Ann Pettifor

On central bank governors past and present

I could not put down  Liaquat Ahamed’s riveting biographical account of ‘the bankers who broke the world’ – the central bankers, that is. (William Heinemann, 2009).  Those that lorded it over the global economy during the Great Depression were Montagu Norman of the Bank of England (1920-1944); Benjamin Strong of the Federal Reserve (1914-1928), Horace Greely Hjalmar Schacht of the Central Bank of Germany (1933-39) and Aime Hilaire Emile Moreau of the Banque de France (1926-1930).

It is sobering to discover that Montagu Norman had the first of many nervous breakdowns in 1906. In 1913 he consulted Dr. Carl Jung in Zurich – who informed that he was suffering from “general paralysis of the insane” – a term then used to describe the onset of mental illness…..The diagnosis was flawed, as in fact Norman was probably a manic depressive.  In 1931, at the height of the financial crisis he had another breakdown, and headed off to Canada on an ocean liner. His mental fragility did not however, prevent him from continually being re-appointed as governor – until 1944.  Such are the filial bonds of the British establishment. They are no less strong than the establishments bonds that ensured Ben Bernanke’s recent re-appointment – despite his role in cheering on the vast credit bubble that fuelled the asset bubble that finally burst on the 9th August, 2007 – arguing all along that the boom “largely reflect(s) strong economic fundamentals.”

Hjalmar Schacht and Montagu Norman were on good terms during the 1930s when Schacht was financing the expansion and militarisation of Nazism – with a good deal of help from the western banking system.  Such was the bond between them that as late as 1939 Norman visited Berlin to attend the christening of one of Schacht’s grandchildren.

This and many other powerful insights to be found in this book, which I strongly recommend.


3 thoughts on “On central bank governors past and present”

  1. Yes, this is a wonderful book. It is one of the most beautifully written accounts in this particular field that I have read in a long

    time. It is so good that you can even read it in bed.

    It was a shame that Schacht decided to “pal around” with Nazis, but he was extremely

    ambitious, not unlike Karajan. Heisenberg tried to justify his working with the Nazi regime after the war, but Einstein never spoke to him again.

    Richard Strauss stayed because his daughter-in-law was in a holding camp for Jews and he thought his visits might save her from the extermination

    camps. I don’t know how much Norman knew about what was actually transpiring in Germany in the late ’30s, though it is likely that he was unaware

    of the existence of the Wahnsee conference, Heydrich’s brilliant idea.

    Hitler also had a good deal of help from IBM. It would have made

    their job of locating all the Jews, gypsies, homosexuals, and disabled people that they so disliked more intractable without IBM’s technology.

  2. Bumped onto your blog whilst searching the Web for some alternative views. Thank you for the lively comments.

    I’ll try to get a

    copy of “Lord of Finance” but certainly keeping in mind James Grant’s view on it:

    “””If Mr. Ahamed were casting around for a genuine hero

    of interwar finance, he missed his man. Jacques Rueff, the great French economist, sounded the alarm time and again. The classical gold standard

    was an instrument of economic balance, he wrote, its successor an engine of excess. “For ten years,” Rueff declared in a speech in 1932, “we had

    done everything in our power to undermine that equilibrium.”

    Harrumphing about the “gold standard,” Mr. Ahamed reminds me of the fellow who

    condemned “painting” because he had no use for Andy Warhol.”””

    I read Rueff thirty years ago. Never been in finance until three years when I

    had suddenly money in charge. Re-reading his imprecative writings about the “monetary sin of the west” by the end of 2006 was is illuminary. And

    even more useful than Roubini’s writings.

    Rueff has the picture clear:

    I especially like this article that I’m in the process to translate (into French…). We are so américains here in Paris.

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