April 14, 2013

Finest Hour 153, Winter 2011-12

Page 12

The Burden of Statesmanship: Churchill as Chancellor  1924-1929

By Ryan Brown

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Mr. Brown graduated in 2010 from Ashland University, where he studied political science, economics and history with the John M. Ashbrook Center for Public Affairs. He is a 2010 recipient of the Charles Parton Award for his senior thesis on the British Empire in India.

The world on the verge of its catastrophe was very brilliant.” Winston Churchill was writing of July 1914, in his memoir The World Crisis. Europe’s empires were gathered into “an immense cantilever”— two mighty rival systems of alliance “glittering and clanking in their panoply,” being drawn ineluctably into the destructive vortex of World War.

Churchill observed these events from his room at the Admiralty, where he had marshaled naval defenses for the conflict. One of the few who anticipated the massive changes the war would cause, he would spend the rest of his life confronting unresolved repercussions of this titanic struggle. His 1930s warnings of Nazi aggression are tied to the unfinished business of World War I.

Many, however, fail to trace a consistent path between Churchill’s hawkish stances in both world wars through his 1924-29 tenure as Chancellor of the Exchequer. His conduct of this office attracts heavy criticism for his decision to return Britain to the Gold Standard in 1925.¹

Though the immediate consequences of this policy were bad, a just evaluation must avoid the error of isolating it from historical context, imposing pure economic philosophy onto consequences determined by political forces. In the end, the return to gold shows Churchill shouldering the burden of states- manship—using every tool at his disposal to forge a lasting peace in a world intent upon repeating the fatal mistakes of the past.

Throughout the 19th century, Britain presided over a tenfold rise in global trade under the classical Gold Standard.² Often misunderstood, the Standard arose naturally from the bartering system in which commodities were exchanged directly. Over time, gold proved to be the most universally desired commodity, and we began to measure the value of goods against it.

As a commodity, gold became the measuring stick of value for goods and eventually developed into the accepted medium of exchange. For ease of trade, banks began to hold gold reserves, and would issue the depositor a paper receipt that could be exchanged as gold in the marketplace. Over time, central banks gained a monopoly on issuing these receipts, and produced paper currencies that were “IOUs”³ for “a specified weight of gold” held by the national banking system.⁴

The amount of currency in circulation was, therefore, limited by the amount of bullion in the national gold reserve. If a central bank pursued an unwise inflationary policy—say by issuing paper currency not represented by gold reserves—the citizenry could protect their savings and “vote” against this action by exchanging their paper bills for gold at national banks. This would contract the gold reserves in the central bank and force them to reverse their policy to stem the gold drain.

Since units of currency were worth a set amount of gold, they could be directly translated into foreign currencies at fixed exchange rates based upon their relationship to gold. These constant exchange rates, founded on gold, tied world markets together with a single standard and created a uniform set of global prices. If a central bank did not preserve the value of a currency, and inflated the money supply, the rise in domestic prices would decrease exports and cause people to spend money abroad, where goods were cheaper.

As a nation received gold, it would issue paper currency to represent this monetary inflow. This increase in money would eventually cause domestic prices to rise and make foreign goods more affordable. In response, the flow of trade would reverse, as gold found its way to cheaper goods abroad and synchronized trade with market forces. In this way, domestic monetary policy was directly linked to a nation’s exchange rate. This process held international gold reserves in proportion to each other based upon how much wealth individual nations produced.

This self-regulating international system depended on central banks to follow these “rules of the game” and to maintain confidence in their national monetary structures by following the impulses of the Gold Standard mechanism as they set policy. Under this system, money was an impartial standard of value through which market forces could direct capital and allocate resources in proportion to needs of society. Central banks could not abuse monetary policy by artificially lowering interest rates to overextend credit, issuing bonds to finance budget deficits, or manipulating the money supply to boost exports—since excessive borrowing and lending would deplete the national gold reserve.

As a result, countries could not manipulate their currency to run long-term budget deficits or trade imbalances without risking financial collapse: distortions in the market were forced back to equilibrium by the Gold Standard.

