This classic work, originally published in 1975, is the definitive history of the great inflation in Weimar Germany, culminating in the archetypal paroxysm of hyperinflation in the Fall of 1923, when Reichsbank printing presses were cranking out 100 trillion (1012) mark banknotes as fast as paper could be fed to them, and government expenditures were 6 quintillion (1018) marks while, in perhaps the greatest achievement in deficit spending of all time, revenues in all forms accounted for only 6 quadrillion (1015) marks. The book has long been out of print and much in demand by students of monetary madness, driving the price of used copies into the hundreds of dollars (although, to date, not trillions and quadrillions—patience). Fortunately for readers interested in the content and not collectibility, the book has been re-issued in a new paperback and electronic edition, just as inflation has come back onto the radar in the over-leveraged economies of the developed world. The main text is unchanged, and continues to use mid-1970s British nomenclature for large numbers (“millard” for 109, “billion” for 1012 and so on) and pre-decimalisation pounds, shillings, and pence for Sterling values. A new note to this edition explains how to convert the 1975 values used in the text to their approximate present-day equivalents.
The Weimar hyperinflation is an oft-cited turning point in twentieth century, but like many events of that century, much of the popular perception and portrayal of it in the legacy media is incorrect. This work is an in-depth antidote to such nonsense, concentrating almost entirely upon the inflation itself, and discussing other historical events and personalities only when relevant to the main topic. To the extent people are aware of the German hyperinflation at all, they'll usually describe it as a deliberate and cynical ploy by the Weimar Republic to escape the reparations for World War I exacted under the Treaty of Versailles by inflating away the debt owed to the Allies by debasing the German mark. This led to a cataclysmic episode of hyperinflation where people had to take a wheelbarrow of banknotes to the bakery to buy a loaf of bread and burning money would heat a house better than the firewood or coal it would buy. The great inflation and the social disruption it engendered led directly to the rise of Hitler. What's wrong with this picture? Well, just about everything…. Inflation of the German mark actually began with the outbreak of World War I in 1914 when the German Imperial government, expecting a short war, decided to finance the war effort by deficit spending and printing money rather than raising taxes. As the war dragged on, this policy continued and was reinforced, since it was decided that adding heavy taxes on top of the horrific human cost and economic privations of the war would be disastrous to morale. As a result, over the war years of 1914–1918 the value of the mark against other currencies fell by a factor of two and was halved again in the first year of peace, 1919. While Germany was committed to making heavy reparation payments, these payments were denominated in gold, not marks, so inflating the mark did nothing to reduce the reparation obligations to the Allies, and thus provided no means of escaping them. What inflation and the resulting cheap mark did, however, was to make German exports cheap on the world market. Since export earnings were the only way Germany could fund reparations, promoting exports through inflation was both a way to accomplish this and to promote social peace through full employment, which was in fact achieved through most of the early period of inflation. By early 1920 (well before the hyperinflationary phase is considered to have kicked in), the mark had fallen to one fortieth of its prewar value against the British pound and U.S. dollar, but the cost of living in Germany had risen only by a factor of nine. This meant that German industrialists and their workers were receiving a flood of marks for the products they exported which could be spent advantageously on the domestic market. Since most of Germany's exports at the time relied little on imported raw materials and products, this put Germany at a substantial advantage in the world market, which was much remarked upon by British and French industrialists at the time, who were prone to ask, “Who won the war, anyway?”. While initially beneficial to large industry and its organised labour force which was in a position to negotiate wages that kept up with the cost of living, and a boon to those with mortgaged property, who saw their principal and payments shrink in real terms as the currency in which they were denominated declined in value, the inflation was disastrous to pensioners and others on fixed incomes denominated in marks, as their standard of living inexorably eroded. The response of the nominally independent Reichsbank under its President since 1908, Dr. Rudolf Havenstein, and the German government to these events was almost surreally clueless. As the originally mild inflation accelerated into dire inflation and then headed vertically on the exponential curve into hyperinflation they universally diagnosed the problem as “depreciation of the mark on the foreign exchange market” occurring for some inexplicable reason, which resulted in a “shortage of currency in the domestic market”, which could only be ameliorated by the central bank's revving up its printing presses to an ever-faster pace and issuing notes of larger and larger denomination. The concept that this tsunami of paper money