eric

The Council on Foreign Relations has a response to my critique of Benn Steil’s Bretton Woods book, in a post by Steil and Dinah Walker. The tenor of the response is conspicuous; Ed Conway notes I “seem to have touched a raw nerve.” Steil himself writes that my criticism is “like being savaged by a dead sheep.”

I’ll set that issue aside for now and just address the substantial areas of dispute here; that is, the gold standard and Pearl Harbor.

The Gold Standard

Of the gold standard, Steil and Walker write,

Rauchway takes specific issue with Benn’s claim that under the classical gold standard “when gold flowed in [the authorities] loosened credit, and when it flowed out they tightened credit,” arguing that this is “at odds with historical evidence.”

Oh?

And then they insert a graphic showing “that long interest rates did indeed tend to rise when gold was flowing out of the United States and fall when gold was flowing in”, adding, “Economics lesson finished.”

I would extend the economics lesson, or anyway the economic history lesson, further. The US was not the only gold standard country. [click to continue…]

When a book reviewer or manuscript referee describes an argument as “persuasive” or “convincing” without explaining exactly what it is that has persuaded or convinced, or alternatively what it would take to persuade or convince, I feel I’ve failed to get my money’s worth. I suspect I’m getting a purely subjective assessment dressed up in fancy language, and I’ve long had a hunch it’s been increasing in use, at least in my discipline.¹

But inasmuch as I had only a hunch that irritatingly subjective language was increasingly used, I knew I was being terribly inconsistent, which troubled me. So at last I went to the data.

I searched JSTOR for instances of “persuasive” and “convincing” and their opposites by year in reviews published in the American Historical Review between 1958 and 2007. To weight the occurrences, I also searched AHR reviews by year for instances of the word “that,” reckoning this was a pretty neutral word to look for. I divided the former by the latter to get a sense of the frequency of subjective language in AHR book reviews. Below is the result, which I hope is more persuasive than my hunch.

The language of “persuasive” is on the increase. Unless I’ve made an Excel error.

¹I also have a terrible prescriptivist annoyance over “persuaded … that” and “convinced … of” but we won’t get into it.

Today Jim Rickards (author of Currency Wars) says,

Last week I had x ounces of #Gold. Today I have x ounces. So value is unchanged. Constant at x ounces. Dollar is volatile though. #ThinkOz

I know it’s a failing in me, but it is hard not to ponder whether this is charlatanism or delusion. As John Maynard Keynes says in the first sentence of his Tract on Monetary Reform, “Money is only important for what it will procure.” With the stubborn volatility of the dollar, Rickards’s ounces procure rather less than they recently did.

The exhortation #ThinkOz is of course wonderful. I think now of hashtags past…

Last week I had x bulbs of #Tulips. Today I have x bulbs. So value is unchanged. Constant at x bulbs. Florin is volatile though. #ThinkBulbs

Money is a medium of exchange and a store of value, they say.

Was the gold standard a golden age, or a gilded one? How does it compare to later monetary regimes? I mean, we know the gold standard was terrible for the US, but what about other countries? I know you want to know, without having to dig in data appendices, so I made you some charts. Because I love you that much. (But not enough to extend the floating exchange rate regime data down to the present; that’s actual work.)

Data from table 1, Michael Bordo, “The Gold Standard, Bretton Woods and other Monetary Regimes: An Historical Appraisal,” NBER working paper no. 4310.

In the recent TLS I have an essay on Benn Steil’s new book on Bretton Woods. Unlike some notices, mine is critical. You can read mine here. If you’re interested in the theory, put forward in Steil’s book, that Harry Dexter White caused US intervention in World War II, read below the fold. If you’re more interested in the late Baroness Thatcher, please carry on down to the other posts for today.

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So, I got these two packages from Sweden today. Obviously, this is part two of this episode. Which Jon Ronson wrote about here.

I’m not going to try to analyze the books I received yet, except to note that yes, that’s clearly the Giant Rat of Sumatra speaking the slogan from The Hitchhiker’s Guide to the Galaxy, “BORN” as a reference to the original Being or Nothingness and, uh, probably some other stuff. One of the books says “Facsimile” and the other doesn’t. I already confirmed with Jon Ronson that he got one too.

I won’t attempt any further analysis for now. But if anyone else got one (or two) please write in to say…

I would have said “gradually,” rather than “secretly,” but over on Bloomberg I have a little piece on how FDR ended the US gold standard.

There’s widespread disagreement over when the US went off gold – was it with the end of domestic convertibility, which happened on March 6, though it wasn’t made clearly permanent until later? was it with the end of exports, on April 19? Scott Sumner just claimed the US didn’t permanently leave the gold standard at all in 1933, “just temporarily suspended it,” which is an answer Friedman and Schwartz sort of give, though they fudge it – “the gold standard to which the US returned was very different, both domestically and international, from the one it had left”. I myself like the answer given in one article, that the US went off gold “about crocus-daffodil time, 1933.”