Sometimes touted as an economic cure-all, the Gold Standard posed many practical challenges. Because it essentially created a unified currency zone, the effects of sharp corrections or poor monetary policies were often carried, through trade, into other nations.

The sheer rigidity of the Gold Standard also made it difficult for a relatively fixed money supply to keep pace with the expansion of the global economy. In some decades, gold discoveries lagged behind economic output, causing money shortages. In others, gold rushes caused the money supply to outdistance production, stimulating inflation.

Given the dynamism of the modern global economy, it would prove difficult to revive this system. But in this historical context, the Gold Standard offered the best solution to the complexities of international trade. Despite its imperfections, it brought stable prosperity to the world and linked forty-seven nations through trade by 1914.⁵

Over decades, the economies of the world grew together through Free Trade and the Gold Standard. But World War I was a traumatic shock to this system. Britain lost one of her largest continental customers—Germany—and was one of many nations struggling for economic survival in a period of commercial disruption. Governments commandeered private industry to coordinate the war effort, and disengaged the Gold Standard mechanism to facilitate massive deficit spending.

Released from fiscal restraint, European governments resorted to inflationary policies and heavy borrowing to finance the war. The major combatants squandered $200 billion, about half their combined wealth, on the conflict.⁶ By 1918, the paper bills in circulation had doubled in Britain, tripled in France, and quadrupled in Germany.⁷

Allied borrowing left America with over 40% of world gold reserves and billions of dollars in outstanding European loans.⁸ A tangled web of international debt claims and excess paper currency weakened the ability of money to report accurately the size of national economies in proportion to one another.

The war also severed the connection between domestic monetary policy and international exchange rates. This left the global system woefully out of equilibrium as nations attempted to reconnect their economies through trade. While many nations neared insolvency, an embittered Europe shunned prewar laissez-faire doctrines and sought domestic price stability at the expense of international price stability. The vestiges of the old world lingered, but now countries turned inwards to seek the interwar ideal of autarky, or self-sufficiency.

Before the war, London was the investment capital of the world. Of the 31.5% of British national income derived from trade,⁹ 8% came from overseas investments.¹⁰ But Britain emerged from the war with exports at half their prewar levels and gold reserves dwindling.¹¹ In response, Parliament suspended the export of bullion until 1925, when the country expected to resume a functioning Gold Standard. Restoring trade was imperative to reviving the British economy, but this first required realigning domestic and international price levels.

The only historical guide for Britain’s domestic quandaries was the resumption of gold in 1821.¹² Rather than devalue sterling following the Napoleonic Wars, the Bank of England had chosen to reverse wartime inflation by deflating the currency to its prewar value over six painful years. Britain emerged a colossus, and experienced a century of unprecedented progress.

A Good Idea at the Time

Now, a century later, after a far more devastating war, Bank of England Governor Montagu Norman sought to apply the same methods to bring sterling back to its prewar worth of $4.86.¹³ To this end, he set out to stabilize the global monetary system and return to gold through the international cooperation of central banks. At the Genoa Conference in 1922, Norman helped engineer a new monetary order around the gold-exchange standard.¹⁴ Under this system, currencies of primary countries, such as the United States and Great Britain, were backed by gold and could essentially function as gold in most international transactions. Rather than send bullion to pay for imports, a nation could make payments in gold-backed bills.

Secondary countries not directly tied to gold could use these bills, instead of gold reserves, to issue more paper currency. Since the world’s money supply was not strictly limited to gold, this gold-exchange standard disabled the old Gold Standard’s anti-inflationary mechanism and increased the amount of credit flowing through the international markets.

By 1924, the pound was within 10% of its prewar parity against the dollar.¹⁵ Norman had gained approval to resume the Gold Standard from Philip Snowden, Chancellor of the Exchequer in the first Labour government (January-November 1924). When that government fell, the final decision was left for the incoming Conservative ministry.

