January 05, 2005

War, Finance, and the State, together in one place. The Bank of England is on the left. The Royal Exchange on the right. And in the background the highrises of the City and the London Stock market. It's the convergence of war finance. The picture suggests a story, which I've told in my Whiskey and Gunpowder essay. More pictures are below. The object of this excursion into the City was to visit the museum at the Bank of England. Unfortunately, you can't take pictures inside the museum. But I did take notes. As you pass into the entrace of the museum, you're greeted with animatronic 17th century members of parliament having an argument about money. One says, "The use of paper money must always be secondary to the precious metals and must flow from credit. And credit must, of its nature, rise out of the opinion that the paper money was issued in due proportion to the quanity of coins." "Rubbish," says the other. Our periwigged, latter-day hard money enthusiast is not to be deterred. He concludes, "The value of paper money must always be dependent on the possibility of converting it into silver and gold." The prospects of the Bank itself were in doubt with the rise of the South Sea Company, which was capitalized by future trade revenues, rather than gold. Land banks also competed with the BOE for some time. But in 1844 the BOE was granted the sole monopoly for issuing legal tender bank notes as means of exchange (money). There were times, when England was not at war, that the Bank notes WERE convertible for gold. A gold standard. But war and gold standards are mutually exclusive. And so the gold standard was abandoned. What conlcusion does the Bank's museum draw from this? The first period where bank notes were NOT convertible for gold was between 1797 and 1821 (one of England's many wars with France). The period was known as "The Restriction." A museum exhibit surmises, "The restriction had shown that ultimately the Bank's credit did not depend on the convertability of its notes into gold, but on confidence." For more on this, see my Whiskey and Gunpowder essay. For more luscious quotes from the Bank of England's museum and my walking tour of the City, scroll down to the pictures and captions below. Posted by Hello

Here is a pretty thing. A statue of Wellington, and behind it a memorial to the men of London who died in the Great War for King and Country.  Posted by Hello

The inscription on the monument is to the "immortal honour of the officers, non-commissioned officers and men of London who served their King and Empire in the Great War 1914-1919. This memorial id dedicated in proud and grateful recognition by the city and county of London. Their name liveth for everyone." Posted by Hello

This plaque at the base of the statue reads: Raised by public subscription at the Mansion House in the Peace year 1919 during the mayorality of the Hon. Sir Horace Brooks Marshall. " Posted by Hello

Towering over Threadneedle Street. More quote from inside the museum: During the wars against France, the drain on the Bank's gold reserves led in 1797 to the suspension of the Bank's committment to convert its notes into gold." Posted by Hello

The BOE from head on. More quotes from the displays inside the museum: In the past, people placed their trust in precious metals, particularly gold and silver. Today, paper money is accepted with the same confidence." Posted by Hello

This former goldsmith's shop near the bank appeared to be closed up. Or just very secretive. Fair enough. The goldsmith's WERE banks before there were banks. They accepted deposits of gold and sliver and issued notes redeemable for the same gold and silver. It worked pretty well, up until the point the King would come and confiscate all the gold to pay for a war. Goldsmith's notes were eventually replaced by...bank notes.  Posted by Hello

Busses headed up Threadneedle toward the Bank, bathed in the weak glow of a late December sun. Posted by Hello

I include this picture only to show you how government can often be an ugly parasite, in this case architecturally. A modern monstrosity for the City of London has been grafted on to a rather older building on the right. And in front of that building is some newer facade. Completing the visiual chaos is a red striped tent in front. You can't see it without a close up, but on top of the facade is a mounted surveillance camera. That's not at all uncommon in London. But these is a nice visual convergence of...something.  Posted by Hello

To redeem the City of London's mistake, is St. Paul's, by Christopher Wren. Posted by Hello

The Chancery, across the street from the more modern Templar House (see below) is a gorgeous building...built originally for lawyers. Posted by Hello

And across the street the Templar House. Hmm. Anyone seen the national treasure? You can't see him in the picture, but as I was taking it, a security guard walked out of the building to ask me what I was doing. "Taking pictures of the building," I said. "Oh. Okay." Posted by Hello

The site of at least one residence of Thomas Gresham as you make your way down Holborn street.  Posted by Hello

And from another angle... Posted by Hello

As you make your way across Holborn Viaduct looking east, you'll see Gresham's house in the background, with a statue of Commerce leading up to (or in this case, away) from it.  Posted by Hello

Here's commerce, looking over traffic. Posted by Hello

The modern Gresham's college is not in the same place as the original. But the grashopper, which adorned the Gresham family crest, is still part of the sign. The town of Gresham says Thomas Gresham adopted the symbol as a reminder of his humble beginnings.  Posted by Hello

Here's a fuzzy view of the interior court of Barnard's Inn, where the College holds its lecture series. The essay I published last week by Avinash Persaud (When Currency Empires Fall) was given in this building. Posted by Hello

Making my way down the street, I crossed Newton street, which happened to be the corner location of the only Goldsmith's shop I saw all day. Coincidence? Posted by Hello

Near the British Museum, and after the gold smith's shop, I saw this sign, which seemed to beg some attention. I expect business to be brisk. Notie that it's a government service. Bless them. First they bankrupt us...THEN they bail us out. Well, that's not entirely fair. Destroying the currency isn't the same as incurring debt at the personal level. But reckless financial behavior goes with currency debasement as night follows day... Posted by Hello

One of the first displays I came across (after passing the Insolvency Institute on the way in) was this explanation of electronic money. Apologies for the image quality of this and those below. The light was low and I was shooting through glass display cases. Here's what it says: Plastic cards offer a convenient way of making, recording, or deferring payments by the movement of electronic pulses. Technology has been developed to make cards which are secure, durable, compatible with different networks across the world, and which bear built-in evidence of ownership. They work by linking directly to central computers; some recent cards even contain their own microchip, enabling them to perform a range of complex functions independently." Great. Money that thinks while it's in your pocket. And talks! But to whom... Posted by Hello

I ended the day at the British Museum to pay a return visit to their exhibit on money. It is a room full of irony. It does do a good job of explaining the role of gold and silver as money. But even here, you get less of an explanation than the one provided at the Bank of England. Perhaps to historians, gold's role as money is simply past, and not prologue. Posted by Hello

The museum's explanation of silver. Noticeably absent, although it was a brief display, was the importance of the silver mines of the New World. The Spanish owned them. And even France, with its vast resource wealth, had more "real assets" than England with her sheep and her pastures. So was it that by the time Issac Newton was done as the Master of the Mint in the Tower of London, all the world's gold and sliver flowed to London and England had both the most robust trade and the soundest currency in the world? Hmm...could their be a connection between a sound currency, free trade, and prosperity?  Posted by Hello

In case you can't read it through the haze, here's what it says: The supremacy of gold and silver coins has given way to the practicality of paper money and coins of base metals. Now, even their role is being challenged by payments made using plastic cards and computers." No fooling. Posted by Hello

As you can see, there are many odd displays in this exhibit on money. None can be odder than this out-dated photo and caption, closeups of which are below. Posted by Hello