Actually, I think the word “disagreement” isn’t quite right – it’s more lack of agreement; I’ve never seen anyone bother to pick apart who prefers which date and why. Obviously it depends on what you mean by “the gold standard,” and what it means to be on or off.

As the Bloomberg post indicates, I’ve been looking into Roosevelt’s intentions and expressed policies, and I’ve become persuaded that he knew pretty clearly what he was doing.

Two weeks before Roosevelt’s inauguration, Keynes wrote,

can it be possible today to forecast a respectable future for [gold], when in the meantime it has betrayed all the hopes of its friends? Yet it does not follow that the monetary system of the future will find no place for gold. A barbarous relic, to which a vast body of tradition and prestige attaches, may have a symbolic or conventional value if it can be fitted into the framework of a managed system of the new pattern. Such transformations are a regular feature of those constitutional changes which are effected without a revolution.

I predict, therefore, that central banks will continue in the future, as in the past, to keep gold reserves for the protection of their exchanges and as an emergency means of settling an adverse international balance.

That’s, in outline, the policy Roosevelt pursued – probably without having read Keynes, but who knows? – beginning with his inauguration. He wanted a managed currency, so he could influence commodity prices, but he also wanted enough gold in US vaults so he could fend off speculative attacks on his managed currency. That’s why he ended convertibility, but didn’t quite announce it. If he said convertibility was done for good and all, it would have been much harder to get hoarders to return their gold to the vaults.

It’s also, of course, the basis for the dollar that became the anchor of the Bretton Woods system, in which, Keynes would later say, reprising his language of 1933, gold had become a “’constitutional monarch’, so to speak, which would be subject to the constitution of the people and not able to exercise a tyrannical power over the nations of the world.”

FDR’s intentions matter because if he meant to do what he did, if he was carefully managing expectations, then the history of his monetary policy becomes a useful text applicable to modern affairs.

Meanwhile, in modern affairs, it’s not a good season to be a gold enthusiast. As usual, the answer to a headline that ends in a question mark is “no.”

In the current New Yorker, Louis Menand says there is a puzzle about how Franklin Roosevelt got reëlected:

When Roosevelt ran for reëlection in 1936, the unemployment rate was 16.9 per cent, almost twice what it had been in 1930. Yet he won five hundred and twenty-three electoral votes, and his opponent Alf Landon, eight. When Roosevelt ran for the unprecedented third term, unemployment was 14.6 per cent. He carried thirty-eight states; Wendell Willkie carried ten.

When Menand says unemployment was 16.9 and 14.6 percent when FDR ran for reëlection, he is counting federal relief workers as unemployed. According to the economist who constructed the series Menand is using, people working for the WPA were morally the same as concentration camp workers in Germany in the 1930s. If Menand realized that, the puzzle would go away: FDR and his New Deal were popular because they gave people jobs and sparked a rapid recovery.

For more, please see here.

In the sub-basement of the old State, War, and Navy building in Washington, DC, there’s a door with a small, yellowing card next to it reading, in Selectriced letters, “AMERICAN HISTORICAL ASSOCIATION.” (There is, of course, an ongoing debate between the authenticity faction and the archival preservation faction over whether the card ought to be replaced with one made of acid-free paper.) Inside the room is – well, is a lot more dust than there should be, actually, but also an agglomeration of black boxes wired to a console distinguished by its steel heft and Bakelite knobs. There’s a row of lights across the top of it, each with a paper label underneath – 1941, 1942, 1943, 1944, and so on – years extending back to the dawn of the republic and forward, with the limited foresight of the original engineers, to 1976. Fortunately, that year – with a special bicentennial appropriation – the AHA was able to add an auxiliary console, carrying the lights forward to the millennium. But no further; nobody works here full time anymore. [click to continue…]

Maybe Hyde Park on Hudson only really makes sense from a British point of view. It’s right there in the title – “Hyde Park on Hudson” reminds you that there’s another Hyde Park, “on Serpentine,” if you like, in London – and if you didn’t catch it from the title, Queen Elizabeth says it in the middle of the movie. “Why is it called Hyde Park? Hyde Park is in London. It’s confusing.”

The movie itself would be confusing if you don’t recall that Hyde Park in London, although technically crown property, is now overrun by the public and indeed home to radical speech and protest, and if you don’t concede that this description also applies pretty well to Hyde Park in New York, formerly a crown colony, and home to Franklin Roosevelt, then – in 1939 – seen as a radical tribune of the American people.