Winston Churchill was glowing as he donned the robes his father had worn as Chancellor of the Exchequer and assumed the same high office. His return to the Conservative Party and appointment by the Prime Minister were as big a surprise to him as they were to England. But no shortage of problems awaited him.

After the war, unemployment swelled to 23%¹⁶ before stabilizing at 11.7% in 1923.¹⁷ Hardest hit were the old industries of the North, such as textiles, coal and manufacturing. The war effort had fueled the growth of these industries beyond what could be supported in peacetime, and the postwar malaiserevealed their inefficiencies. Britain had lost ground to industrializing nations before the war and the revived capacities of Europe were providing stiff competition.

The war had also seen union membership balloon, to 8.3 million in 1306 organizations.¹⁸ Unions resisted the deflationary pressure on wages introduced by the central bank, and hindered the adjustment process needed to restore British international competitiveness.

Also, business interests lacked the capital to upgrade their manufacturing capabilities or to risk tapping into new industries. Stalemate and stagnation reigned as Churchill turned to the pressing issue of gold resumption.

Churchill Chooses Gold

Only the “final steps” toward gold remained as Churchill entered office.¹⁹ Four successive governments over five years had unequivocally supported a return to gold, but Churchill recognized the gravity of this decision and began consulting his advisers.²⁰

Since gold was seen as the true form of money in those days, everyone thought the return to gold was inevitable. The only question was the timing; the only controversy was restoring prewar parity. On 31 December 1925, the gold embargo would expire, returning the pound to its prewar value.²¹ Montagu Norman, adamantly insisting that Britain would be ready, devised a plan with Benjamin Strong, the New York Federal Reserve President, to cushion the changeover using American credit. A government committee unanimously endorsed this measure, and only two witnesses testified against resumption at prewar parity.

Churchill was no financial expert, but was unwilling to be pressured into a decision. He endeavored to understand both sides of the issue, floated polemics to elicit answers from the Bank, and invited the dissenters, John Maynard Keynes and Reginald McKenna, to explain their objections over dinner.

McKenna, a former Chancellor of the Exchequer, feared the short-term consequences of the old parity, but was fatalistic: “[Y]ou will have to go back; but it will be hell.”²²

Keynes, however, saw the Gold Standard as “a barbarous relic”²³ and envisioned “a more scientific standard.”²⁴ In his mind, the Gold Standard restricted the government from curing England’s ailing economy through monetary policy. Under the pure paper standard Keynes advocated, the value of money would be determined and manipulated by the government as a means to manage economic growth.

By inflating the money supply to expand credit and increase spending, Keynes believed government experts could revive a stalled economy. This chronic inflation, however, only wears away the value of money and creates a subjective standard of value that obscures the fundamental realities of the economy; it does not create wealth. These policies flood industries with excessive volumes of paper credit and finance unsustainable economic booms that rapidly collapse. Furthermore, the fluctuating value of money increases the volatility of international trade as floating exchange rates plummet and soar based upon international demand for national currencies.

In no way did this system promote the price stability the world desperately needed between the wars. Throughout his lifetime, Keynes was notoriously inconsistent on many of his guiding principles, but was invariably committed to his belief that governments could manufacture prosperity.²⁵ As he expressed these views, nations just across the Channel were self-destructing from extreme doses of the remedies he was proposing for Britain.

As Keynes lobbied Churchill, he correctly noted that prewar parity inflated the value of sterling by 10%. This meant a foreigner had “to pay 10% more in his money or we have to accept 10% less in our money” for exports.²⁶ The Gold Standard would eventually close this price level gap through deflation, but promised a stable international exchange. Keynes wanted a fundamentally different solution: to reduce unemployment by freeing credit and leaving the “foreign exchanges…to look after themselves.”²⁷

British unemployment, however, was structural—caused by fundamental weaknesses in the economy, such as outdated industries. It would not be cured by printing more currency. Keynes failed to see the importance of establishing a stable international exchange, though he did not advocate protectionism (tariffs) until the Great Depression. He believed Britain could find a government-managed prosperity if freed from the inevitable volatilities of trade and international competition.²⁸ Obsessed with the short run, Keynes had no vision except to turn inwards and shelter Britain’s antiquated economy from the invigorating power of competition. The lone voice against gold was one of countless voices around the world advocating the nationalistic pursuit of economic self-sufficiency.

