’s
research and development of synthetic fuel. After years of mutually fascinated
cooperation, especially on the part of the Americans, the accord with Standard Oil was
sealed in 1929. In exchange for the world rights for the hydrogenation process, with the
exception of Germany, Standard transferred to I. G. $35 billion in Standard oil stock.
December 1929 witnessed the creation of a joint venture subscribed by I. G. and Standard
Oil, for the mutual exploitation of precious patents and the manufacture of synthetic oil,
named American I.G. Company, on whose board sat a few of America’s great captains of
industry and business: Edsel Ford of Ford Motor Company; Walter Teagle, head of
Standard, and Director of the FRBNY; C. E. Mitchell, chief of National City Bank, and
Director of the FRBNY; and Paul Warburg, first member and creator of the Federal
Reserve Board, and Chairman of Manhattan Bank.100
‘The full story of I. G. Farben and its world-wide activities before World War II
can never be known, as key German records were destroyed in anticipation of Allied
victory’,101 but there are sufficient testimonies to suggest that German-American
technical and military collaboration, shielded by complex corporate contracts, hosted in
the ‘neutral’ nodes of the Grid (such as Holland and Switzerland), went on throughout the
Thirties, and well into the duration of the second world conflict.
Standard Oil [will keep] its cartel with I. G. Farben alive, war or no war…A
Standard official said:…‘Technology has to carry on…’102
During the second world war, I. G. would provision and supply the Nazi regime
with the bulk, if not the entirety, of the following essential staples: synthetic rubber
(100%), dyestuffs (100%), poison gas (95%), plastics (90%), explosives (84%),
gunpowder (70%), aviation gasoline (46%), synthetic gasoline (33%), not to mention the
manufacture of Zyklon B, the canned cyanide employed to annihilate of the camps’
inmates, which was produced by I.G. Leverkusen and sold from the Bayer sales office
through an outfit called Degesch.103
An American post-war committee, drawn from the senate and chaired by Harley
M. Kilgore, a Democrat from West Virginia, after gaining a fairly deep insight into the
ramification of American collusion with the enemy, and not without edulcorating to the
point of distortion the obscenities found therein, framed its conclusion according to what
has since Versailles become the customary apologetic template of the Allies:
The United States accidentally played an important role in the technical arming
of Germany…Neither the military economists nor the corporations seem to have
realized to the full extent what that meant…Germans were brought to Detroit to
learn the techniques of specialized production of components…The techniques
learned in Detroit were eventually used to construct the dive-bombing
Thus, the meager evidence accessible suggests by itself that the American
collaboration with the German military-industrial complex, through Weimar and the Nazi
regime, was indeed intense and pervasive. The ‘Dawes machine’ inaugurated this
determining phase of the incubation, in 1924, when the dynasts of the American Grid,
egged on by Norman, set out to divide amongst themselves in a rational fashion the bond
sales of Germany’s giant industrial axes.
Morgan & Co. and Rockefeller, via Chase National promoted I. G. Farben and the
German chemicals on Wall Street. Dillon & Read placed $70 million worth of debentures
on behalf of the coal and steel concerns, such as Alfred Thyssen’s Vereinigte Stahlwerke,
which would serve as a Nazi slush fund,* and one of the prime founts of pig iron and
heavy plate for the Third Reich. V. A. Harriman & Co., which merged with Brown
Brothers in 1931, sponsored the electro-technical conglomerates.105 As shall be seen, the
revision of the Dawes Plan, the so-called Young Plan of 1929, would be named after a
General Electric Co. officer, Owen Young. Young would be appointed thereafter as one
of A.E.G’s foreign directors. A.E.G., Germany’s General Electric, the great Konzern
founded by Rathenau’s father, received under the Dawes Plan at least $35 million worth
of loans. By 1933, at which time there was irrefutable evidence that it financed Hitler, A.
E. G. was owned by its American counterpart G.E. to the extent of 30 per cent.106
No accident: Germany was being gradually, but steadily, rearmed, in keeping with
the dictates of Versailles. Since 1924, the Anglo-Americans equipped what would
become Hitler’s war machine through well over 150 foreign long-term loans contracted
in less than seven years:107 the more thorough and elaborate the fitting, the more
devastating the German Army, the bloodier the war, the more resounding the foregone
victory of the Allies (and the defeat of Germans, who were being set up), and the more
sweeping and permanent the Anglo-American conquest. There was neither greed nor
treason behind the Dawes bailout, but solely the long-term objective of fitting a
prospective enemy with a view to bringing him down in a fiery confrontation – a
confrontation to be orchestrated at a later stage.
With these American loans Germany was able to rebuild her industrial system to
make it the second best in the world by a wide margin…and to pay reparations
without either a balanced budget or a favorable balance of trade.108
The great German machine, having been raised on borrowed capital to be the
most powerful and the most efficient in Europe, was running on borrowed
gas…Why were the Germans putting their own gas out of Germany for safekeeping,
in the banks of foreign countries?109
The Dawes bailout was in fact Germany’s first Five-Year-Plan (1924-29) in the
view of the forthcoming world war.
Throughout this critical quinquennium, Norman had been busily at work: to
sustain at such a pace the flux of American money into Weimar had required of the Bank
of England such financial acrobatics that only he, in the world, could have performed.
* See below, p. 298.
For Norman brought the foreign money in, and, when it was time to alter the political
physiognomy of Germany, he took it out.
Britain’s Grand Charade to Crash the New Gold Standard
Much underwater paddling had gone into opening the gates of the American
feeder to Germany, and most of it conceived, organized and effected by Montagu
Norman. The succession of his maneuvers punctuated each salient date of the inter-war
period: he was the uncontested and unrivaled architect of Europe’s downfall; the priest
that expedited and turned to account the obscene degeneration of European civilization.
With World War II, the Anglo-Americans came, saw and won, but before they did all
that, Montagu Norman schemed –and his peculiar doings, unjustly misreckoned,
remained so far the most astonishing feat of the great Anglo-American siege of the Landmass,
which had begun with the First World War.
As Germany underwent the Dawes transfusion, the path for the Allies was
cleared: the mark was being made fully convertible into gold, and sterling might
presently resume its ascent towards the old parity of $4.86.
So, in April 1924, the Dawes Plan, which in fact postponed the gravamen of the
reparations transfers for some years, was announced, and from that moment onward, the
pound rose without ever faltering again (graph. 2). In May, J. P. Morgan & Co. and the
FRBNY communicated to Norman and associates that they were ready to grant their
British counterpart generous lines of credit for defending the gold convertibility of
sterling when it would come, which, they all anticipated, would be in early 1925. The
British Treasury haggled a bit, and in the end they all agreed, reassured and confident.
And then, the Norman/Strong tandem resumed its favorite game, that of the Bank Rates.
In July 1923 Norman had raised his rate from 3 to 4 per cent, thus sending the
signal to New York that London was ready –ready to pull gold (graph 1). It took some
time to allow the German debacle to run its course and set up Schacht for the bailout, but
finally, New York responded by lowering its rate by two half-point reductions from 4 ½
in May 1924 to 3 percent in August. The positions were inverted; New York was
presently below London. The plan, of course, was to attract lenders in London, the
expensive money market, and borrowers in New York, the affordable one. The switch
was of decisive importance. New York initiated thereby a policy of ‘easy money’: she
swallowed at once conspicuous amounts of private and public paper-promises and
injected cash in the economy, which was magnified by the lax credit routine of the
commercial banks.110 America was flush with cash, and London, the tighter market,
pulled gold like a magnet. Thus was sparked America’s phenomenal stock exchange
mania of the Roaring Twenties: it started in the late summer of 1924 to give Norman a
hand in attracting gold to London.111
But it was not until the great Dawes loan was floated in October that sterling
began its final and decisive convergence to parity. The unbroken improvement from
October (4.43 dollars per pound) to April (4.86) was made ‘in the face of formidable
adverse conditions’: buttressed by the American Grid, the pound reached the yearned
gold parity on 28 April 1925, even with a ‘strongly negative merchandise balance’. It was
in fact the invisible balance (capital imports) that did all the work in lifting the pound to
the gold plateau.112 Norman had had his way; there were no ‘rules of the game’ other than
the particular ways of bending the Grid.
And so it was finally done: Britain returned to gold, at 1£ = $ 4. 86. Over thirty
countries followed her example; the City of London was once more the clearing center of
Upon closer inspection, however, a few attentive scholars came to notice that
England’s new ‘gold standard’ was rather peculiar. First of all, gold virtually disappeared
from circulation:113: the note-holder could not under the terms of the new act convert his
Bank of England note into gold at the Bank. And the latter was obliged to sell gold only
in amounts of 400 fine ounces, that is ‘for…not less than $8268 worth at a time’:114 gold
was quietly dropped out from the public traffic, and confined to a special inner circuit
accessible only to ‘the big players’. What was Norman after? By excluding the possibility
for the economy to transact in gold, and, most importantly, hoard it in times of crisis, he
was removing from the system a buffer, which could have rendered its actions and
reactions much more sluggish. Norman was calibrating the system to play a fast game.
Second, he leveraged this new gold circuit greatly by imposing upon all central
banks presently tied to it to keep part of their reserves in English pounds, which was
presently anchored to gold, and which London would proceed to invest on their behalf.115
On the one hand, this device of the gold-exchange diluted enormously the ‘cover’
for the standard as a whole, and thus predisposed the world system to an unprecedented
inflationary swelling, and on the other, it preset the game for a catastrophic chain
reaction, which should have started as soon as either of the two gold-currencies, the
pound or the dollar, should have suffered a run for having been over-extended: if, for
instance, London were to lose much gold, the pound would collapse, and if the pound
collapsed, as most satellites were forced to hold large amounts of sterling as ‘cover’, the
entire circuit would disintegrate.
Norman was playing for high stakes: he demanded a swift and momentous
response from the set-up; he was literally assembling a time bomb, and the world,
unawares, looked distractedly the other way.
The banking structure of the modern world with its huge pyramid of deposits
nominally convertible into gold on demand, and actually represented by assets
that cannot be liquidated, is full of dynamite116
Third, the parity itself. No doubt, the pound at $4.86 was expensive. And Norman
knew that well. Sterling at such a level was obviously not likely to pull British exports
through, though it might certainly be counted on to strengthen England’s vital produce
imports and, far more important, her invisibles: overseas investment, shipping freight and
financial services, all of which were denominated in sterling. Having conquered anew the
position of world clearing center, London and the Empire might confidently expect to
derive a rich source of revenue from the forthcoming magnified flux of foreign moneys in
search of high interest –hence the importance of keeping the interest rate in London
above New York’s.
At last, in 1925, after a full decade in the temple, Norman was on top of his game;
most of the industrialized world was on gold now, and the great financial carousel,
strapped with dynamite, might be spun in motion. Truly, Norman had impressed the
world; building against all odds this new, awesome machine that seemed to have brought
the chances for world prosperity and cooperation to levels hitherto unimaginable. And he
His persona, as the events, corridor rumors, and legends had come by this time to
incise it in the public fantasy, was a fair match to the enigma of his nature. Completely
wedded to the Empire and the adored Bank –‘his sole mistress’, as he said—117 he led a
veritable monastic life, without company and friends worthy of the name.
