Accounting and Financial Management Research Seminar – Professor Chris Swinson
Title: A Special Relationship? American Influence on the British Decision to Restore the Gold Standard in 1925 (A Biographical Study of Montagu Norman)
Date: 26 February 2025
Time: 14:00 – 15:00
Venue: NUBS.2.03
If you would like to attend, please register using the following link:
Speaker: Professor Chris Swinson
Chris Swinson was senior partner of BDO, Chartered Accountants, and President of the Institute of Chartered Accountants in England and Wales. He is now an author writing on financial affairs in the 1920s and 1930s.
Abstract:
On Thursday 19 March 1925, Winston Churchill, the Chancellor of the Exchequer shared lunch at 11 Downing Street with Montagu Norman, the Governor of the Bank of England. They were joined by Sir Warren Fisher, Permanent Secretary of the Treasury and Sir John Bradbury, a former Permanent Secretary of the Treasury. during the lunch, Churchill confirmed that restoration of the gold standard had been approved politically and would be announced in the Budget speech at the beginning of April. The gold standard was the international monetary system which had underpinned global trade before the 1914-1918 war but had broken down when war was declared. Since 1918, restoration of the system at the pre-war rate of exchange had been a prime objective for the Bank both to facilitate the resumption of trade and to restore the prestige of the City and the Bank. After lunch, the Governor returned to the Bank and immediately sent a cable to Benjamin Strong, his counterpart in New York. In the cable which was timed at 1530 hours, Norman reported the political decision and sought Strong’s confirmation that he would support Norman’s intention of convening a conference of central bankers. Strong did not answer Norman’s request immediately. When he did reply, he turned down Norman’s request – to Norman’s surprise. Restoration of the gold standard proved a disaster. The USA and Britain had experienced very different rates of inflation during the war. Elimination of the differential was a pre-requisite of restoration of the pre-war rate of exchange. The differential had not been completely eliminated by 1925 but Norman had recommended restoration in the belief that New York would support his initiatives to restore the Bank’s prestige. As New York did not support him in this, the eventual outcome was a currency crisis in 1931, the collapse of the Labour government, the near destruction of the Labour party, and the installation of a National Government. New York was recognised as the pre-eminent international financial centre. How and why did Montagu Norman make this mistake?