This was a far cry from Churchill’s vision. He felt that the times demanded bold leadership to restore international stability and awaken domestic industry. For Churchill, this issue was not “entirely an economic matter” but “a political decision.”²⁹ Good economic theory traces rational principles to their logical conclusions; it is the mathematical science of producing the most with the least. But applying economic theory in politics involves human activity and uncertainty.

In theory, it would have been easiest to devalue sterling after the war, since there are only painful remedies for currency inflation. To devalue, however, would be comparable to declaring bankruptcy. It would mean that all outstanding currency could only be repurchased at a fraction of its previously guaranteed value.³⁰ By 1925, this would have shattered confidence in sterling and erased any benefits of devaluation by sinking the recovering financial sector.

Churchill could not alter the past—so he made a decision in view of the present. He saw the virtue of gold in establishing “a uniform standard of value to all international transactions.”³¹

Europe’s manipulated currencies had transformed the use of money from an impartial standard of exchange to a weapon of policymakers. It created imbalances as national policy aims devolved into currency crises, or were used to destabilize trading partners for competitive advantages.

In an island nation dependent on trade, these fluctuations had a profound effect on the stability of domestic prices. Rather than finding stability through autarky, or at the expense of other nations, Churchill hoped Britain’s financial influence would restore fair competition to the globe and temper wartime rivalries. The longer Britain waited, the more her influence waned in establishing a stable international system.

The overseas Empire was growing restive waiting for Britain to move. The Dominions were contemplating returning to gold independently, “not on the basis of the pound sterling, but of the dollar.”³² This was alarming. Nations conducting business in pounds (later called the “sterling bloc”) represented a crucial monetary network in the interwar years. Its demise would have spelled disaster for the Empire.³³ The preservation of the sterling bloc alone would have justified the return to gold and spared Britain the worst of the Great Depression that followed.

The “spectacle of Britain possessing the finest credit in the world simultaneously with a million and a quarter unemployed” troubled Churchill.³⁴ Contrary to popular prejudices, his primary concern was not with wealthy interests, but with the working class. It was they who bore the painfully slow transition out of war. He said he preferred to see “Finance less proud and Industry more content.”³⁵ He chose the Gold Standard because he genuinely believed it would benefit all classes in the long run.

Churchill was initially reluctant to pursue a policy that would raise the cost of exports, but was told that overvaluation of the pound could be as low as 2% (the estimates varied greatly).³⁶ Furthermore, the world was soon expected to encounter an inflationary period; the rise in global prices would shorten the fall of the pound necessary to reach parity, and ease the adjustment of exchange rates. The deflationary pressure on prices would cause difficulty, but Churchill warned Parliament that “to inflate our currency…in order to produce hectic expansion not warranted by underlying facts” would cause “widespread misery.”³⁷ The British economy had to convert the wartime juggernaut into a sustainable pattern of production. The Gold Standard promised to put Britain in tune with the economic forces driving growth, and in Churchill’s words, “shackle us to reality.”³⁸

On 28 April 1925, Churchill submitted the annual budget and announced Britain’s return to gold.³⁹ He made the best choice he could with the information he had and then committed the vindication of his decision to forces outside of his control.

The General strike

Within five months labor became restless, with wages declining under the weight of deflation. The electorate craved the stability of gold, but wished to preserve jobs in unsustainably large industries. English exporters in the textile, shipbuilding, and steelmaking sectors had begun to lag behind their international competitors before the war and immediately felt the pressure of the Gold Standard. British coal mining suffered from restoration of coal production in Germany’s Ruhr district, in addition to increasing export prices.⁴⁰

The government had issued a £10 million subsidy to ease the downward pressure on wages, but pay cuts accelerated as these funds ran dry.⁴¹ In May 1926, the Trades Union Congress (TUC) quit wage negotiations and called for a General Strike: six million Britons walked off their jobs, and the country was brought to a near-standstill.⁴²

For nine days, industry was disrupted—at a cost of £800 million before union funds were exhausted and the TUC capitulated.⁴³ Britain emerged divided along class lines, with static prices gridlocking the economy. Unemployment— increased more by the strike than by gold resumption—remained high for the rest of the decade.