might be the cause of the “depreciation of the mark” both at home and abroad, never seemed to enter the minds of the masters of the printing presses. It's not like this hadn't happened before. All of the sequelæ of monetary inflation have been well documented over forty centuries of human history, from coin clipping and debasement in antiquity through the demise of every single unbacked paper currency ever created. Lord D'Abernon, the British ambassador in Berlin and British consular staff in cities across Germany precisely diagnosed the cause of the inflation and reported upon it in detail in their dispatches to the Foreign Office, but their attempts to explain these fundamentals to German officials were in vain. The Germans did not even need to look back in history at episodes such as the assignat hyperinflation in revolutionary France: just across the border in Austria, a near-identical hyperinflation had erupted just a few years earlier, and had eventually been stabilised in a manner similar to that eventually employed in Germany. The final stages of inflation induce a state resembling delirium, where people seek to exchange paper money for anything at all which might keep its value even momentarily, farmers with abundant harvests withhold them from the market rather than exchange them for worthless paper, foreigners bearing sound currency descend upon the country and buy up everything for sale at absurdly low prices, employers and towns, unable to obtain currency to pay their workers, print their own scrip, further accelerating the inflation, and the professional and middle classes are reduced to penury or liquidated entirely, while the wealthy, industrialists, and unionised workers do reasonably well by comparison. One of the principal problems in coping with inflation, whether as a policy maker or a citizen or business owner attempting to survive it, is inherent in its exponential growth. At any moment along the path, the situation is perceived as a “crisis” and the current circumstances “unsustainable”. But an exponential curve is self-similar: when you're living through one, however absurd the present situation may appear to be based on recent experience, it can continue to get exponentially more bizarre in the future by the inexorable continuation of the dynamic driving the curve. Since human beings have evolved to cope with mostly linear processes, we are ill-adapted to deal with exponential growth in anything. For example, we run out of adjectives: after you've used up “crisis”, “disaster”, “calamity”, “catastrophe”, “collapse”, “crash”, “debacle”, “ruin”, “cataclysm”, “fiasco”, and a few more, what do you call it the next time they tack on three more digits to all the money? This very phenomenon makes it difficult to bring inflation to an end before it completely undoes the social fabric. The longer inflation persists, the more painful wringing it out of an economy will be, and consequently the greater the temptation to simply continue to endure the ruinous exponential. Throughout the period of hyperinflation in Germany, the fragile government was painfully aware that any attempt to stabilise the currency would result in severe unemployment, which radical parties of both the Left and Right were poised to exploit. In fact, the hyperinflation was ended only by the elected government essentially ceding its powers to an authoritarian dictatorship empowered to put down social unrest as the costs of its policies were felt. At the time the stabilisation policies were put into effect in November 1923, the mark was quoted at six trillion to the British pound, and the paper marks printed and awaiting distribution to banks filled 300 ten-ton railway boxcars. What lessons does this remote historical episode have for us today? A great many, it seems to me. First and foremost, when you hear pundits holding forth about the Weimar inflation, it's valuable to know that much of what they're talking about is folklore and conventional wisdom which has little to do with events as they actually happened. Second, this chronicle serves to remind the reader of the one simple fact about inflation that politicians, bankers, collectivist media, organised labour, and rent-seeking crony capitalists deploy an entire demagogic vocabulary to conceal: that inflation is caused by an increase in the money supply, not by “greed”, “shortages”, “speculation”, or any of the other scapegoats trotted out to divert attention from where blame really lies: governments and their subservient central banks printing money (or, in current euphemism, “quantitative easing”) to stealthily default upon their obligations to creditors. Third, wherever and whenever inflation occurs, its ultimate effect is the destruction of the middle class, which has neither the political power of organised labour nor the connections and financial resources of the wealthy. Since liberal democracy is, in essence, rule by the middle class, its destruction is the precursor to establishment of authoritarian rule, which will be welcomed after the once-prosperous and self-reliant bourgeoisie has been expropriated by inflation and reduced to dependence upon the state. The Weimar inflation did not bring Hitler to power—for one thing the dates just don't work. The inflation came to an end in 1923, the year Hitler's beer hall putsch in Munich failed ignominiously and resulted in his imprisonment. The stabilisation of the economy in the following years was widely considered the death knell for radical parties on both the Left and Right, including Hitler's. It was not until the onset