He had some fundamental dislikes…The French, Roman Catholics, Jews…An
innate ruler with a profound distaste for so-called democracy…118
Norman was a strange man whose mental look was one of suppressed hysteria…
When he rebuilt the Bank of England, he constructed as a fortress prepared to
defend itself against popular revolt, with the sacred gold reserves hidden in deep
vaults below the level of underground waters which could be released to cover
them by pressing a button on the governor’s desk. For much of his life Norma
rushed around the world in steamship, covering thousands of miles each years
traveling incognito…under the assumed name of “Professor Skinner”…119
This was the individual that the French had to reckon with in 1926. Because he
had laid eyes on them. Presently, the achievement of his plans had to pass through the
French tangle. France was, in fact, the last of all big players, who was still not hooked
onto the newly assembled gold standard.
Like Germany, France after the war was shaken by a violent inflation and an
extraordinary flight of capital. In the early Twenties, because of the perennial uncertainty
surrounding the German reparations, and the organized speculation against the franc at
the time of the Ruhr invasion, the French absentees exported en masse a fabulous
treasure, which they remitted for custody to New York, and especially London. Statistics
measuring the magnitude of the outflow are as usual unavailable, but what seemed a
certitude among bankers in the know, was that it was far more significant than what had
been the German export of capital a few years previously.120 Now, realizing what fugitive
wealth had done to Germany in 1923, a few experts, lucid enough to appraise the
situation for what it was, took fright and found the time to fire warnings to the outside
world. On September 10, 1926, one of such dispirited omen-mongers, Swiss banker Felix
Somary, put 2 and 2 together in a public lecture hosted by the University of Vienna.
‘We now find ourselves’, he began, ‘at a provisional state of rest. Yet this is the
calm before the tempest. How can we Europeans cope with a power such as the United
States, who wields a surplus both on her trade and capital account? The only way out is
for America to keep on extending short-term-credits. Never has an economic cycle
initiated under such hazardous conditions as the bailouts of Austria and Germany.
Beware, America is the strongest protectionist of the world. She will bolt her door when
Europe will come knocking with her wares for export. And if today the United States
must lend to keep the system afloat, this cheap money policy cannot but usher in a
Gargantuan stock exchange bubble. What if all the French refugee capital, which is now
being invested from New York by its American custodians, is suddenly repatriated? That
will set off the collapse. Therefore, only the immediate withdrawal of French funds from
their foreign shelters and the peremptory abolition of the new gold standard can prevent a
stock exchange boom from developing. For if both movements were to unravel during an
upswing, or in the midst of an American crisis, the dimension of the catastrophe that
would befall Europe would be unimaginable’.121
The great 1929 Wall Street crash was thus fully anticipated by a common
practitioner of the Grid in 1926. Which is to say that Norman could by no means have
failed to envision the eventuality himself, especially in the light of the 1920 crunch,
which he had wrought.
As for the French expatriated capitals, timing, as Somary intuited, was of the
essence. Norman, who was keenly alert to the potential of such funds, could scarcely
afford to yield to France any form of control, albeit a tangential one, over the fate of
Germany, who was now fed vital money from America. A mass recall of French gold
from London and new York, on terms other than Norman’s, could have indeed wrecked
the new gold standard, and swept the momentum from under the Wall Street lending
bonanza. So, the money had to be repatriated to France immediately, but through
London, and in ways congruent with the Governor’s plans.
At once, in the summer of 1926, the Empire dispatched its human spiders to spin
the web round France.
On July 29, 1926 at eleven sharp, Norman crept in the Banque de France to face
his opposite, Emile Moreau. The Frenchman was somewhat uneasy; he had been told that
Norman was ‘très dur en affaires et très rusé’: Moreau knew he was coming face to face
with the ‘best governor in the world’.122
Not before speaking ill of the Jews, yet passionately of his Bank and Great
Britain, to whom he wished the domination of the world, Norman urged Moreau to join
the ‘Bankers’ club’, by readying himself as quickly as possible to convert the franc at a
fixed rate under the new gold standard. 123
A few weeks later, in August, the Agent General for the reparations, Parker
Gilbert, met the French President, Raymond Poincaré, and the two cut a deal. For the first
three years, the installments which France owed to America for the war credits, would be
subtracted from the larger Dawes payments which Germany presently owed to France.
Britain and America nodded. On the sly, the three parties had thus revised the Dawes
Plan to link war debts and reparations.124 Poincaré was triumphant –the accord would
keep him in power: he had made France safe for the investors again.125 The Banque was
advised to prepare itself for a major absorption of francs from abroad.
All of a sudden, in the second half of 1926, a wave of capital returned to the
French motherland. The Banque de France swallowed these foreign moneys and printed
francs galore, in exchange. Its foreign reserves swelled to extraordinary heights. The
franc left the doldrums behind, appreciated rapidly, and became the object of a frantic,
international speculation, which was systematically organized from London. The latest
rumor was that ‘speculators from Berlin’ borrowed pounds in London, and sold the
pounds in Paris for francs. Paris deposited these pounds in London, where they were lent
anew, and so on.126 But the truth was that the chief speculators on the franc were British
financiers.127 Which leads one to infer that Norman, ‘the trusted confidant of the whole
City’,128 was, in fact, allowing the London market to feed the French with oodles of
Feeding the French, until these in May 1927, with their mouths full, and fearing a
disruptive appreciation of their currency, demanded to convert some of their enormous
sterling reserves in gold. And that was exactly what Norman was waiting for.
Though his biographers were always fond to recount that there was ‘calculation in
the face…[this] character with a thousand and one disguises…chose to wear’,129 the
reader, however, is never told on which occasions Norman was supposed to have
performed these extraordinary feats of dissimulation. There is reason to surmise that May
1927 was one such remarkable instance.
Feigning unspeakable distress at the French conversion of £1.5 million into gold
on 19 May, 1927, Norman rushed a week later to Paris with an adjutant to confront
Moreau. The latter rehashed peevishly his argument against speculation, and defiantly
dug his heels in by telling Norman that France was playing by the book, and that such a
conversion (of sterling into gold) was the least Britain should expect since her imperial
return to gold two years ago: London, sentenced Moreau, should now raise its rate to
defend its gold. Norman retorted that there would be a public outcry if he did that.130 The
British Governor then proceeded to explain that London’s monetary market was a high
precision mechanism, perfectly gauged to lubricate the British economy; any abnormal
tampering with this device would be insufferable; an unwarranted and disproportionate
withdrawal of gold from London would topple the entire system. Moreover, Norman
went on, it was impossible to spot the source of the speculation; speculators were
faceless: Paris had power over London, Norman declared, but London had none over
third parties. Finally, with such high rates in Paris and the continual allurement of an
appreciating franc, capital affluence to France was simply unstoppable. Paris, Norman
concluded, should lower her rate.131
Framed to inflate the French Governor’s self-importance, and corroborate
France’s newfound feeling of financial allure, the lines of Norman were cleverly crafted,
and effective. He had told Moreau that England was at France’s mercy. Which was not
true, as wasn’t true a single word of his entire act.
Officially France and England had reached a stalemate in May; neither party
agreed to alter its rate, though they signed a truce of sorts whereby Moreau, sufficiently
cajoled, forbore for the nonce to withdraw more gold from London, and directed his
requirements to New York, whereas Norman willingly tweaked upwards by an eighth of
a percent point some rather insignificant short-term rate in London: ‘I shouldn’t want to
throw the pound sterling in the dirt’, Moreau signed off on his diary, gloating and
diligent, ‘that would earn us the justified reproach of Ben Strong and the Americans’.132
He had been completely fooled.
From the start, Norman operated deliberately with a ‘very slender gold reserve’,
that is, with a cover rarely larger than 2-3 per cent of the country’s total money supply.133
With a gold base spread so thin, any incoming monetary mass of substantial magnitude,
such as the repatriation of French capitals, likely to be satisfied, at least in part, in gold
might be assuredly counted on to rattle the system. Which was precisely the effect
Norman sought from the sudden reversal of French money transiting in London. He was
the one encouraging the speculation against the franc; besides, he felt neither
awkwardness in cohabiting with 1.2 million unemployed, nor inhibition in raising the rate
to 7 per cent when necessary: he was afraid of no riot. All of which bespoke, instead, of
his intention to obtain something altogether different from this maneuver.
…He somehow managed to get a great number and a great variety of people to
do just what he wanted them to do, although very often they did not want to do
it…He could mobilise, in effect, an army out of the ground, and he did so, time
And that was to persuade his companion Benjamin Strong in New York to
postpone the tightening that was in the offing, the measure being necessary in the United
States to cool the bustling activity on the stock exchange, which of late had become too
audacious. Norman presented the stalemate with Paris as a question of life and death for
the new gold standard, and begged Strong to come to his succor. A conference was
immediately arranged in July 1927 in Long Island; Norman, Schacht, Strong and Charles
Rist, former Law Professor and second-in-command at the Banque de France, attended.
The result was, at first glance, a rather inconspicuous dip in the Federal Reserve’s rate
from 4 to 3 ½ percent in August of 1927. New York was one full point below London
But this apparently innocuous cheapening of money in New York, coupled with
more paper-swallowing on the part of the Federal Reserve was the turning point of the
inter-war period. This second boost, compounded with the much ampler, and still
effective, inflationary push of late 1924,135 would trigger Wall Street’s infamous wild
ride to the Faustian heights of September 1929.
It appears the Federal Reserve Board has permitted a speculative spree, which
was already out of hand by August 1928, to grow progressively worse until July
To help Britain ‘survive’ temporarily the contrived ‘French shock’, America,
through cash injections and the mechanism of the interest differential, released excess
gold reserves (overall ca. 17 per cent) from her enormous chest once more.
In the first half of 1925 [the United States] lost 140 million dollars worth of gold,
and in the 14 months which ended in May 1928, [she] lost nearly 540 million
dollars. The first outflow furnished much of the basis for the new gold currency
of Germany and the second for that of France.137
The aim of this British game of ricochet was always the same: namely, to keep the
‘Dawes machine’ running. The American policy of cheap money renewed in August ’27
went in fact to sustain the continuous flotation of German securities in New York, and
strengthen thereby the Reichsmark in terms of the dollar.138 Another brilliant move deftly
And so the Anglo-Americans replayed what they had done in 1924: the borrowers
borrowed money in New York, the cheaper market, and wired the proceeds to London to
earn the higher rate. U.S. private short-term funds moved to London in considerable
volume. Norman’s gold reserves were plenteous again, and until June 1928, the sterlingdollar
exchange averaged the highest for any of the years 1924-1931.139 American gold
had started to flow in since the previous December. And certain interests in the United
States, including the Federal Reserve Bank of Chicago, protested: they did not understand
why New York had to overheat the American economy for the sake of Norman –for no
amount of mystification, anywhere, succeeded in convincing anyone that it was
otherwise.140 It was at this time that Benjamin Strong earned that semi-insult of being the
‘mental annex’ of the British Governor.141 Yet for all of the hue and cry, the step was not
The relief brought to London, however, was merely temporary. Already in July
the tide began to turn. It so happened that, because of the revamped speculation, short151
time money on Wall Street was shooting to levels so recklessly high (20 per cent) that the
funds that had hitherto been flowing from New York to London and the rest of Europe,
were being recalled in New York by the fatter baits. And the dismal news for Norman
was that, therefor, money was being pulled out of Germany as well.
In brief, the world economy was back to the late 1919 scenario, yet cumbered by
a mass of credit several orders of magnitude greater; it barreled along like a file of
overloaded wagons, pulled by the Anglo-American locomotive along a roller coaster
without any safeguards.