As a self-described “unrepentant Free-Trader,” Churchill resisted the voices from within his own Conservative Party calling for protectionist tariffs.⁴⁴ Instead, he looked to Free Trade and the Gold Standard as the means to economic revitalization. But these twin pillars of prewar economic expansion required maximum efficiency in the domestic marketplace; obstacles, like high taxation and heavy regulation had to be removed to remain competitive.

Britain failed to make these adjustments. The war had brought a dramatic increase in taxation, which severely limited private investment. Immediately after the war, the income tax was nearly five times higher than it had been in 1913⁴⁵ and never sank below four times the prewar rate.⁴⁶

High taxes diverted national resources to the massive war debts owed to the United States. By 1929, debt service and repayment costs were consuming 46% of Britain’s annual budget. Although the UK had loaned other nations twice what she had borrowed, her creditors were slow and uncooperative in repaying their own debts.⁴⁷

As Chancellor, Churchill was forced to retain some protectionist vestiges of the war as sources of revenue, in order to balance the budget. High taxation, lingering regulations and expensive social programs were a drain on national resources. In both public and private sectors, these powerful factors were preventing the movement of the Gold Standard towards equilibrium.

Gold did motivate some “entrepreneurs to switch from old, low-productivity industries to new ones—electronics, automobiles, aeronautics,” but Britain remained over-invested in traditional, staple industries.⁴⁸ Thus growth was lethargic. Yet the financial accountability of the Gold Standard exerted a tremendous discipline on national finances, and had provided a slightly favorable balance of trade by the end of the decade.⁴⁹

Many assume—I think wrongly—that the Keynesian alternative would have produced prosperity. But Britain suffered the same sluggish growth under floating exchange rates, when the pound was on 10% “discount”—and after the pound was devalued in 1931, 1949, and 1967.⁵⁰

Once Britain had returned to gold, Keynes did not support devaluation or advocate formally repealing the Gold Standard until 1931, when the international monetary order collapsed.⁵¹

The Aftermath

By 1927, gold was leaving Britain at an alarming rate.⁵² Searching for security and fearful of inflation, France in 1926 intentionally undervalued her currency to undercut British trade, and began redeeming sterling notes for English bullion.⁵³ Rather than issuing paper currency for these gold inflows, the French “sterilized” (hoarded bullion) to prevent domestic prices from rising and stabilizing their economy. Under the old rules of the game, the Bank of England would have increased interest rates to draw gold back into its reserves. But this was now politically impossible, since it was already hard enough to borrow capital in a period of prolonged deflation.

Montagu Norman anxiously appealed for help to Benjamin Strong, who lowered American discount rates to reverse the exodus of British gold. This easy-money policy unleashed a speculative fervor in America that sent stock markets soaring, and poured even more credit into world markets. Growing American loans enabled Germany to finance reparation payments and build its own gold reserve.

Within a year, however, the U.S. Federal Reserve became alarmed by reckless speculation and hastily reversed course. German and English gold reserves followed high interest rates back to the United States, where the Fed began to sterilize them to prevent inflation. While expanding credit was filtering through world markets, the gold supply it was built upon was disappearing.

The world system buckled under all of this intensifying stress and finally disintegrated after the 1929 Wall Street Crash—but it was not the fault of Churchill’s orthodox monetary ideals. Great Britain had returned to a type of Gold Standard called a “bullion standard,” under which currency could be redeemed only in gold bars. This bought time to restore confidence in sterling—but at the same time it prevented average citizens from obtaining gold and influencing the central bank’s decisions. The concentration of monetary policy in the Bank of England freed Montagu Norman to pursue his internationalist vision of monetary cooperation through the gold- exchange mechanism.