of the Great Depression following the 1929 crash that rising unemployment, falling wages, and a collapsing industrial economy as world trade contracted provided an opening for Hitler, and he did not become chancellor until 1933, almost a decade after the inflation ended. And yet, while there was no direct causal connection between the inflation and Hitler's coming to power, the erosion of civil society and the rule of law, the destruction of the middle class, and the lingering effects of the blame for these events being placed on “speculators” all set the stage for the eventual Nazi takeover. The technology and complexity of financial markets have come a long way from “Railway Rudy” Havenstein and his 300 boxcars of banknotes to “Helicopter Ben” Bernanke. While it used to take years of incompetence and mismanagement, leveling of vast forests, and acres of steam powered printing presses to destroy an industrial and commercial republic and impoverish those who sustain its polity, today a mere fat-finger on a keyboard will suffice. And yet the dynamic of inflation, once unleashed, proceeds on its own timetable, often taking longer than expected to corrode the institutions of an economy, and with ups and downs which tempt investors back into the market right before the next sickening slide. The endpoint is always the same: destruction of the middle class and pensioners who have provided for themselves and the creation of a dependent class of serfs at the mercy of an authoritarian regime. In past inflations, including the one documented in this book, this was an unintended consequence of ill-advised monetary policy. I suspect the crowd presently running things views this as a feature, not a bug. A Kindle edition is available, in which the table of contents and notes are properly linked to the text, but the index is simply a list of terms, not linked to their occurrences in the text.In an information economy, growth springs not from power but from knowledge. Crucial to the growth of knowledge is learning, conducted across an economy through the falsifiable testing of entrepreneurial ideas in companies that can fail. The economy is a test and measurement system, and it requires reliable learning guided by an accurate meter of monetary value.Money, then, is the means by which information is transmitted within the economy. It allows comparing the value of completely disparate things: for example the services of a neurosurgeon and a ton of pork bellies, even though it is implausible anybody has ever bartered one for the other. When money is stable (its supply is fixed or grows at a constant rate which is small compared to the existing money supply), it is possible for participants in the economy to evaluate various goods and services on offer and, more importantly, make long term plans to create new goods and services which will improve productivity. When money is manipulated by governments and their central banks, such planning becomes, in part, a speculation on the value of currency in the future. It's like you were operating a textile factory and sold your products by the metre, and every morning you had to pick up the Wall Street Journal to see how long a metre was today. Should you invest in a new weaving machine? Who knows how long the metre will be by the time it's installed and producing? I'll illustrate the information theory of value in the following way. Compare the price of the pile of raw materials used in making a BMW (iron, copper, glass, aluminium, plastic, leather, etc.) with the finished automobile. The difference in price is the information embodied in the finished product—not just the transformation of the raw materials into the car, but the knowledge gained over the decades which contributed to that transformation and the features of the car which make it attractive to the customer. Now take that BMW and crash it into a bridge abutment on the autobahn at 200 km/h. How much is it worth now? Probably less than the raw materials (since it's harder to extract them from a jumbled-up wreck). Every atom which existed before the wreck is still there. What has been lost is the information (what electrical engineers call the “magic smoke”) which organised them into something people valued. When the value of money is unpredictable, any investment is in part speculative, and it is inevitable that the most lucrative speculations will be those in money itself. This diverts investment from improving productivity into financial speculation on foreign exchange rates, interest rates, and financial derivatives based upon them: a completely unproductive zero-sum sector of the economy which didn't exist prior to the abandonment of fixed exchange rates in 1971. What happened in 1971? On August 15th of that year, President Richard Nixon unilaterally suspended the convertibility of the U.S. dollar into gold, setting into motion a process which would ultimately destroy the Bretton Woods system of fixed exchange rates which had been created as a pillar of the world financial and trade system after World War II. Under Bretton Woods, the dollar was fixed to gold, with sovereign holders of dollar reserves (but not individuals) able to exchange dollars and gold in unlimited quantities at the fixed rate of US$ 35/troy ounce. Other currencies in the system maintained fixed exchange rates with the dollar, and were backed by reserves, which could be held in either dollars or gold. Fixed exchange rates promoted international trade by eliminating currency risk in cross-border transactions. For example, a German manufacturer could import