The Federal Reserve had a mind to kill the euphoria softly, by accompanying it,
as it were. The American bankers set out to ration credit gradually, hoping that the bubble
would eventually run out of steam. Thus, in July, the Federal Reserve in New York raised
the rate to 5 percent, half-a-point above London, but well below the market rates
prevailing on Wall Street. With this move, the game changed radically; the June 1924
switch between London and New York was reversed (graph 1). As in 1920, this was for
Norman the summons to intervene peremptorily: the crash had to come as soon as
possible, or else sterling, and the Empire’s policies, would be weakened to the point of
impotence: Norman could not watch Wall Street send Britain into a spin by sucking out
of it all the gold amassed previously in London.
At this time, in late 1928, things worsened for Britain; she kept losing gold to
Wall Street, and, again, to France. Norman wrote to Schacht: ‘The Jews continue day by
day to take away our gold’.142 As if it hadn’t been enough, his partner Strong died in
October of tuberculosis.
It yet took Norman the time to wink, before George Harrison, Strong’s successor,
fell for him; not long after the replacement, Harrison’s fellow directors could already be
heard hashing that the new boss ‘lived and breathed for Norman’.143 The British
Governor courted his new prey immediately, entreating him to engage without delay in
that chase of the Rates that Norman and the former Fed Governor had run in 1920: i.e.,
to prick the bubble for the sake of Britain’s gold. And as proof of his resolve, Norman
took the plunge and raised Bank Rate on February 7, 1929, by a full point to 5 ½ per cent
(graph 1), awaiting immediate reaction in New York.
But New York lingered. There was a communication breakdown within the
American Grid; Harrison and the Anglophiles in New York wanted to play the game and
step the rate up forthwith to 6 per cent, but the seven-member Federal Board, a separate
supervisory board presiding in Washington, seemed to have lost all sense of New York’s
doings and intentions. Between February and August 1929, fearful of affecting business
unfavorably, the Board denied for ten consecutive times New York’s request for raising
the Rate to 6 percent.144 Finally, on August 9, 1929, in a delirious convergence of policy,
inspired by diametrically opposed objectives –the Board interpreting the measure as an
expansive and accommodating gesture towards the market, and New York willing it
instead as the coveted, and restrictive response to an anxious Norman—, the Federal
Reserve finally set its rate at 6 percent.
At last, with the green light from New York, on September 26, 1929, a week after
the all-time peak for share prices,145 Norman raised his rate to 6 ½ percent and yanked the
air out of the bubble. ‘Then, suddenly’, wrote the Financial Editor of the New York
Times, Alexander Dana Noyes, ‘the great decline began…No one seemed able to explain
the source of the huge selling orders which poured in…Possibly London…started
indiscriminate foreign selling’.146 London sold and gold flowed back to England.
It is certain that …the raise of the London bank Rate to 6 ½ percent…hastened
the downfall of speculation in the United States…[and] precipitated the stock
exchange crisis and slump of October.147
It was done: Norman arrested America’s long season of profits, 1914-1929,
fifteen years of avid dreams and opulence, suggested by Britain, and inspired by the
ravage of Europe. Afterwards the rates of London and New York, like twined serpents in
a caduceus of folly, came rolling down as well (graph 1): the world economy was
crippled by debt contracted during the boom at exorbitant rates, and the central banks’
crunch had so depressed prices as to send the money scampering underground: it was
locked up in the vaults –the rates decreased, banks lent no more, the Grid shut close. A
crisis, the likes of which no one had ever experienced, had begun. Begun as a mere
repetition of the Norman/Strong sabotage of 1920.
The ratio of gold to total credit in America had sunk to less than 7 per cent in
April 1929, the lowest point in her history; when the crash hit her the paralysis was
extensive148: through bank failures the American elite had burnt a third of her Grid to
play this British game. It would cost the United States ten years to come out of the
Depression. The Dawes bailout, barring a momentary lending spurt to a comatose
Germany in 1930, was finished: Americans wanted their money back. Suddenly and
completely they ceased to buy German securities.149
Thereafter, Norman waited. It was a slow process of strangulation that he
observed at home, and especially in Germany. There, the clutches of the Dawes machine,
without the ‘stream’, had brought political despair to such a pitch that in March 1931
Germany and Austria, Norman’s two bailed-out creatures, announced their intention to
unite into a customs union (Zollverein) as a means to overcome the commercial drought
of Middle-Europe. But on May 11, Austria’s leading bank, the Creditanstalt suffered a
run and, with it, the whole Austrian banking system, collapsed. How it collapsed remains
a mystery to this day. The documents available mention some obscure and ‘intricate
system of cross-deposits between [the Austrian Grid] and a number of American and
British banks’, which had been set up in 1929 –‘tainted money’ in the words of Norman.
What the role of such a system might have been in this connection is still unknown.150
Three weeks later, the rupture spread to Germany. The Reichsbank accused foreigners of
an external run, while the Federal Reserve laid the blame on the Germans for exporting
their money. Either way, the money fled, and Norman knew that Britain was next.
He had been planning and preparing for this fateful juncture a long time since –at
least for the six years that it had taken him to assemble his new gold standard. For indeed
it had been constructed for self-disintegration; the aggregate of his Bank’s policies
throughout this period proved it irrefutably.
Whenever he had lost gold, Norman was the first to violate the ‘rules of the game’
by expanding the money supply, instead of restricting it:151 between 1924 and 1929, a
significant percentage of the foreign moneys that Norman had attracted with the trick of
the interest differential between London and New York, was taken in by the London
joint-stock banks and re-lent to Germany continually in excess of their resources, with
the full knowledge of the Governor.152 In the process, the London banks relaxed their
cover and made it twice as thin as customary. An inquiry into such inexplicable
‘oversights’ was solicited after the 1931 rout, but nothing came of it.153
Shortly after Germany’s complete financial collapse, in mid-July, a run was
launched against sterling.
On the 13th an ad hoc committee set up to report on the health of British banking
completed its work: the ‘Macmillan Report’, which bared the lewd foreign indebtedness
of British banks, was released with suspiciously good timing and no explanation
whatever of the ‘large figures’ published therein.154 Alarmed by the Report and the crisis
in Berlin, the central banks of France, Holland, Switzerland and Belgium liquidated
between the 16th and the 29th a small part of their bulky sterling balances in London, and
took away with them £32 million in gold –about 20 per cent of Norman’s stock. What
followed from that moment on was a tale from an alien realm.
Harrison cabled Norman immediately; ‘Can you throw light on this?’ he asked. ‘I
cannot explain this drop…’, answered Norman.155 The situation, to say the least, was
serious, and it called for drastic measures. Such as tightening the rate to 7, or 8 per cent,
as Norman conceded on July 23, when speaking again with Harrison over the phone.156
So what did the Bank of England finally opt for? She raised on the 29th her rate from 3 ½
to 4 ½ per cent, when 10 could have ‘pulled money from the moon’…A meager point, as
if it were bandaging a hemorrhage with a gossamer gauze. Bankers round the world were
flabbergasted by London’s reaction: unforgivably inane, they thought.
On the same day, Norman, ‘feeling queer’, eventually collapsed during a meeting
at the Treasury.157 He abandoned the helm at the Bank. Adducing health complications,
and without allowing his name to appear on the passenger list158, he boarded a fast liner
to Quebec on August 15th. His Deputy, Ernest Harvey, was now in charge, and duly
instructed. Washington and Paris immediately came forth with offers of help. Harvey
floated the decoy of England’s government deficit: ‘that’, he averred, ‘is the source of our
trouble, and it really can’t be helped’. No one believed him, and fellow international
bankers insisted on assisting the ‘Old Lady of Threadneedle Street’.* On July 31, Paris
and New York extended credits to London to defend sterling, to use it as ammunition, as
it were, wherewith the Bank of England might repurchase the pounds that speculation
was dumping in London. On August 5, the pound kept skidding, and more gold was
forfeited, but Harvey did not draw on the new Franco-American credits. The French
wondered what on earth he was doing; Harvey replied that he had let the gold go to teach
his colleagues at the Treasury a lesson; to prod them to balance the budget. Moret, the
new French Governor could not believe his ears, ‘he was appalled’.159
Harvey, undaunted, and slathering falsehood upon falsehood, professed further
that the source of the run remained inexplicable, and that British citizens were only
marginally involved in it, when in truth suspicion ran high in the banking community that
the British financiers of the City were the chief speculators against their own currency.160
The pound continued to sag, and eventually the Franco-American credits were blown
away in a matter of days. The French and the Americans, not daring to doubt the good
faith of England, persisted and offered in late August two additional lines of credit, in
dollars and francs, for a last-ditch defense of the pound. The Bank of England, instead of
keeping the new ammunition close at hand and firing it from her own defense lines,
dispatched it to two minor forts, the British Overseas Bank and the Anglo-International
Bank; and these two banks, by the frequency and magnitude of their purchases of pounds,
revealed to the speculation what never ought to have been revealed: i.e., the amount of
the reserves themselves.161 Everyone guessed that the money was on tap, so to speak, and
that it wouldn’t last long –and so it was wasted in little time.
* The moniker of the Bank of England.
Mid-September dealt sterling the coup de grace: no one knows for sure, but the
last fatal withdrawal appears to come by way of the Netherlands162, though not on official
account163: the central bankers stayed put. France had nothing to do with this last raid.
Given the size of her sterling account, she stood only to lose tremendously from a
depreciation of the British currency; she actually bought sterling at this time. The same
applied to the Dutch central bank. So who really mugged the Old Lady?
The evidence is ‘scanty’, regret the historians.164
Therefore, this had to have been the work of that gray blob conveniently referred
to as ‘speculation’ or ‘the market’ –ghost privateers, who in September ransacked the
cellars of the Bank some more, thus bringing the total loss in the last two months to £200
million in gold and deposits.165 But being it known that:
In its operations with…foreign exchanges balances, the Bank of England was
continuously preoccupied by the need for secrecy and discretion. That its efforts
in this respect were generally successful…is beyond doubt, as the paucity of
press, and even Treasury, guesses as to the extent of its activities
indicates…Public knowledge of the fact that the Bank held hidden reserves, at
times as large as its published, would have made execution of its…policy
impossible…In its market operations, [the Bank] deliberately disguised itself.
Through a number accounts at the Federal Reserve Bank of New York, it
prevented banks paying in funds or receiving them from knowing their ultimate
destination or origin.166
Being it know that these were the methods of the Old Lady, the temptation to
conjecture that it was the Bank itself that led the speculation from under the cover of its
secret foreign accounts by way of short sales and like operations, with a view to igniting
a herd movement, which it then deviously lured into its own gold sanctum through ‘the
line of least resistance’ –i.e., an absurdly low rate of discount at 4 ½ and the weak
defense of the two small banks in September; the temptation to conjecture this much is
Then, on September 15th, 500 sailors mutinied at Invergordon, Scotland, because
of a pay cut. The meretricious press jumped at the story and blared out in the open that
the Royal Navy was in disarray. The organs of the Empire were now diffusing the
psychosis that Britain was on the verge of a precipice. Norman from Nova Scotia
concerted by wire with Harvey the bill draft that would abrogate the 1925 Gold Act. On
the 18th the defense of sterling was given up. A day out from Quebec, on the homeward
voyage, Norman received a cable from his men at the Bank: ‘Old Lady goes off on
On Monday, September 21st, before a speechless world, Britain suspended gold
Within four weeks eighteen countries would depart from the gold standard. To
disperse the loitering speculation, the Bank hiked up the Rate at 6 per cent, where it
would stay for the next four months (graph 1).