The two kindred parks yield two kindred stories.

In one, FDR’s distant cousin Daisy has an affair with him, believes she is unique, then discovers he has other lovers. One of them, FDR’s secretary Missy LeHand, tells Daisy that she will learn to share. And she does; in the end, happily.

In the other story, George VI (“Bertie”) and his queen, Elizabeth, come to the American Hyde Park to visit the President and court his support for Britain’s defense. It is the first visit by a British monarch to the United States, and a dark hour for Britain. But Bertie hits it off with FDR, feeling he has found a father figure in him, and declaring (in one of several bits of invention) that the two nations have forged a “special relationship.”

In case we miss the point, Daisy also says she has a “special relationship” with Franklin Roosevelt. Bertie’s special relationship with FDR is no more unique than Daisy’s. The movie ends on a high note, but we know that one day, soon, the British will learn they must share his promiscuous affections; by Bretton Woods and Yalta, FDR was courting Josef Stalin.

Perhaps, like Daisy’s bond with FDR, Britain’s tie to the US is not less special because America is so profligate with its affections.

Historians are supposed to quarrel with the film’s depiction of Roosevelt. I don’t think it’s necessary; the Roosevelt in the movie isn’t the human, historical FDR - he’s America personified – smiling, inscrutable, shameless, exploitive, powerful, popular. Bill Murray doesn’t do an impersonation – though he gets the smile right.

But there are essential things about Roosevelt the film does show, more economically and elegantly than I imagined a work of fiction could.

He got along because he made people feel good about themselves – after their meeting, Bertie bounds up the stairs, two or three at a time.

And he let people think he had not made up his mind, when in fact he had – he talks ambivalently about an alliance with Britain, but by the end of the movie we realize he has meant to make it happen, and has worked hard to make it happen.

And people did look to him, craving his attention, trusting him, even though his interior life was finally inaccessible.

The meeting between FDR and Bertie is a really terrific scene, as are all the scenes between Bertie and Elizabeth – but especially the one when they discuss the web of FDR’s promiscuity, and conclude with relief they did not bring Lilibet. There are some gorgeous scenes of the parklike Hudson scenery, humid, rolling in thistle capped by pale blue skies stacked with billowing clouds. It is a beautiful film to look at, and to think with.

As recreation while teaching a new course on World War II, I was watching The Great Escape, and it occurred to me, this is the same movie as Cool Hand Luke except Cool Hand Luke has rednecks in place of Nazis.

Which suggested the possibly wrong or maybe trivially true observation that the echt World War II movie is a pop culture treatise on existentialist philosophy, and not about the war at all. Or rather, it is about the war as an existentialist experience and not as a world-historical event. [click to continue…]

Writing about the ways of making peace, Brad DeLong describes “the [1944-45] debate between [Secretary of the Treasury Henry] Morgenthau and [General George] Marshall that was carried on—largely below the surface, largely without explicit confrontation” over the fate of postwar Germany and notes “The State and Defense positions win entirely and utterly and completely over the Treasury-based Morgenthau Plan. We get the Marshall Plan instead. I am still not sure why.” Morgenthau, you will remember, wanted – in Winston Churchill’s word – the “pastoralization” of Germany.

I think there are two reasons for Morgenthau’s failure. First, though, I disagree with Brad: there was not a conflict between Morgenthau and Marshall, above or below the surface. The conflict was between Morgenthau and everybody else. As John Morton Blum writes, by the end of January 1945, Morgenthau “had yielded in his views toward Germany neither to his fellow New Dealers, nor to his colleagues in the Cabinet, nor to the arguments of his subordinates. So also, he had conceded nothing to the objections of Churchill, Eden, and Sir John Anderson. Nor was he moved by Russian plans.” That’s a lot of different people not to yield to; almost nobody wanted the Morgenthau plan except Morgenthau. Not even the man whom Brad – I think not 100% seriously – calls a “Marxist,” Harry Dexter White; White wanted internationalization of the Ruhr and its industrial production used to pay reparations. [click to continue…]

Californians gave their 55 electoral votes to Barack Obama – of course; the networks called it the instant the Golden State’s polls closed. But more importantly, the state routinely derided as ungovernable¹ has got its best chance of governance in generations. [click to continue…]

In the New York Times today you can read about the newly available transcripts from the Bretton Woods conference of 1944, as edited by Kurt Schuler and Andrew Rosenberg. I have a few things to say about them in the NYT - and why not a few more here?

Historians of Bretton Woods might well have said, eh, a transcript – no big deal; what happened at the conference was largely theater, and the real business was done before and afterward. There is some truth in this – and the transcript amusingly shows that – but it also shows some of the ways in which it is not true. [click to continue…]