raw materials priced in British pounds, incorporate them into machine tools assembled by workers paid in German marks, and export the tools to the United States, being paid in dollars, all without the risk that a fluctuation by one or more of these currencies against another would wipe out the profit from the transaction. The fixed rates imposed discipline on the central banks issuing currencies and the governments to whom they were responsible. Running large trade deficits or surpluses, or accumulating too much public debt was deterred because doing so could force a costly official change in the exchange rate of the currency against the dollar. Currencies could, in extreme circumstances, be devalued or revalued upward, but this was painful to the issuer and rare. With the collapse of Bretton Woods, no longer was there a link to gold, either direct or indirect through the dollar. Instead, the relative values of currencies against one another were set purely by the market: what traders were willing to pay to buy one with another. This pushed the currency risk back onto anybody engaged in international trade, and forced them to “hedge” the currency risk (by foreign exchange transactions with the big banks) or else bear the risk themselves. None of this contributed in any way to productivity, although it generated revenue for the banks engaged in the game. At the time, the idea of freely floating currencies, with their exchange rates set by the marketplace, seemed like a free market alternative to the top-down government-imposed system of fixed exchange rates it supplanted, and it was supported by champions of free enterprise such as Milton Friedman. The author contends that, based upon almost half a century of experience with floating currencies and the consequent chaotic changes in exchange rates, bouts of inflation and deflation, monetary induced recessions, asset bubbles and crashes, and interest rates on low-risk investments which ranged from 20% to less than zero, this was one occasion Prof. Friedman got it wrong. Like the ever-changing metre in the fable of the textile factory, incessantly varying money makes long term planning difficult to impossible and sends the wrong signals to investors and businesses. In particular, when interest rates are forced to near zero, productive investment which creates new assets at a rate greater than the interest rate on the borrowed funds is neglected in favour of bidding up the price of existing assets, creating bubbles like those in real estate and stocks in recent memory. Further, since free money will not be allocated by the market, those who receive it are the privileged or connected who are first in line; this contributes to the justified perception of inequality in the financial system. Having judged the system of paper money with floating exchange rates a failure, Gilder does not advocate a return to either the classical gold standard of the 19th century or the Bretton Woods system of fixed exchange rates with a dollar pegged to gold. Preferring to rely upon the innovation of entrepreneurs and the selection of the free market, he urges governments to remove all impediments to the introduction of multiple, competitive currencies. In particular, the capital gains tax would be abolished for purchases and sales regardless of the currency used. (For example, today you can obtain a credit card denominated in euros and use it freely in the U.S. to make purchases in dollars. Every time you use the card, the dollar amount is converted to euros and added to the balance on your bill. But, strictly speaking, you have sold euros and bought dollars, so you must report the transaction and any gain or loss from change in the dollar value of the euros in your account and the value of the ones you spent. This is so cumbersome it's a powerful deterrent to using any currency other than dollars in the U.S. Many people ignore the requirement to report such transactions, but they're breaking the law by doing so.) With multiple currencies and no tax or transaction reporting requirements, all will be free to compete in the market, where we can expect the best solutions to prevail. Using whichever currency you wish will be as seamless as buying something with a debit or credit card denominated in a currency different than the one of the seller. Existing card payment systems have a transaction cost which is so high they are impractical for “micropayment” on the Internet or for fully replacing cash in everyday transactions. Gilder suggests that Bitcoin or other cryptocurrencies based on blockchain technology will probably be the means by which a successful currency backed 100% with physical gold or another hard asset will be used in transactions. This is a thoughtful examination of the problems of the contemporary financial system from a perspective you'll rarely encounter in the legacy financial media. The root cause of our money problems is the money: we have allowed governments to inflict upon us a monopoly of government-managed money, which, unsurprisingly, works about as well as anything else provided by a government monopoly. Our experience with this flawed system over more than four decades makes its shortcomings apparent, once you cease accepting the heavy price we pay for them as the normal state of affairs and inevitable. As with any other monopoly, all that's needed is to break the monopoly and free the market to choose which, among a variety of competing forms of money, best meet the needs of those who use them. Here is a Bookmonger interview with the author discussing the book.