At first, it seemed one of those incomprehensible losses, which the Britishers
didn’t quite know whether they were to hail or mourn. Though soon, ‘the politicians, the
press, and the public seemed to arrive at the belief that those who…had driven Britain off
gold had forced a blessing upon her government against her will’.167
But it wasn’t over: the Empire’s stewards, to make it perfect, achieved this pièce
extraordinaire with a solemn finale. Snowden, the chief of the Treasury and ‘Norman’s
devoted slave’,168 in officiating the funeral of the Gold Standard in the House of
Commons, appealed with maudlin majesty ‘to everyone not to use words…at this
moment, which will make things more difficult’. The few skeptics in the House, lest they
should crack a ‘joke in the cathedral’ if they spoke up, kept their mouths shut.169
On September 23, Norman docked in Liverpool; on the 28th he was back at the
Bank. Allegedly, ‘he was utterly bowled over on discovering of the terrible truth’.170
Clearly, Harvey and the others ‘had lost their heads’.171
So, here was Montagu Norman, a controversial, and patently ill man in charge of
the financial arm of the world’s Empire until late July ’31 –nine years past the customary
term—, who relinquished the command at the most critical juncture of Britain’s recent
financial history, and in his absence deputized his most delicate duties to a team of semiincompetents.
As a result, the Empire’s currency fell so steeply as to sever the connection
to the gold anchor, and hurl thereafter the world economy down a spiral slide into hell.
The Navy mutinied, and upon his return the Governor was pilloried like a monumental
loser by a wolfish mob of cartoonists. The pound depreciated by 30 per cent, and the
losses of the French and Dutch central banks realized on their sterling balances numbered
in the billions of dollars. The outrage of the Hollanders at the double cross was such that
they contemplated a legal suit versus the Bank of England; the Dutch Governor,
Vissering, was fired on the spot.
What did the Empire do? Did it fire Norman? Clément Moret, the French
Governor, for having held on to his pounds, ‘was decorated as a Knight of the British
Empire in October’.172 And Norman was confirmed governor for yet the first of thirteen
What of prices and gold? Did prices in Britain, as all feared, shot up because of
sterling’s fall? No; England, most had seemed to forget, did not suffer the imposition of
world prices, but dictated them herself: copper, freights, wheat, cotton, fats, jute, rubber
and tin were all quoted on the Empire’s markets. It was the others that would have to
And Gold? Here is the evolution of the Bank’s stocks of the metal between 1925
and 1935 (in million of dollars of 1929 content)174:
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935
695 729 737 748 710 718 588 583 928 935 973
By late 1932, not only was the gold hoard refurbished, but it had even increased.
How? Why, by crushing the Indian serf, of course, with the exact same device employed
ten years before. Between 1928 and 1930, the Indian Government was ordered to dump a
third of its surplus stocks of silver (90 million ounces), thus causing a diminution in price
of the metal of 50 per cent.175 In 1931, India’s Imperial Bank, besieged by the furious
protests of India’s farmers and merchants, was enjoined to peg the rate at 6 per cent; and
even the Bank’s director, hand-picked by Norman, remonstrated. The monetary
stringency was coupled with a rupee, whose artificial expensiveness in terms of gold, was
kept maddeningly high, all of which conspired, in keeping with Norman’s expressed
wish, to depress local prices and cause a devastating ‘money famine’.176 Despite the
turmoil and the fiery indignation of Gandhi, Indians had no alternative but to discharge
their debts with the Empire by exhuming their stashes of metal.177 Which: gold, sona, or
silver, chandi? Since chandi had been rendered nearly worthless, they could only pay
England with sona. ‘Distress sales’ they were called. After September 1931, and for the
rest of the decade, a torrent of gold welled out of India to irrigate the coffers of the City –
the flow was steady and intense. Viceroy Willingdon, ecstatic, reported from the Raj:
‘…Indians are disgorging gold…’178
September 1931 was indeed ‘the watershed of the interwar period’. The British
betrayal signaled the ‘end of the international financial system established in the 1920’s
and contributed substantially to the disruption of the international economy.’179
While he had been setting up the Gold Standard, Norman, in view of its
forthcoming breakdown, had pulled the sub-Grid of the British Empire together: South
Africa, Canada, India, New Zealand and Australia were financially re-engineered, either
with the creation of a Bank, or the modernization of the existing one. September 1931
thus found the Empire financially compact, and self-sufficient, with a vast, closed market
sheltered by Imperial Preference and soon to be walled by a 20 per cent tariff (October
In October 1933, at a dinner hosted by the Lord Mayor at the Mansion House,
Winston Churchill lifted a glass to the health of the Governor: ‘British banks’, he orated,
‘have shown themselves capable of a…resourcefulness which has been a definite
contributory factor in the strength of the country.’[Cheers]. Norman capped it off with an
Arab proverb: ‘The dogs may bark but the caravan moves on’.180
The Last Scheme of Kurt von Schleicher and the End of Weimar
In December 1924 Hitler was amnestied. He had been in prison since November
12, 1923 –thirteen months of detention in all. He told the faithful Hess that it would take
him five years to resume control of the Party.181 He was provident: five years that
coincided with the course of the Dawes bailout. There was no more question of coups and
the like; this time, he swore, he would gain power by ‘legal means’. Röhm, the SA
commander, had no patience for such dilatory tactics: he gave up and shipped to Bolivia
to train the local army. Meanwhile, the Anglo-American services had been watching
Hitler with interest since 1922.182
Ebert, Weimar’s first President, died in 1925, and in March new presidential
elections were scheduled. The Nazis threw their slender weight behind the chief strategist
of WWI, the ex-general Ludendorff, who found himself competing against his former
other half: Field Marshal Hindenburg. Hindenburg carried the day with nearly 15 million
votes, and his alter ego, Ludendorff, the reckless gambler to whom Hindenburg truly
owed his fame, garnered a humiliating 1 per cent of the people’s sympathy: he was
finished, and Hitler, deep down, was quite satisfied to be rid of this cumbrous, antiquated
piece of furniture.
But the measure of the electoral rout gave a fair idea of the Nazis’ overall
prostration. Until 1927, Hitler suffered moreover from the handicap that the Bavarian
government had barred him from making public speeches; Prussia would hold out until
1928. The Golden Years had shut ‘the drummer’ up. So, unable to speak, he delegated
the organization of the Party to the zealous Left Wing of the Northwest, which was led by
the capable organizers, Gregor and Otto Strasser. Veterans of the Great War and
Freikorps volunteers, the Strasser brothers incarnated the anti-capitalist current of
Germany’s petty bourgeoisie, a movement that hearkened back to late-Renaissance
German utopianism, for which land was conceived as inalienable and protected by a
‘peasant aristocracy’, industry segmented into guilds, and national union achieved by a
federations of self-governed cantons. A federated Germany, in the view of the Strassers,
meant a federated Europe, and an anti-British alliance of free workers across Eurasia.
There was no trace of the religious racialism of the Hitlerites in the Strassers’ outlook.
In 1926, on the occasion of the Fürstenenteignung, a motion introduced by the
Communists to demand the immediate expropriation of princely estates for public
redistribution, Hitler and Strasser clashed for the first time. The latter, who wanted to
second the Communists, was also campaigning for an alliance with the East, and
widespread socialization at home: the very antipodes of the Hitlerite strategy. Hitler
called a meeting in Bamberg on February 14, 1926, and lambasted Strasser before the
Party’s vanguard, deriding, moreover, the Strasser line as ‘Spielerei (pie in the sky)’.183
Strasser was no match for the Führer; even Strasser’s young assistant, Josef Goebbels,
who had been full of pugnacious hope about the confrontation, was dismayed by his
boss’s performance. In fact, he was bewitched by Hitler, the halo, the bodyguards and the
caravan of expensive limousines that motored him around. The club-footed Goebbels
jumped the fence to rejoin Hitler, who dispatched him to Berlin as the NSDAP’s new
Gauleiter (district leader), with the composite task of smashing the Reds, luring the
working class to Nazism, and ousting the Strasserites from the capital. Gregor Strasser
hung his head and fell back within the ranks, while Otto remained defiant. It was just a
matter of time before Hitler would sacrifice the Left Wing entirely; it was altogether a
foreign body within the Party, which might have mobilized dissent, but was not
committed to waging a European war. A war, which, for Hitler, was the sine qua non for
fashioning the empire of the swastika. And to fight the war, the princely estates, the Grid,
absentee power, and the heavy industry, for the time being, should have stayed right
where they were. On this occasion, because the German Democratic Party had, it too,
ranged itself temporarily ‘against the protection of private property’, Governor Schacht
gave up his party membership in a huff.184 The Führer and the banker drew a small step
closer to each other. The motion of the Communists was defeated.
The Litmus test of Gregor Strasser’s recruiting effort came with the national
elections of 1928, in which the NSDAP scored a miserable 2.6 per cent of the vote,
809.000 voices. The marginalization of the movement might have been suitably blamed
on Strasser by Hitler and his Munich retinue, but selling Nazism ever as the receptacle of
brutal malcontent, especially during the fat years of the American lending feast, could not
but yield null results. And the Hitlerites were aware of it. It was misery they needed, as
in 1923, and Montagu Norman would not tarry long before setting them loose upon the
When in 1928 Prussia lifted its ban on the public appearance of the Nazi leader,
whom Weimar no longer seemed to fear, Wall Street happened to be slowly withdrawing
its credits from Germany; Hitler was about to be summoned to the stage once more –five
years after his release, five years since the foreign overhaul of the German economy.
Firmly moved forward by the strange certainty of its Führer Adolf Hitler that the
decisive breakthrough was near, the NSDAP had meanwhile completed its
organisational battle preparations, as if it had prior information about the
In all, and without counting the abominable Zeitgeist of the Modern Era, three
were the clans that contributed to the Nazi seizure power: Anglo-American finance, the
USSR and the Vatican –the first two designedly, the third less so.
With the Wall Street Crash of October 1929, which boon the Nazi organ, the
Völkischer Beobachter, did not even bother to mention, 186 and the severance of the
Pound from gold in September 1931, Anglo-American finance interrupted the monetary
transfusion to Germany, causing automatically, as shall be seen, the electoral success of
the Nazis. In the same interval of time, as if faithfully aiding the plots of London, the
Russian Soviets engineered within Germany a civil war to ‘baptize’ the freshly elected
The 1923-1924 biennium was indeed an historical divide: key personages that had
accompanied the first phase of the German incubation in one capacity or another had all
departed: Havenstein (December ’23), Parvus Helphand (December ‘24), Helfferich
(April ‘24), Wilson (February ’24), and the cardinal of all professional revolutionaries,
Lenin (January ’24). The five years that followed the death of Lenin, Stalin employed to
purge the Soviet Union of its ‘true believers’. There was a group belonging to the old
Leninist guard that still clung fanatically to the notion of ‘permanent revolution’. Drunk
with the blood and success achieved thus far upon the land that was once the czar’s, men
like Trotsky, in 1924, were still convinced of the World’s imminent Revolution in the
industrialized West: from Germany to America, via France. Trotsky was evidently
drifting in an illusory world of his own, and this would not have been a complication for
his rival Stalin, had it not been that the former was still 1) one of the symbols of the
USSR, and 2), which was far more worrisome, an exponent and leader of that group
within the Soviets that was seeking a peaceful entente with the Socialist forces of
In 1927, after three years of demoniac intrigues, back-stabs, orchestral maneuvers,
and Siberian confinement for his men, Trotsky was expelled from the politburo –he
delivered his last speech parrying with a forearm a hail of inkwells, tumblers, books,
insults, and other objects.188 He went into exile in 1929.