The gold-exchange standard, which John Maynard Keynes worked to reestablish in the Bretton Woods Agreement after he drifted toward Norman’s style of internationalism during World War II, disastrously mingled the restrictive foundation of gold with the elastic effects of controlled currency in most central banks.⁵⁴ Without the classical system’s safety mechanisms, central banks had far more latitude over monetary policy, and—as today—foolishly attempted to tame market forces with it.

What Churchill described as an “unwholesome accumulation of gold” in American and French vaults would trigger a global money shortage over a prolonged deflationary period, and eventually break the interwar Gold Standard system.⁵⁵ Since all sides wanted a stable international market slanted towards their interests, mutual distrust spread as banks broke the rules of the game. The antagonisms of the Great War lived on through these rogue policies, and gradually reemerged as economic times worsened.

The whole business ended where it had begun, in the destruction of world war. Churchill had labored to steer Britain towards peace under a stable world order, but the currents of the times overwhelmed his efforts.

There was no silver bullet for these problems; all options had costs. Churchill, guided by prudence, tried to chart a course through many uncertainties to bring about his vision. The Gold Standard was the most promising means to this end. In choosing it, he made the best decision.⁵⁶ His choice, after all, had been between joining the economic skirmishes of Europe, and aiming to create stability.

As “a man within the horizons,” it was impossible for Churchill to foresee the results of his decision.⁵⁶ Once the outcome was clear, he looked back and did regret the return to gold.⁵⁷ Hindsight showed the gold-exchange standard was a trap: Britain would “waste her pain” by abandoning gold in 1931, exposing hopes of international concord as vanity.⁵⁸

Knowing that history can reward excellence with failure is the burden of the statesman. From his rapid rise to high office and his struggles through political exile, Churchill consistently resisted the drift towards war. His return to power and greatest triumph would be under the auspices of another war he had labored tirelessly to prevent.

End Notes

1. D.E. Moggridge, The Return to Gold 1925: The Formulation of Economic Policy and its Critics (London: Cambridge University Press, 1969), 9.

2. P.J. Cain, “Economics and Empire: The Metropolitan Context” in Andrew Porter, ed., The Oxford History of the British Empire, vol. 3, The Nineteenth Century (New York: Oxford University Press, 1999), 42.

3. Henry Hazlitt, What You Should Know About Inflation (Princeton, New Jersey: Van Nostrand Press, 1965), 3.

4. Ibid., 37.

5. Melchior Palyi, The Twilight of Gold, 1914- 1936: Myths and Realities (Chicago: Regnery, 1972), 8.

6. Liaquat Ahamed, Lords of Finance: The Bankers Who Broke the World (New York: Penguin, 2009), 100.

7. Ibid., 87.

8. Palyi, The Twilight of Gold, 46.

9. Avner Offer, “Costs and Benefits, Prosperity, and Security, 1870-1914,” in The Oxford History of the British Empire, vol. 3, 695.

10. Ibid., 693.

11. Moggridge, Return to Gold, 14.

12. Cecil C. Carpenter, “The English Specie Resumption of 1821,” in the Southern Economic Journal, vol 5, no. 1 (July 1938): 45-54, http://www.jstor.org/pss/3693802.

13. Moggridge, Return to Gold, 35.

14. Palyi, The Twilight of Gold, 48.

15. Hazlitt, What You Need to Know About Inflation, 48.

16. Moggridge, Return to Gold, 16.

17. Francis Wrigley Hirst, The Consequences of the War to Great Britain (New York: Greenwood Press, 1968), 283.

18. C.E. Black and E.C. Helmreich, Twentieth Century Europe: A History, 2nd ed. (New York: Knopf, 1967), 283.

19. Winston S. Churchill, “Revised Budget Proposals,” House of Commons, 15 September 1931, in Robert Rhodes James, ed., Winston S. Churchill: His Complete Speeches 1897-1963, 8 vols. (New York: Bowker, 1974), V 5075.