Does it always take work to construct constraints? No, as we will soon see. Does it often take work to construct constraints? Yes. In those cases, the work done to construct constraints is, in fact, another coupling of spontaneous and nonspontaneous processes. But this is just what we are suggesting must occur in autonomous agents. In the universe as a whole, exploding from the big bang into this vast diversity, are many of the constraints on the release of energy that have formed due to a linking of spontaneous and nonspontaneous processes? Yes. What might this be about? I'll say it again. The universe is full of sources of energy. Nonequilibrium processes and structures of increasing diversity and complexity arise that constitute sources of energy that measure, detect, and capture those sources of energy, build new structures that constitute constraints on the release of energy, and hence drive nonspontaneous processes to create more such diversifying and novel processes, structures, and energy sources.I have not cherry-picked this passage; there are hundreds of others like it. Given the complexity of the technical material and the difficulty of the concepts being explained, it seems to me that the straightforward, unaffected Point A to Point B style of explanation which Isaac Asimov employed would work much better. Pardon my audacity, but allow me to rewrite the above paragraph.
Autonomous agents require energy, and the universe is full of sources of energy. But in order to do work, they require energy to be released under constraints. Some constraints are natural, but others are constructed by autonomous agents which must do work to build novel constraints. A new constraint, once built, provides access to new sources of energy, which can be exploited by new agents, contributing to an ever growing diversity and complexity of agents, constraints, and sources of energy.Which is better? I rewrite; you decide. The tone of the prose is all over the place. In one paragraph he's talking about Tomasina the trilobite (p. 129) and Gertrude the ugly squirrel (p. 131), then the next thing you know it's “Here, the hexamer is simplified to 3'CCCGGG5', and the two complementary trimers are 5'GGG3' + 5'CCC3'. Left to its own devices, this reaction is exergonic and, in the presence of excess trimers compared to the equilibrium ratio of hexamer to trimers, will flow exergonically toward equilibrium by synthesizing the hexamer.” (p. 64). This flipping back and forth between colloquial and scholarly voices leads to a kind of comprehensional kinetosis. There are a few typographical errors, none serious, but I have to share this delightful one-sentence paragraph from p. 254 (ellipsis in the original):
By iteration, we can construct a graph connecting the founder spin network with its 1-Pachner move “descendants,” 2-Pachner move descendints…N-Pachner move descendents.Good grief—is Oxford University Press outsourcing their copy editing to Slashdot? For the reasons given above, I found this a difficult read. But it is an important book, bristling with ideas which will get you looking at the big questions in a different way, and speculating, along with the author, that there may be some profound scientific insights which science has overlooked to date sitting right before our eyes—in the biosphere, the economy, and this fantastically complicated universe which seems to have emerged somehow from a near-thermalised big bang. While Kauffman is the first to admit that these are hypotheses and speculations, not science, they are eminently testable by straightforward scientific investigation, and there is every reason to believe that if there are, indeed, general laws that govern these phenomena, we will begin to glimpse them in the next few decades. If you're interested in these matters, this is a book you shouldn't miss, but be aware what you're getting into when you undertake to read it.
Oil powers just about everything in the US economy, from food production and distribution to shipping, construction and plastics manufacturing. When less oil becomes available, less is produced, but the amount of money in circulation remains the same, causing the prices for the now scarcer products to be bid up, causing inflation. The US relies on foreign investors to finance its purchases of oil, and foreign investors, seeing high inflation and economic turmoil, flee in droves. Result: less money with which to buy oil and, consequently, less oil with which to produce things. Lather, rinse, repeat; stop when you run out of oil. Now look around: Where did that economy disappear to?Now if you believe in Peak Oil (as the author most certainly does, along with most of the rest of the catechism of the environmental left), this is pretty persuasive. But even if you don't, you can make the case for a purely economic collapse, especially with the unprecedented deficits and money creation as the present process of deleveraging accelerates into debt liquidation (either through inflation or outright default and bankruptcy). The ultimate trigger doesn't make a great deal of difference to the central argument: the U.S. runs on oil (and has no near-term politically and economically viable substitute) and depends upon borrowed money both to purchase oil and to service its ever-growing debt. At the moment creditors begin to doubt they're every going to be repaid (as happened with the Soviet Union in its final