Meanwhile, Stalin prepared his part of the German ambush, for the ultimate
benefit of the Nazi gestation, during the Sixth Congress of the Communist International
in Moscow, in 1928.
Already in 1925-26, the Russians had demanded the expulsion of all those leaders
of the German Communist Party that had put their independence of thought above
everything else. Afterwards Moscow had submitted the rest of the KPD to the
‘leadership’ of its tool, Ernst Thälmann: Stalin had no wish to see the German
Communists prosper. From the 1925 purge onwards, he fielded Thälmann and the street
fighters of the Red Front as a special shock troop of Soviet foils with which to intensify
the clash with the SA. At the same time, the German Red jackals, upon orders from the
Russian central, were instructed to fragment the German Left. By painting in its official
rhetoric the drowsy Socialists of the SPD as ‘Social Fascists’, i.e., as an enemy, Moscow
sought to confuse the electorate of the Left and prevent the formation of a solid
proletarian dam –approximately 40 per cent of the vote between the SPD and the KPD—
to the forthcoming Nazi onrush.189
Throughout the ensuing years, down to and even after the Nazi take-over, [the
line laid down in 1928 at the Comintern Congress] was never
altered…Throughout this period, as the shadow of Nazi brutality and
intimidation fell deeper and deeper over German political life, the attitude of the
Communists toward the moderate opponents of Hitler remained undeviatingly
hostile and destructive. It was clear that this aided the Nazis…Less than three
months before Hitler’s take-over, the Social Democrats in their despair,
…appealed repeatedly to the Soviet embassy in Berlin to induce the German
Communists to give them help against the Nazis…The blunt answer was given by
the secretary of the embassy: ‘Moscow was convinced that the road to a Soviet
Germany lay through Hitler’. 190
And then there were the Catholics –a whole third of the German population under
Weimar. Hitler could not afford the luxury to alienate the absentee owners, nor could he
outright repel the adepts of Rome with his racial gnosis, which, in its esoteric details,
should only have been shared among the Nazi initiates. In religious matters, the stance
advocated by the Party was one of neutrality.
In 1928, when the Dawes annuity was increased, Germany protested so violently
that a new Committee, chaired this time by the General Electric director, Owen D.
Young, was constituted to draw up the revision of the original bailout. Between February
and June 1929, the clubs drafted in Paris the final installment of ‘the merry-go-round of
reparations of debts, the most preposterous episode in modern history’:191 this was the
Young Plan. It was a direct sequel to the 1926 business with the French over the link
between German payment and war remittances to the Allies. According to its terms,
Germany was to pay 59 slightly reduced installments until 1988. Part of the burden was
to be securitized, that is packaged and sold to private investors on the money markets of
the West, so as to raise some cash pronto for the ever thirsty French, who in exchange
promised to evacuate the Rhineland in 1930, five years before the original deadline
imposed at Versailles. To assist in the task of selling the bonds a new private bank called
the Bank for International Settlements was established in Switzerland at Basle. The
Agent General was demobilized, and Germany was the mistress of her railroads once
again. The Depression would cut short the life of such a plan to a mere year and a half.
As Reichsbankspräsident and financial expert of the German delegation, Schacht
signed the Young Plan in June ‘29, but then, the ebb from New York began to sponge off
the money from Germany. Foreseeing what lay ahead, Schacht probably panicked. He
had to cut loose from the sinking ship. So in December, in the midst of the final round of
negotiations for the new Plan, he troubled the waters by circulating an official letter, ‘a
bomb’, in which he recanted his commitment adducing all manners of diplomatic and
financial quibbles. The government, he claimed, had inserted late additions that violated
the original document.192 The effect in the financial community was so distasteful that the
Finance Ministry recommended him to resign, which was precisely the egress Schacht
was hoping to fish from his mischief. In March 1930, President Hindenburg, indignant
for what seemed to him as a shameful ‘mutiny before the enemy’, 193 and not quite
capable of fathoming the motives of this petulant Schacht, accepted the banker’s
Schacht, it is true, had attempted throughout his tenure as Weimar’s Governor
(1924-1929) to curb the extravagant borrowing of the municipalities, in vain, though he
had clearly done absolutely nothing to interrupt the giant American transfer, pecuniary
and technological, to the great industrial poles of Germany194 –for good reason: this had
been the objective of the prize essay he had submitted to Dulles in 1922. All in all,
Norman and the clubs were delighted with him. He had done well. And they all surmised
that it was not yet over for this resourceful hierodule of the great Grid, who presently
retired cunningly to his estate in Brandenburg to watch from a distance how the story
unfolded, while reading Mein Kampf.
Nineteen-thirty: with high finance wreaking havoc in the background, the Red
Front in battle trim, and an open Nazi hand outstretched towards Catholicism, the crisis
finally struck Germany with all the violence the savvy of men could muster.
Unemployment began to decimate the country. On paper, there were over three
million jobless individuals by 1930. It was that story of ordinary despair that will bring
many of them to suicide.
The Republic was finished: in March 1930, incapable to force through a hostile
House a raise in the unemployment insurance, the last of Weimar’s ghost cabinets fell.
Thereafter, a conservative Catholic, Heinrich Brüning, was chosen by president
Hindenburg as Weimar’s next Chancellor. Brüning was bent on enforcing harsh decrees
to balance the budget. Hoping to find some sort of coalition amenable to support his
politics, he dissolved the Reichstag in July and called for new elections in September.
Then came the Nazi breakthrough: from 2.6, they jumped to 18.7 per cent of the
vote –6.4 million voices. After the Socialists (24.5 per cent), the Nazis came to rank as
the Germany’s second political force. The Catholics wielded 15 per cent of the vote, The
Communists, 13.5 per cent, whereas the Nationalists –the survivors of the Wilhelmine
Reich— gradually dissolved themselves into insignificance; as a whole, they had
attracted 47 per cent in 1924, 39 per cent in 1928, 24 per cent in 1930, and would fall to
10 percent in 1932.195 By then the incubation was complete; the old guard would die from
giving a painful birth to the Nazi movement. One-hundred-and-seven Nazi
representatives paraded through the Reichstag on 13 October, 1930, nearly six years after
Hitler had walked out of prison. Fully obedient to Moscow, armed and trained by agents
of the Soviet secret police (the GPU), who filtered through the German borders with
falsified passports, a million Red fighters whittled their bludgeons to welcome the new
Nazi arrivals. Ready to brawl, Röhm shipped back home from Bolivia in January 1931.
So soon as the ‘stream’ of foreign money was drained out of Germany, all the
trappings of the Allied bailout snapped closed upon her. 1) Since the Reichsbank Law of
1924 forbade the central bank from advancing cash to the Reich above a low statutory
level, the federal and regional governments fell back upon the private commercial banks,
begging them for money. The banks, lending upon canons of profitability, were not
accommodating, and the few that were willing to purchase public bonds, reduced
proportionately their engagements with the private sectors, exacerbating thus the
monetary stringency, and unemployment.196 2) As in 1923, the German Grid was literally
colonized by the Allied investors: more than 50 per cent of all German bank deposits
belonged to foreigners in 1930—197 this was money that would vaporize at the first sign
of distress. 3) And, finally, the unshakable burden of the reparations impeded any
freedom of financial initiative on the part of the Reich. The ‘Dawes machine’ had nailed
Germany to the cross, right and proper.
When, in March 1931, Germany and Austria announced their desire to fashion
through a customs union what was de facto the Anschluss*— a Greater German-speaking
Reich under republican auspices—, mysteriously, vital funds were withdrawn in
* Germany’s annexation of Austria.
sequence from Austria in May, and from Germany in June, shortly after the Brüning
Cabinet published a new set of emergency decrees. These contemplated cuts in the
salaries of government officials, public expenditure, and war pensions, and an increase in
taxation –measures that fell under the caption of ‘deflationary policies’: all they effected
was to reduce the money supply so as to keep it proportioned to the available hoard of
gold and foreign exchange, which, incidentally, foreigners and German absentees, as in
1923, were swiftly exporting out of the country.
A few weeks after the aborted Anschluss, the United States, as predicted by Swiss
banker Somary in 1926,* passed the Hawley-Smoot Tariff, which instituted the highest
rates in American history, increasing duties on a number of products more than 20 per
After the engagement of the Anschluss, Germany was a city besieged, with the
lines of supply all cut, and the resources of the defenders rigidly limited by a
watchful foe…Voices raised on every hand celebrated the example of Samson, as
indicating the only possible course for a desperate Germany. For deep in the
Teutonic soul lies the ineradicable conviction that Germany will not fall alone,
nor European civilization long survive her ruin.198
On June 20th, on the face of an unsightly hemorrhage of gold out of Germany, and
the consequent disarray suffered by the leading banking establishments of the West, US
President Hoover declared a general moratorium on reparations and debts for a year. The
measure was designed to give the German economy some respite and prevent it from
collapsing altogether. Four days later, after the entreats of Chancellor Brüning and Luther
–the new Reichsbank Governor—, the French, American, and British central banks, in
addition to the new Swiss institute, conceded an emergency loan to Germany: crumbs.
The Germans begged for more. On July 9, Luther flew to London via Paris to implore the
creditors to revive Weimar. Norman shook his head, as he had done eight years
previously in the presence of Governor Havenstein; he empathized, but added that there
was not much he could do at present; the issue, he concluded regretfully, was political
rather than financial. In the meantime, Norman advised Luther to restrict credit further.199
Evidently, Norman was resolved upon ousting the Brüning-Luther team from power by a
maneuver of prolonged financial exhaustion. Already, after the fall of the Creditanstalt,
the British Governor had told the media that the Austrian bank needed a ‘foreign
butcher’, and that ‘Schacht was the right type of butcher’.200 Schacht was flattered, but by
this time, he was ‘taken’: in fact, he had liked what he had read in Mein Kampf so much
that in Januray ’31 he had hooked up with the author himself to talk things over.
It became unmistakably clear that, whereas French policy aimed to perpetuate the
status quo, Norman…was working for a new order.201
The financial shape of the ‘new order’ was delineated in the summer of 1931. In
July, after the failure of several important banks and their rehabilitation at the public’s
expense, the most acute phase of the German crisis ended, but there was ‘no return to
“normal conditions”.’202 Tight exchange controls were introduced, along with the
establishment of special banking consortia for rescuing the healthiest part of the starved
economy. State control over the economic apparatus was significantly extended. This
* See above, pp, 265-266.
would be the system that the Nazis would inherit, and fuel their miraculous recovery
therewith. Special Standstill Agreements were reached with the creditors on September 1,
which froze within Germany $1.25 billion. Thirty percent of such frozen credits were
British short-term assets; a fortnight thereafter began the final ‘run’ on sterling. Official
unemployment in Germany rose to five million.
