May 12, 2013

Finest Hour 149, Winter 2010-11

Page 9

Around and About

The Wall Street Journal observed on September 17th that proposals for the U.S. government to punish China for its overvalued yuan with protective tariffs are bad policy: “…pegging the yuan to the dollar is not ‘currency manipulation’ or ‘stealing American jobs’…China’s real sin is sterilization, which insulates its domestic economy from the money-creating effect of a currency board.”

2025 International Churchill Conference

Join us for the 42nd International Churchill Conference. Washington, DC | October 9-11, 2025

2025 International Churchill Conference

Quoting Milton Friedman’s A Monetary History of the United States, the Journal says that in 1921-29, “when the world used gold instead of dollars for monetary reserves, the [U.S.] gold stock grew by about 50%, reflecting its trade surplus. [But] from 1923 on, a policy of sterilization caused the level of high-powered money to remain stable, and wholesale prices fell 8% from 1925-29. This short-circuited the self-correcting mechanism inherent in the gold standard, which is akin to a universal currency board when all currencies are pegged to gold. The U.S. should have seen an increase in the money supply, causing higher prices and over the long term tending to restore trade balances.

“Instead the Federal Reserve wreaked havoc on countries trying to stay on or rejoin the gold standard, especially Britain, which was hemorrhaging gold. It was forced into a period of deflation and couldn’t compete with the American export juggernaut. London responded with protectionism in the form of Imperial Preference, which contributed to the Great Depression, and the gold standard system collapsed.”

The reader who sent us this cutting added: “It’s too bad no one understands this except the Wall Street Journal. When Churchill decided to support Imperial Preference in the late 1920s, he was not abandoning Free Trade, but reacting to U.S. monetary policy, desperate to defend Britain against the Fed.”

The editor is very muddy where economic theory is concerned, but this seems to make some sense. Though Churchill said his decisions as Chancellor of the Exchequer only mirrored recommendations of the Bank of England, the Bank at that time was as pro-gold as the late Dr. Friedman. We would welcome an article from a qualified reader who can explain all this to us “on one sheet of paper.” Or, say, 1500 words.

Ted R. Bromund in Commentary magazine, 27 August: “On Fox News Sunday, a slightly incredulous Chris Wallace asked former Illinois Governor Rod Blagojevich if he were serious when he compared himself to Winston Churchill in his ability to come back from political oblivion. Blagojevich replied: “You’re right, I’m not serious. I don’t smoke cigars or drink scotch, and I think I can run faster than him.”

Bromund, who quoted Churchill’s reply to teetotaler Field Marshal Sir Bernard Montgomery (“I drink and smoke and am 200% fit”), went on to recall Churchill’s note to his War Secretary in 1941 (published in The Grand Alliance): “Is it really true that a seven-mile cross-country run is enforced upon all in this division, from generals to privates?….A colonel or a general ought not to exhaust himself in trying to compete with young boys running across country seven miles at a time….Who is the general of this division, and does he run the seven miles himself? If so, he may be more useful for football than war. Could Napoleon have run seven miles across country at Austerlitz? Perhaps it was the other fellow he made run. In my experience based on many years’ observation, officers with high athletic qualifications are not usually successful in the higher ranks.” Perhaps, Bromund adds, “Churchill’s maxim also applies to governors.” Well done, Mr. Bromund.