20. Churchill, “Gold Standard Bill,” 5 August 1925, Complete Speeches, IV 3742.

21. R.S. Sayers, “The Return to Gold, 1925” in Sidney Pollard, ed., The Gold Standard and Employment Policies Between the Wars (London: Methuen, 1970), 85.

22. Grigg’s account is in Martin Gilbert, Winston S. Churchill, vol. IV The Prophet of Truth 1922-1939 (Boston: Houghton Mifflin, 1976), 100.

23. John Maynard Keynes, “A Tract on Monetary Reform” in Royal Economic Society, The Collected Writings of John Maynard Keynes, vol. 4 (London: Macmillan, 1971), 138.

24. Ibid., 132.

25. Hunter Lewis, Where Keynes Went Wrong: and Why World Governments Keep Creating Inflation, Bubbles, and Busts (Mount Jackson, Virginia: Axios Press, 2009), 257.

26. John Maynard Keynes, “The Economic Consequences of Mr. Churchill” in Pollard, The Gold Standard and Employment Policies, 27.

27. John Maynard Keynes, “A Tract on Monetary Reform,” Collected Writings, IV 146.

28. Palyi, The Twilight of Gold, 88.

29. Grigg’s account is in Gilbert, The Prophet of Truth, 100.

30. Hazlitt, What You Should Know About Inflation, 24.

31. Churchill, “Budget Speech,” 28 April 1925, Complete Speeches, IV 3562.

32. Churchill, 5 August 1925, op. cit., IV 3742.

33. D.K . Fieldhouse, “The Metropolitan Economics of Empire.” in Judith M. Brown and William Roger Lewis, eds., The Oxford History of the British Empire, vol. 4, The Twentieth Century (New York: Oxford University Press, 1999), 94.

34. Winston S. Churchill to Otto Niemeyer (Churchill Papers 18/12), 22 February1925, in Gilbert, The Prophet of Truth, 97.

35. As above, in Martin Gilbert, Winston S. Churchill, Companion Volume 5 Part 1 (Boston: Houghton Mifflin, 1966), 412.

36. Moggridge, Return to Gold, 50.

37. Churchill, “Return to Gold,” 4 May 1925, Complete Speeches, IV 3598.

38. Ibid., 3598.

39. Moggridge, Return to Gold, 9.

40. Hirst, The Consequences of the War, 283.

41. A.J. Youngson, The British Economy: 1920- 1957 (Cambridge: Harvard University Press, 1960), 40.

42. William Manchester, The Last Lion, vol. 1, 1874-1932 (Boston: Little Brown, 1983), 795-98.

43. Ibid., 795.

44. Winston S. Churchill, speech at Chingford, 14 June 1929, Churchill Centre, http://bit.ly/tg4ByM.

45. Youngson, The British Economy: 1920-1957, 59.

46. Philip S. Bagwell & G.E. Mingay, Britain and America: A Study of Economic Change 1850-1939 (New York: Praeger, 1970), 248.

47. Youngson, The British Economy: 1920-1957, 52.

48. Paul Johnson, Churchill (New York: Viking, 2009), 77.

49. Youngson, The British Economy: 1920-1957, 54.

50. Palyi, 86.

51. Moggridge, Return to Gold, 9.

52. Jim Powell, FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression (New York: Crown Forum, 2003), 27.

53. Douglas A. Irwin, “Did France Cause the Great Depression?” (Paper, Dartmouth College and the National Bureau of Economic Research, 2010), 16.

54. Palyi, The Twilight of Gold, 141.

55. Churchill, Bristol University, 27 June 1931, Complete Speeches, V 5052.

56. Justin D. Lyons Lecture on Statesmanship, Ashland University, March 2010.

57. R.A. Sayers, “The Return to Gold” in The Gold Standard and Unemployment Policies, 88.

58. Moggridge, The Return to Gold, 9.