In October, after the world financial system had been disintegrated, officers of the
Royal Air Force escorted Alfred Rosenberg, Hitler’s theorist of the race, in a guided tour
of the London clubs. Rosenberg encountered, amongst others, the director of The Times,
Geoffrey Dawson, the editor of the Daily Express and Churchill’s sidekick Lord
Beaverbrook, the human spider himself, Norman, whom he indulged with anti-Semitic
disquisitions, and the future great electors of the Nazis, the directors of the Schröder
Bank.203 This was a concern towering over a vast network of interests all over the world;
its legal office in Wall Street was none other than Sullivan & Cromwell, where the Dulles
brothers, John Foster, the lawyer of Versailles and future U.S. Secretary of State, and
Allen, the Cold War chief of the CIA, had completed their apprenticeship.204 Bruno von
Schröder, the patriarch, had been one of the founding members in 1905 of the Anglo-
German Union Club,205 and his bank had come to belong to ‘that small ring of London
finance houses [that had] an acknowledged, if unwritten, claim to be represented…on the
Court of the Bank of England’.206 ‘Since the war…Schröders had become the financial
agents of Germany in London’.207 From 1918 to 1945, the fiduciary of Schröders on the
Court of the Bank of England was an individual by the name of Frank C. Tiarks. In a
variety of posts and assignments, Tiarks had been involved with the ‘German
experiment’ since its inception in 1918.208
For a while, the German government paid out the dole, but by the fall of 1931, the
jobless were left to fend for themselves. The political troopers of all colors clashed
repeatedly on the streets, the blood flowed. In this atmosphere, Hitler, as representative of
Germany’s novel mass movement, encountered on October 10 President Hindenburg (see
graph 2). The timeliness of the encounter was simply extraordinary: a mere fortnight
after the British disruption of the gold standard, the Nazis sought an audience with the
Republic’s president to make what was, in fact, their first legitimate bid to power. And,
from the Sea Powers’ viewpoint, the preconditions to such an encounter could not have
been more favorable: a new, dynamic nationalist leader face to face with the Ersatz-
Kaiser Hindenburg, a war hero and resplendent symbol of the imperial epoch –‘it is
done’, they must have thought.
And yet it wasn’t. Hindenburg felt but the most profound revulsion for this
‘Bohemian lance corporal’; he received, entertained, and dismissed the latter with iciest
coolness. Germany resisted. Hindenburg remained solidly behind his Chancellor,
Spited, Hitler joined the great anti-republican manifestation of the Right gathered
on October 11 at Bad Harzburg, where the private armies of reaction were seen filing by
supportive crowds and a pedestal of leaders, who presently included Schacht. The latter,
in the guise of Hitler’s officious economic councilor, could not contain the lust that made
him utter a speech, a vile one, against the pathetic attempts of Luther –Schacht’s
successor at the Reichsbank— to salvage the situation.
Chancellor Brüning, by now ruled by decrees, invoking the 48th article of the
Weimar Constitution, which enabled him to pass controversial ordinances above the head
of the Reichstag: the collegial fashioning of laws in Germany had definitely ceased to
function. The vexatious measures Brüning had published in July were enforced on
December 8, 1931, through one of such decrees. The Chancellor took a dangerous
gamble: he aimed to disarm emotionally Germany’s creditors by making pain at home
ever more excruciating, hoping thence to obtain the cancellation of reparations, and
launch thereafter a program of public works. In fact, he had no choice, much as the
foreign creditors had no pity. Like Weimar, Brüning was doomed from the start.
Nineteen-thirty-two, the year of the electoral madness. Having completed his first
seven-year term, Hindenburg was up for re-election in March. Hitler, after some
hesitation, decided to challenge him. The Nazis spent much money for publicity, as well
as for unprecedented plane flights advertised in the press under the slogan of ‘Hitler over
Germany’.209 In the first round, Hindenburg polled 49.6, Hitler 30.1 per cent of the
vote—a disappointment. Hindenburg was re-elected president with the second ballot.
Given the violence of the street clashes that accompanied the election campaigns, the
Brüning government, for fear of a civil war, banned Hitler’s paramilitary corps: the SA
and the SS were enjoined to disband.
Then Kurt von Schleicher slowly emerged from the mists of the ministerial
backwaters. This was the ‘field-gray eminence’ whose shadow lurked behind every plot
that had twisted the uneasy life of this wretched ‘republic’.
Schleicher had begun his career of backstage puppeteer in Ludendorff’s General
Staff during the war by organizing the orderly retreat of the German forces; he had been
the one negotiating with Ebert during the seditions of the German Soviets in 1918-19,
and a coordinator of their suppression by the White corps; with von Seeckt in 1923 he
had planned the state of emergency; and he had been one of the architects of the secret
National-Bolshevik entente with the Trostkyites: a sharp brain, a sophisticated officer,
enamored of his skills— which were out of the ordinary. That is all that is known.
Scheleicher remains the true enigma of Weimar. No one’s ever deciphered the man: ‘a
question mark with the epaulettes of a general’, said Trotsky of the personage.210
From 1929 on, Schleicher, as head of the political office of the Reichswehr
Ministry, had acted as the unofficial liaison between the army and the government.
On April 28, he invited Hitler to initiate a series of secret talks with a view to
toppling Brüning, now known as the ‘Hunger Chancellor’ for having smashed the
country and himself into a cul-de-sac. The plan was to lift the ban on the SA and dissolve
the Parliament in return for temporary National Socialist tolerance of the new
government. As straw-chancellor of the new government, Schleicher had selected a
Catholic aristocrat, Franz von Papen, a rather unprepossessing gentleman of leisure, fond
of horse riding and intrigue. Papen would lead a cabinet of barons maneuvered by
Schleicher from behind the scenes in the view of the eventual economic rehabilitation of
Germany. The ‘Old Man’ Hindenburg was persuaded, and on May 30th, 1932, Brüning
fell. ‘A hundred meters from the finish line’, the latter would add, sorrowful.
In fact, in June, during the international conference gathered in Lausanne, now
that the incubation was finished, the Allies at the suggestion of Britain terminated at long
last the reparations scheme by demanding a symbolic lump sum of 3 billion marks, which
Germany would never pay –Hitler would repudiate reparations in 1933. And Veblen was
vindicated: the Germans had surrendered under that head approximately 10 per cent of
their income until 1923, and nothing afterwards: all the money for that purpose had been
borrowed, and would have never been repaid. The end of reparations ended war debts as
well. Between 1918 and 1931, the United States recovered but 20 per cent of the total
credits extended to the Allies.211 Thereafter American legislation forbade token
payments, and no one insisted on paying anything anymore –this was the last of it.
Between German loans and Allied credits, America had so far sunk 20 per cent of her
1914 GDP in this European adventure (ca. $40 Billion);212 she would come collecting
with WWII, and make the investment pay off after 1945.
Papen became chancellor since June, and the Parliament had just been dismissed.
Germany geared up for the second electoral joust of the year. This time the Nazis gave
their very best. Thousands of speakers rambling across the Fatherland, Hitler’s outlandish
airplane jaunts from one rostrum to another, radios ablare, vinyl records, marching bands,
mounds of merchandise, reels rolling, swastika pins, a state-of-the-art propagandistic film
shot by no less than XXth Fox,213 towers of pamphlets, oceanic quilts of posters patching
the walls of all cities and flags everywhere: a babylonian splash. It was now or never.
Also thanks to the strong popular appeal of Gregor Strasser’s economic program calling
for land-reclaiming projects, rural settlements and public works to be funded by the
somewhat magic suggestion of ‘productive credit creation’, which amounted to an
insurrectional take-over of the Grid by the communal hordes of Germany’s burghers, the
NSDAP scored its record poll of 37.3 per cent of the votes on July 31, 1932: 13.7 million
ballots.214 This was the maximum Nazism would ever be able to capture by legal means –
a significant share, for sure, though far short of the absolute majority. This was no
So soon as the ban on the SA was lifted in June, Reds and Brown-shirts tore each
other into pieces; more than a hundred street killings were counted in a month, the
wounded were three times as many. Goebbels wrote in his diary: ‘We’re headed straight
for civil war, but the Wilhelmstrasse doesn’t seem to notice’.
On August 10, Hitler met Hindenburg again, and bid for the chancellorship. Hitler
told the president that he was not willing to join the present cabinet to play second fiddle
to Papen, nor did he intend to waste energy searching for a supporting coalition in the
Parliament. He too wanted to rule by decrees: all or nothing. Nothing, replied
Hindenburg, brusque; his mistrust for Hitler was whole. Hitler seethed.
At this juncture, the puppet Papen severed the strings from Schleicher, and began
to conspire on behalf of the Anglo-American cabal against his mastermind.215 The horseriding
aristocrat expected to bend Hitler into obedience and domesticate him in a baronial
cabinet by strangling his party financially with another election, in which, as Papen
correctly intuited, Hitler was most likely to lose seats –by now, the people were weary of
electoral campaigns, and promises unfulfilled. To carry this out Papen persuaded his
absentees friends, bankers and industrialists, to stop their contributions to the Nazis.
For, in fact, who had paid for them ever since the beginning? According to one
hideously humorous folk tale eagerly circulated, the Nazis financed themselves by way of
rallies and contributions, in addition to the storm troopers’ late endorsements of razor
blades called Stürmer (stormer), and a brand of margarine named Kampf (battle).216 Ten
years of political activity all over the nation, and three technologically innovative, masspublicized
elections in a country half-bankrupt, funded by means of tickets, piddling
donations and margarine?
A more creditable version exposed by a first-class historian that had access for
two years to classified documents alleged that Nazism from 1919 to 1923, the year of the
putsch, had been financed by the secret funds of the Reichswehr (the army), and
thereafter by German industrialists.217 Industrialists, such as the steel magnate Fritz
Thyssen, who began paying Hitler in 1931 by remitting funds to his deputy, Hess, via an
account with a Dutch bank, which was interlocked with a Wall Street outfit called Union
Banking Corporation. This was a subsidiary of Harriman Brown Bros. that was managed
by Prescott Bush.218 In 1934 the foreign correspondent of the Manchester Guardian
confirmed the widely diffused rumor that the bulk of Nazi funding was foreign in origin:
…Hitler had large funds at his disposal, not obtained entirely from German
sources. He got money from certain capitalist interests in foreign countries, who
were attracted by his hostility to Soviet Russia, or by…his policy to increase the
demand for armaments…International finance does not seem to be unfavorable to
the Nazi regime.219
In September, Papen dissolved the Reichstag and new elections were scheduled
for November 6. His hopes were realized: the Nazis lost 2 million votes—their
percentage slid to 33.1 per cent. They were bankrupt, and losing momentum fast. But
Papen himself foundered with the election: the Nationalist block, which he incarnated,
suffered a disastrous decline; he and his barons were incapable of taming Germany’s riot.
The unemployed were now officially 6 million, and adding drifters and the undeclared,
the new horde of vagabonds numbered approximately 9 million individuals, that is, about
half of Germany’s workers.220 Here was the long-term effect of the ‘Dawes machine’,
Montagu Norman’s masterpiece. Stories of indescribable violence, street clashes, rural
incest, and robbery made up the news of an ordinary day.
On November 19, Hitler, who was still in command of Germany’s first political
force, came knocking on Hindenburg’s door to demand once again the president’s
mandate. And once again he was rebuffed. ‘A cabinet led by you’, Hindenburg told the
Führer in all frankness, ‘would develop necessarily into a party dictatorship with all the
consequences for an extraordinary accentuation of the conflicts in the German
people…For that, I cannot answer neither before my oath nor to my own conscience’.
This rejection appeared final. In this hour Hitler was afraid –and utterly broke; he
confided to Goebbels that if the movement collapsed, it would take him three minutes to
blow his brains out, and that would be the end of it.221
Now was the time for the serpentine Schleicher to pull the wires of the last,
decisive plot: baring is face, he went to Hindenburg and pleaded with the Old man to let
him, the general, take the matter in his hands. With a shiver of disastrous forebodings,
the Old Man consented, and on December 2, he appointed Schleicher Chancellor of the
Reich, the last of the Weimar Republic.