days), it's game over for the economy, even if the supply of oil remains constant. Drawing upon the Soviet example, the author examines what an economic collapse on a comparable scale would mean for the U.S. Ironically, he concludes that many of the weaknesses which were perceived as hastening the fall of the Soviet system—lack of a viable cash economy, hoarding and self-sufficiency at the enterprise level, failure to produce consumer goods, lack of consumer credit, no private ownership of housing, and a huge and inefficient state agricultural sector which led many Soviet citizens to maintain their own small garden plots— resulted, along with the fact that the collapse was from a much lower level of prosperity, in mitigating the effects of collapse upon individuals. In the United States, which has outsourced much of its manufacturing capability, depends heavily upon immigrants in the technology sector, and has optimised its business models around high-velocity cash transactions and just in time delivery, the consequences post-collapse may be more dire than in the “primitive” Soviet system. If you're going to end up primitive, you may be better starting out primitive. The author, although a U.S. resident for all of his adult life, did not seem to leave his dark Russian cynicism and pessimism back in the USSR. Indeed, on numerous occasions he mocks the U.S. and finds it falls short of the Soviet standard in areas such as education, health care, public transportation, energy production and distribution, approach to religion, strength of the family, and durability and repairability of capital and the few consumer goods produced. These are indicative of what he terms a “collapse gap”, which will leave the post-collapse U.S. in much worse shape than ex-Soviet Russia: in fact he believes it will never recover and after a die-off and civil strife, may fracture into a number of political entities, all reduced to a largely 19th century agrarian lifestyle. All of this seems a bit much, and is compounded by offhand remarks about the modern lifestyle which seem to indicate that his idea of a “sustainable” world would be one largely depopulated of humans in which the remainder lived in communities much like traditional African villages. That's what it may come to, but I find it difficult to see this as desirable. Sign me up for L. Neil Smith's “freedom, immortality, and the stars” instead. The final chapter proffers a list of career opportunities which proved rewarding in post-collapse Russia and may be equally attractive elsewhere. Former lawyers, marketing executives, financial derivatives traders, food chemists, bank regulators, university administrators, and all the other towering overhead of drones and dross whose services will no longer be needed in post-collapse America may have a bright future in the fields of asset stripping, private security (or its mirror image, violent racketeering), herbalism and medical quackery, drugs and alcohol, and even employment in what remains of the public sector. Hit those books! There are some valuable insights here into the Soviet collapse as seen from the perspective of citizens living through it and trying to make the best of the situation, and there are some observations about the U.S. which will make you think and question assumptions about the stability and prospects for survival of the economy and society on its present course. But there are so many extreme statements you come away from the book feeling like you've endured an “end is nigh” rant by a wild-eyed eccentric which dilutes the valuable observations the author makes.
Perhaps the most important distinction is between what sounds good and what works. The former may be sufficient for purposes of politics or moral preening, but not for the economic advancement of people in general or the poor in particular. For those willing to stop and think, basic economics provides some tools for evaluating policies and proposals in terms of their logical implications and empirical consequences.And this is precisely what the intelligent citizen needs to know in these times of financial peril. I know of no better source to acquire such knowledge than this book. I should note that due to the regrettably long bookshelf latency at Fourmilab, I read the second edition of this work after the third edition became available. Usually I wouldn't bother to mention such a detail, but while the second edition I read was 438 pages in length, the third is a 640 page ker-whump on the desktop. Now, my experience in reading the works of Thomas Sowell over the decades is that he doesn't waste words and that every paragraph encapsulates wisdom that's worth taking away, even if you need to read it four or five times over a few days to let it sink in. But still, I'm wary of books which grow to such an extent between editions. I read the second edition, and my unconditional endorsement of it as something you absolutely have to read as soon as possible is based upon the text I read. In all probability the third edition is even better—Dr. Sowell understands the importance of reputation in a market economy better than almost anybody, but I can neither evaluate nor endorse something I haven't yet read. That said, I'm confident that regardless of which edition of this book you read, you will close it as a much wiser citizen of a civil society and participant in a free economy than when you opened the volume.
