The True Gold Standard (Second Edition)
Book Reviews: "War and Gold" by Kwasi Kwarteng
After Words: Kwasi Kwarteng, "War and Gold: A 500-Year History of Empires, Adventures, and Debt," hosted by Toby Harnden, Sunday Times of London
Beginning with the Spanish discovery of the Americas, Conservative Member of British Parliament Kwasi Kwarteng takes readers through a history of money, its relationship to war and the resulting impact he believes the interconnection has on present-day free markets worldwide. He talks with Toby Harnden, Washington Bureau Chief of The Sunday Times of London.
In the past 12 months alone, the world's top five central banks have conjured up $1.4 trillion. They called it into existence as a sorcerer might summon the spirits. No wand, no printing press was required; taps on a keyboard did the heavy lifting.
"War and Gold" is a chronicle of fiscal ruination and redemption, with the emphasis on the former. In ages past, observes the historian and politician Kwasi Kwarteng, governments printed currency and levied taxes to fight wars. Now they materialize the money on computer screens to jolt their underachieving and overindebted economies back to life (so far without notable success). Customarily, sound finance resumed with the peace. What's new is that, starting about 1919, the taxing and inflating has kept right on going even after the shooting stopped.
Money is as old a story as the historian cares to make it. Mr. Kwarteng begins his chronicle with the 16th-century Spaniards, who ripped gold and silver from the hands of the Incas and Aztecs and hauled it back to Seville, making that inland port "one of the great financial centers of the world." "It is no accident," the author relates, "that four of the most widely performed operas of the modern era— Mozart's The Marriage of Figaro and Don Giovanni, Rossini's Barber of Seville and Bizet's Carmen—are set in this city."
Comes now to respectful international attention a volume entitled War and Gold: A 500-Year History of Empires, Adventures, and Debt by Member of Parliament Kwasi Kwarteng. This near-perfect volume appears with almost preternaturally perfect timing around the centenary of the beginning of World War I and, with that, the end of the classical gold standard. It, along with the work of Steve Baker, MP (co-founder of the Cobden Centre), constitutes a sign of sophistication about the gold standard in the British House of Commons.
Kwarteng, the most historically literary Member of Parliament since Churchill, is an impressive figure. As War and Gold‘s jacket flap biography summarizes, “Kwasi Kwarteng was born in London to Ghanaian parents in 1975. … After completing a PhD in history at Cambridge University, he worked as a financial analyst in London. He is a Conservative member of parliament and author of Ghosts of Empire: Britain’s Legacies in the Modern World.” Kwarteng thus possesses four crucial skill sets: an international, multicultural, perspective; rigorous training as an historian; direct experience in the financial markets; and the perspective of an elected legislator. It shows.
History Review: ‘War and Gold: A 500-year History of Empires, Adventures and Debt,’ by Kwasi Kwarteng
One of my souvenirs is a note from the Reserve Bank of Zimbabwe. I paid a vendor in Victoria Falls $3 for it, and that was more than it was worth. Its value to me is in the impressive pledge on the note: “I promise to pay the bearer on demand TWENTY BILLION DOLLARS.”
When your national currency is rooted in such paper promises, inflation and chaos are sure to follow.
This is the lesson taught in War and Gold by Kwasi Kwarteng, a son of Ghanaian parents who is a historian, hedge fund analyst and Conservative member of Britain’s Parliament. Kwarteng does not mention the fiscal follies of Zimbabwe’s President Robert Mugabe. His eye is fixed on the West, where abandoning gold to finance war and government largesse has repeatedly meant surrendering order and sound money.
War and Gold is a well-written history of money — particularly in the last 100 years — rather than a history of the interplay of its title subjects. It is a reach, for example, to tie the consequences of war into the big credit crashes of 1929 and 2008.
Kwarteng is not a gold bug. He does not think it feasible to return to a gold standard anywhere outside of China, where doing so would dramatically raise the value of the yuan and destroy China’s export-led growth model. Like his colleagues in the austerity-minded British government, though, Kwarteng clearly yearns for the discipline of balanced budgets and strict control over the growth of the money supply.
In War and Gold, British Member of Parliament Kwasi Kwarteng traces the history of debt from 16th century Spain all the way to our post-2008 economy and concludes that tying currency to gold is the best policy. That the gold standard is essential to a strong and prosperous economy.
He does, however, recognize that rapid deflation would occur if we went back to gold. “I’m not going to say that we’re going to bring the gold standard back immediately or that we should. What I am saying is that if you look at history you find that the gold standard is a much more stable arrangement than what subsequently happened,” he says.