On December 15, the general on the radio announced a public program of largescale
work-creating endeavors; he looked to the Left and sought to create a transversal
alliance that cut across the Socialist unions, the Army and the Strasserite wing. It was a
superb maneuver, a last sally which Germany conceived through one of her generals to
save herself from the abyss, a true fruit of despair. On December 19, Schleicher received
Maxim Litvinov, the Russian Foreign Minister, who showed himself exquisitely
cordial.222 But Litvinov was deceiving what the reactionary press was presently attacking
as the dreaded ‘Red General’: in the first half of October Litvinov had already told Ivan
Maisky, the freshly appointed Soviet ambassador to London, that the Nazis would soon
come to power.223
In spite of all, Schleicher set his plan into motion: the post of vice-chancellor he
offered to Strasser, and looked forward to tearing away the Left Wing onto his camp.
And Strasser did not say no… The Parliament he would dissolve and prorogate the
elections past the constitutional sixty-day limit –he trusted he would sway the old
president, Hindenburg, to concede him that much. This would take care of the Nazis,
whose ballot-box strength was rapidly waning. And if push came to shove, he would
ready the army to engage the Hitlerites in a genuine civil war. Had this maneuver
succeeded, by some evasive caprice of fate, Germany would probably have been saved.
To fend off this diversion, on 4 January 1933, Papen summoned Hitler to convene
under cover of secrecy at the townhouse of Baron von Schröder, a partner in J. H. Stein
of Cologne, the German appendix of Schröders. Kurt von Schröder, along with Schacht
and other exponents of German big business, had signed in November 1932 a petition
addressed to von Hindenburg, urging the president to appoint Hitler as chancellor.
During the pivotal synod of January 4th, Hitler, sobered by the cold shower at the
polls, agreed to join a coalition government, which he had until now sternly refused, and
to serve as the Quartet’s spearhead –or rather, ‘figurehead’, in the intendment of Papen
and friends— in overthrowing the republic.224 From now on, Baron von Schröder and his
syndicate of investors stood behind the debts of the Party: with the stroke of a pen, the
absentees granted the Nazis a new set of keys to the Grid—they granted them unlimited
‘credit’.225 On January 17, Goebbels entered in his diary: ‘The financial situation is
Simultaneously, asked by an American journalist at his country residence about
the permanence of the Schleicher regime, Schacht responded, confident: ‘three weeks’.226
Schleicher’s spies found out about the hidden assembly, and the news of the
Papen intrigue was leaked to the press. But everything conspired against the great
conspirator. The Junkers and big business, let alone the absentees of the Grid, were all
aggressively arrayed against Schleicher’s collectivist measures. The Left, devouring
herself, still spared some life to worry at his throat, while the Catholics were taking their
cues from the ambassador of the Pope, Monsignor Eugenio Pacelli.* As head of the
German nunciature for the entire duration of the Weimar regime, Pacelli had expended
himself on a tireless hunt to wrest from each Land (German State) a collection of
agreements between the Holy See and the Land’s secular government, securing rights to a
variety of catechumenal trademarks, such as doctrine, education and worship: the socalled
‘concordats’. At this crossroads, in January 1933, jolted by the opportunity offered
by the pious von Papen for clinching the much yearned concordat with the Reich, Pacelli
prompted the German Catholic leaders to explore ‘the possibility of at least a modus
vivendi with all the Right, including the Nazis, in order to combat the danger from the
Left’ and the blasphemous Bolsheviks.227
Incredible as it all might appear, Weimar’s two largest ‘democratic’ mass parties,
the socialists (the SPD) and the Catholics, who together stood for 35 per cent of the
electorate, which could have risen to 52 per cent with the added strength of the
Communists –a full majority! —, feeling more menaced by Schleicher than by Hitler,
joined hands to dethrone the Red General.228
Indeed, three weeks was what it took the Quartet, led by the Papen junta and
backed by the conspicuous interference of foreign finance, to buy off, coax, and convert
the rest of the establishment, especially its last standing bastion, the old Field Marshal
Hindenburg, and obtain thereby the removal of Schleicher. The ‘question mark with the
epaulettes of a general’ faded in less than two months; the president dismissed him on
January 28th, 1933. Shortly thereafter, Schleicher was seen walking ‘in a long oval
around his room, whispering to himself, head half bent’.229
* The future pope Pius XII (1939-1958).
Of all the great actors, it was the army of the Reich the one least inclined to fight
the next war –the irony of it all.
On January 30th, Hitler was sworn in as Chancellor. Papen was Vice-Chancellor
in a Cabinet that numbered only two Nazis, Frick and Göring, the rest of them were blueblooded
Six months later to the day, Montagu Norman, without explaining and without
excusing, vouched publicly for the first issue of Nazi debentures to be sold on the
markets of London.230 Three months previously, Schacht had been recalled by the Nazis
to resume control of the Reichsbank.
1 Louis-Ferdinand Céline, 1952. Voyage au bout de la nuit (Paris: Gallimard ), p.
2 Erich Kästner, Lärm im Spiegel (Berlin: Deutsche Verlag-Anstalt, 1929), pp. 70, 71,
and Erich Kästner, Fabian, The Story of a Moralist (Evanston: Northwestern
University press ), p. 44.
3 Gesell, Natural Economic Order, Part I.
4 Ibid., pp. 275-278.
5 Jacques Rueff, De l’aube au crépuscule. Autobiographie de l’auteur. Paris: Librairie
Plon, 1977), p. 307.
6 Webster G. Tarpley, and Anton Chaitkin, George Bush, The Unauthorized Biography
(Washington D.C.: Executive Intelligence Review, 1992), p. 31.
7 Francis Williams, A Pattern of Rulers (London: Longmans, 1965), p. 201.
8 Ibid., p. 199.
9 Ibid., p. 203.
10 Henry Clay, Lord Norman (London: Macmillan & Co., 1957), p. 475.
11 Williams, Pattern, p. 203.
12 Andrew Boyle, Norman (London: Cassell, 1967), p. 67.
13 Ibid., p. 85.
14 Williams, Pattern, p. 204
16 Percy Arnold, The Bankers of London (London: The Hogarth press,1938), pp. 9, 16-17.
17 Ibid., p. 11.
18 Boyle, Norman, pp. 129-130.
19 Ibid., p. 133.
20 Ibid., p. 131.
21 Quigely, Tragedy, p. 326.
22 Boyle, Norman, pp. 133-134, 137-318, emphasis added.
23 William Adams Brown, England and the New Gold Standard, 1919-1926 (New Haven:
Yale University Press, 1929), p. 55.
24 Boyle, Norman, p. 217.
25 Ibid. p. 185
26 G. Balachandran, John Bullion’s Empire, Britain’s Gold Problem and India Between
the Wars (Curzon Press,1996), p. 64.
27 Maxwell S. Stewart, ‘Silver –Its International Aspects’, Foreign Policy Reports, Vol.
VII, No. 13.(1931), p. 242.
28 Adams Brown, England, p. 84.
29 Balachandran, John Bullion’s Empire, p. 91.
30 Ibid., p. 89.
31 Ibid., pp. 98, 100.
32 Ibid., p. 202.
33 Boyle, Norman, p. 138.
34 Stanley Lebergott, The Americans. An Economic Record (New York: Norton &
Co.,1984), p. 396.
35 Clay, Lord Norman, p. 129.
36 Boyle, Norman, p. 68.
37 Clay, Lord Norman p. 135.
38 Ibid., p. 132.
39 Barry Eichengreen, Golden Fetters. The Gold Standard and the Great Depression,
1919-1939 (New York: Oxford University Press,1992), p. 118.
40 Charles O. Hardy, Is There Enough Gold? (Washignton D.C.: The Brookings
Institution, 1936), pp. 103, 153.
41 Ibid., p. 154.
42 Marcello De Cecco, Moneta e impero. Il sistema finanziario internazionale dal 1890 al
1914 (Torino: Piccola biblioteca Einuadi, 1979), p. 157.
43 Balachandran, John Bullion’s Empire, p. 92.
44 William Adams Brown, The International Gold Standard Reinterpreted 1914-1934
(New York: National Bureau of Economic Research, Inc., 1940), p. 295.
45 Hardy, Enough Gold?, p. 93.
46 Adams Brown, Gold Standard, p. 294.
47 Ibid., p. 290.
48 Ibid., p. 301.
49 Eichengreen, Golden Fetters, p. 164.
50 Boyle, Norman, pp. 147-148.
51 Melchior Palyi, The Twilight of Gold 1914-1936. Myths and Realities (Chicago: Henry
Regnery Company, 1972), p. 144.
52 Hjalmar Schacht, My First Seventy-six Years. The Autobiography of Hjlamar Schacht
(London: Allen Wingate, 1955), p. 131.
54 Anton Chaitkin, Treason in America, from Aaron Burr to Averell Harriman. (New
York: New Benjamin Franklin House, 1985), p. 545.
55 Ibid., p. 546, emphasis added.
56 Schacht, Autobiography, p. 188.
57 Clay, Lord Norman, p. 197.
58 B.O.E. G1/44-419, p. 123, quote from an article of Carl von Ossietzky on the
Weltbühne, 27 November, 1928.
59 Boyle, Norman, p. 169.
60 Ibid., p. 171.
61 Schacht, Autobiography, p. 194.
62 Boyle, Norman, p. 171.
63 Charles L. Mowat, Britain Between the Wars 1918-1940 (The University of Chicago
Press,1955), p. 373.
64 Boyle, Norman, p. 159.
65 Alvi, Occidente, p. 195.
66 Ibid., p. 197.
67 Paul R. Leach, That Man Dawes (Chicago: Reilly & Lee Co.,1930), pp. 206-207.
68 Ibid., p. 194.
69Quigley, Tragedy, p. 308.
70 Alvi, Occidente, pp. 197-198.
71 Ibid., p. 199.
72 Maurice Callot, Le mark allemand depuis 1924 (Paris: Librairie Arthur Rousseau,
1934), p. 20.
73 Boyle, Norman, p. 197.
74 Alvi, Occidente, p. 208.
75 Démètre Delivanis, La politique des banques allemandes, en matière de crédit à court
terme (Paris: Librairie du Recueil Sirey, 1934), p. 53.
76 Alvi, Occidente, p. 198.
77 Louis T. McFadden, Collected Speeches of Congressman Louis T. McFadden, as
Compiled from the Congressional Record (Hawthorne, California: Omni
78 Quigley, Tragedy, p. 308.
79 Theo Balderston, The Origins and Causes of the German Economic Crisis, November
1923 to May 1932 (Berlin: Haude & Spener,1993), p. 134.
80 Carl T. Schmidt, German Business Cycles, 1924-1931 (New York: National Bureau of
Economic Research, 1934), p. 71.
81 Balderston, Origins and Causes, p.140.
82 Garret Garett, The Rescue of Germany & As Noble Lenders (The Curtis Publishing
Company,1931), p. 3.
83 McFadden, Collected Speeches, p. 57.
84 Derek Aldcroft, From Versailles to Wall Street, 1919-1929 (New York: Penguin
Books, 1978), p. 90, and Quigley, Tragedy, p. 309.