Not many people in this country believe the Communist thesis that it is the deliberate and conscious aim of American policy to ruin Britain and everything Britain stands for in the world. But the evidence can certainly be read that way. And if every time aid is extended, conditions are attached which make it impossible for Britain to ever escape the necessity of going back for still more aid, to be obtained with still more self-abasement and on still more crippling terms, then the result will certainly be what the Communists predict.Dollar diplomacy had triumphed completely. The Bretton Woods system lurched from crisis to crisis and began to unravel in the 1960s when the U.S., exploiting its position of issuing the world's reserve currency, began to flood the world with dollars to fund its budget and trade deficits. Central banks, increasingly nervous about their large dollar positions, began to exchange their dollars for gold, causing large gold outflows from the U.S. Treasury which were clearly unsustainable. In 1971, Nixon “closed the gold window”. Dollars could no longer be redeemed in gold, and the central underpinning of Bretton Woods was swept away. The U.S. dollar was soon devalued against gold (although it hardly mattered, since it was no longer convertible), and before long all of the major currencies were floating against one another, introducing uncertainty in trade and spawning the enormous global casino which is the foreign exchange markets. A bizarre back-story to the creation of the postwar monetary system is that its principal architect, Harry Dexter White, was, during the entire period of its construction, a Soviet agent working undercover in his U.S. government positions, placing and promoting other agents in positions of influence, and providing a steady stream of confidential government documents to Soviet spies who forwarded them to Moscow. This was suspected since the 1930s, and White was identified by Communist Party USA defectors Whittaker Chambers and Elizabeth Bentley as a spy and agent of influence. While White was defended by the usual apologists, and many historical accounts try to blur the issue, mentions of White in the now-declassified Venona decrypts prove the issue beyond a shadow of a doubt. Still, it must be said that White was a fierce and effective advocate at Bretton Woods for the U.S. position as articulated by Morgenthau and Roosevelt. Whatever other damage his espionage may have done, his pro-Soviet sympathies did not detract from his forcefulness in advancing the U.S. cause. This book provides an in-depth view of the protracted negotiations between Britain and the U.S., Lend-Lease and other war financing, and the competing visions for the postwar world which were decided at Bretton Woods. There is a tremendous amount of detail, and while some readers may find it difficult to assimilate, the economic concepts which underlie them are explained clearly and are accessible to the non-specialist. The demise of the Bretton Woods system is described, and a brief sketch of monetary history after its ultimate collapse is given. Whenever a currency crisis erupts into the news, you can count on one or more pundits or politicians to proclaim that what we need is a “new Bretton Woods”. Before prescribing that medicine, they would be well advised to learn just how the original Bretton Woods came to be, and how the seeds of its collapse were built in from the start. U.S. advocates of such an approach might ponder the parallels between the U.S. debt situation today and Britain's in 1944 and consider that should a new conference be held, they may find themselves sitting the seats occupied by the British the last time around, with the Chinese across the table. In the Kindle edition the table of contents, end notes, and index are all properly cross-linked to the text.
Contrast the present — think how different was a meeting in the 2020s of the National Joint Council, which has been retained for form's sake. On the one side sit the I.Q.s of 140, on the other the I.Q.s of 99. On the one side the intellectual magnates of our day, on the other honest, horny-handed workmen more at home with dusters than documents. On the one side the solid confidence born of hard-won achievement; on the other the consciousness of a just inferiority.Seriously, anybody who doesn't see the satire in this must be none too Swift. Although the book is cast as a retrospective from 2038, and there passing references to atomic stations, home entertainment centres, school trips to the Moon and the like, technologically the world seems very much like that of 1950s. There is one truly frightening innovation, however. On p. 110, discussing the shrinking job market for shop attendants, we're told, “The large shop with its more economical use of staff had supplanted many smaller ones, the speedy spread of self-service in something like its modern form had reduced the number of assistants needed, and piped distribution of milk, tea, and beer was extending rapidly.” To anybody with personal experience with British plumbing and English beer, the mere thought of the latter being delivered through the former is enough to induce dystopic shivers of 1984 magnitude. Looking backward from almost fifty years on, this book can be read as an alternative history of the last half-century. In the eyes of many with a libertarian or conservative inclination, just when the centuries-long battle against privilege and prejudice was finally being won: in the 1950s and early 60s when Young's book appeared, the dream of equal opportunity so eloquently embodied in Dr. Martin Luther King's “I Have a Dream” speech began to evaporate in favour of equality of results (by forced levelling and dumbing down if that's what it took), group identity and entitlements, and the creation of a permanently dependent underclass from which escape was virtually impossible. The best works of alternative history are those which change just one thing in the past and then let the ripples spread outward over the years. You can read this story as a possible future in which equal opportunity really did completely triumph over egalitarianism in the sixties. For those who assume that would have been an unqualifiedly good thing, here is a cautionary tale well worth some serious reflexion.