85 Paul Oesterfeld, La tragedia dell’oro (Roma: Casa Editrice Mediterranea, 1943), pp.
86 Garrett, Rescue of Germany, p. 36-40.
87 Rosenberg, Weimar, p. 193.
88 Kästner, Fabian, p. 33.
89 Rosenberg, Weimar, pp. 198, 199, 210.
90 Delivanis, Politique des banques, p. 52.
91 Joseph Borkin, The Crime and Punishment of I. G. Farben (New York: The Free press,
1978), p. 7.
92 Richard Sasuly, I. G. Farben (New York: Boni & Gear, 1947), p. 40.
93 Borkin, Crime and Punishment, p. 21.
94 Ibid., p. 1.
95 Ibid., p. 28.
96 Anthony C. Sutton, Wall Street and the Rise of Hitler (Bloomfield Books, 1976), p. 33.
97 William Manchester, The Arms of Krupp, 1857-1968 (Boston: Little, Brown and
Company, 1968), pp. 348-350.
98 Borkin, Crime and Punishment, p. 45.
99 Ibid., p. 54.
100 Sasuly, I. G. Farben, p. 148.
101 Sutton, Rise of Hitler, p. 35.
102 Sasuly, I. G. Farben, p. 149.
103 Sutton, Rise of Hitler, pp. 35, 36.
104 Ibid. p. 22, emphasis added.
105 Andrej Gromyko, L’espansione internazionale del capitale, storia e attualità (Roma:
Editori Riuniti, 1985 ), p. 139.
106 Sutton, Rise of Hitler, pp. 51-66.
107 Palyi, Twilight of Gold, p. 155.
108 Quigley, Tragedy, p. 308.
109 Garrett, Rescue of Germany, p. 29.
110 Stephen V. O. Clarke, Central Bank Cooperation, 1924-1931 (New York: Federal
Reserve Bank of New York, 1967), p. 85.
111 Adams Brown, England, p. 206.
112 Ibid., pp. 213-214, 220-221, and Adams Brown, Gold Standard, 1940, p. 368.
113 As a result of the particular dispositions of the Gold Act of 1925 with regard to
convertibility, gold in circulation would amount by 1928 to 8 per cent of the total
monetary stock, world-wide, whereas, barring Chinese and Indian hoards, it had been
45 per cent in 1913 (Edwin F.Gay, ‘The Gold Problem’, Foreign affairs, Vol. 9,
January 1931, p. 198.).
114 Quigley, Tragedy, p. 322.
115 Rueff, De l’aube au crépuscule, p. 313.
116 Hardy, Enough Gold?, p. 101, emphasis added.
117 Emile Moreau, Souvenirs d’un Gouverneur de la Banque de France, histoire de la
stabilisation du franc (1926-1928). Paris: Librairie de Médicis, 1954), p. 48.
118 Boyle, Norman, p. 194.
119 Quigely, Tragedy, p. 326.
120 Felix Somary, Die Ursache der Krise (Tübingen: J. C. B. Mohr, 1932), p. 11.
121 Ibid., pp. 4, 11-13.
122 Moreau, Souvenirs d’un Gouverneur, p. 40; ‘Norman is a very tough businessman,
and very astute’.
123 Ibid.., pp. 48-49.
124 Alfred Sauvy, Histoire économique entre les deux guerres (Paris: Fayard, 1965), p.
125 McFadden, Collected Speeches, p. 158.
126 Moreau, Souvenirs d’un Gouverneur, p. 308.
127 Boyle, Norman, p. 228.
128 Clay, Lord Norman, p. 486.
129 Boyle, Norman, p. 135.
130 Ibid., p. 228.
131 Moreau, Souvenirs d’un Gouvereur, pp. 329-331.
132 Ibid., p. 333.
133 Aldcroft, From Versailles to Wall Street, pp. 165-166.
134 Clay, Lord Norman, p. 484.
135 Clarke, Central Bank Cooperation, p. 124.
136 George B. Robinson, Monetary Mischief (New York: Columbia University press,
1935), p. 30.
137 Hardy, Enough Gold?, p. 155.
138 Adams Brown, Gold Standard, p. 487.
139 Clarke, Central Bank Cooperation, pp. 130, 134.
140 Moreau, Souvenirs d’un Gouverneur, p. 383.
141 Diane Kunz, The Battle for Britain’s Gold Standard in 1931 (London: Croom Helm,
1987), p. 18.
142 B.O.E. G1/453, Norman to Schacht, 11 December 1928.
143 Clarke, Central Bank Cooperation, p. 157.
144 Robinson, Monetary Mischief, p. 43.
145 J. R. Levien, Anatomy of a Crash –1929 (New York: Traders press, 1966), p. 45.
146 Alexander Dana Noyes, The Market Place. Reminiscences of a Financial Editor
(Boston: Little, Brown & Company, 1938), pp. 329, 330.
147 Francis W. Hirst, Wall Street and Lombard Street, the Stock Exchange Slump of 1929
and the Trade Depression of 1930 (New York: The Macmillan Company, 1931), pp.
148 Robinson, Monetary Mischief, p. 37.
149 Frank Simonds, Can Europe Keep the Peace? (New York: Blue Ribbon Books, Inc.,
1934), p. 307.
150 Lago Gil Aguado, ‘The Creditanstalt Crisis of 1931 and the Failure of the Austro-
German Customs Union Project’, The Historical Journal, 44, 1, (2001), p. 201.
151 Lionel Robbins, The Great Depression, (New York: The Macmillan Company, 1934),
p. 28, and Rueff, De l’aube au crépuscule, p. 301.
152 R. J. Truptil, British Banks and the London Money Market (London: Jonatham Cape,
1936), p. 289.
153 Walter A. Morton, British Finance, 1930-1940 (New York: Arno Press, 1978), pp. 32-
154 Clay, Lord Norman, p. 396.
155 Boyle, Norman, p. 263.
156 Clarke, Central Bank Cooperation, p. 203.
157 Kunz, The Battle, p. 84.
158 McFadden, Collected Speeches, p. 229.
159 Kunz, The Battle, p. 91.
160 Ibid., pp.122, 130.
161 Einzig, The Tragedy of the Pound (London: Keegan, Paul, Trench, Trubner & Co.,
Ltd., 1932), pp. 90-91.
162 Adams Brown, Gold Standard, p. 1015.
163 Clarke, Central Bank Cooperation, p. 214.
165 Palyi, Twilight of Gold, p. 155.
166 D. E. Moggridge, British Monetary Policy1924-1931. The Norman conquest of $ 4.86
(Cambridge: Cambrdige University Press, 1972), pp. 184, 185.
167 Morton, British Finance, p. 45, emphasis added.
168 Williams, Pattern, p. 210.
169 Morton, British Finance, p. 46.
170 Boyle, Norman, p. 275.
171 Palyi, Twilight of Gold, p. 272.
172 Kindleberger, The World in Depression 1929-1939, (New York: Penguin Books,
1987), p. 157.
173 Robert Wolff, Économie et finances de la France, passé et avenir (New York:
Brentano’s, 1943), p. 175.
174 Hardy, Enough Gold?, p. 92.
175 Francis W. Hirst, Money, Gold, Silver and Paper (New York: Charles Scribner’s
Sons, 1934), p. 162, and Balanchandran, John Bullion’s Empire, p.152.
176 Balachandran, John Bullion’s Empire, p. 177.
177 Alvi, Occidente, p. 376.
178 Balachandran, John Bullion’s Empire, p. 181.
179 Clarke, Central Bank Cooperation, p. 218.
180 John Hargrave, Montagu Norman (New York: The Greystone Press, 1942), pp. 308-
181 Benoist-Méchin, Armée allemande,Vol. 3, p. 11.
182 Chaitkin, Treason in America, p. 541.
183 Martin Broszat, Hitler and the Collapse of Weimar Germany (Leamington Spa: Berg,
1987 ), p. 65.
184 Schacht, Autobiography, pp. 230-231.
185 Broszat, Hitler and the Collapse, p. 66.
186 Kershaw, Hubris, p. 318.
187 Edward H. Carr, German-Soviet Relations between the Two World Wars, 1914-1939
(Baltimore: The Johns Hopkins Press, 1951), p. 36.
188 Volkogonov, Trotsky, p. 270-272.
189 Kennan, Russia, p. 286.
191 Simonds, Can Europe Keep the Peace?, p. 306.
192 Hjlmar Schacht, Das Ende der Reapartionen (Oldenburg: Gerhard Stalling,1931), pp.
193 Alvi, Occidente, p. 318.
194 Rosenberg, Weimar, p. 204.
195 Broszat, Hitler and the Collapse, p. 83.
196 Balderston, Origins and Causes, p. 313.
197 Eichengreen, Golden Fetters, p. 272.
198 Simonds, Can Europe Keep the Peace?, pp. 151-152.
199 Karl Erich Born, Die deutsche Bankenkrise 1931, Finanzen und Politik (München: R.
Piper & Co. Verlag, 1967), p. 100.
200 Boyle, Norman, p. 260.
201 Clarke, Central Bank Cooperation, p. 196.
202 Adams Brown, Gold Standard, p. 1045.
203 Alvi, Occidente, pp. 512-513, and Alleau, Hitler et les sociétés secrètes, p. 209.
204 Eustace Mullins, Secrets of the Federal Reserve. The London Connection (Staunton,
Virginia: Bankers Research Institute, 1991), pp. 81, 98.
205 Kennedy, Anglo-German Antagonism, p. 304.
206 Arnold, The Bankers, p. 23.
207 Truptil, British Banks, p. 148.
208 David Williamson, The British in Germany, 1918-1933. The reluctant Occupiers
(New York: Berg Publishers) 1991, p. 43.
209 Broszat, Hitler and the Collapse, p. 90.
210 Leon Trotsky, The Struggle Against Fascism in Germany (New York: Pathfinder
Press, 1971 [1931-1933]), p338.
211 Aldcroft, From Versailles to Wall Street, p. 95.
212 Garrett, The Rescue of Germany, p. 72.
213 Mommsen, The Rise and Fall, p. 339.
214 Udo Kissenkoetter, Gregor Straßer und die NSDAP (Stuttgart: Deutsche Verlags-
Anstalt, 1978), p. 120.
215 Quigley, Tragedy, p. 433.
216 Henry A. Turner, German Big Business and Hitler (Oxford: Oxford University Press,
1985), p. 117.
217 Quigley, Tragedy, pp. 429-430.
218 Tarpley & Chaitkin, Bush Biography, pp. 29-31; information recently reconfirmd in
The Sarasota Herald Tribune, 12 November 2000..
219 Robert Dell, Germany Unmasked (London: Martin Hopkins Ltd., 1934), pp. 61-70.
220 Kershaw, Hubris, p. 404.
221 Benoist-Méchin, Armée allemande, Vol. 3, p. 77.
222 Winkler, Weimar, pp. 651-652
223 Ivan Maisky, Who Helped Hitler? (London: Hutchinson, 1964 ), pp. 16, 19.
224 Quigley, Tragedy, p. 433.
225 James Pool and Suzanne Pool, Who Financed Hitler. The Secret Funding of Hitler’s
Rise to Power, 1919-1933 (London; MacDonald and Jane), p. 444.
226 Karl R. Bopp, Hjalmar Schacht: Central Banker (The University of Missouri Studies,
1939), p. 62.
227 Stewart A. Stehlin, Weimar and the Vatican, 1919-1933 (Princeton: Princeton
University Press,1983), p. 365.
228 Winkler, Weimar, p. 671.
229 John Gunther, Inside Europe (New York: Harper and Brothers, 1938), p. 41.
230 Hargrave, Montagu Norman, pp. 219-220.