As you know, one of the reasons that the Brits hated Churchill was because he went along with putting Britain back on the gold standard in the '20s, thereby decreasing the money supply and causing misery for the lower classes.
True but it was more than that. During WWI all combatant nations except the USA went off gold completely, and even the US printed some non-backed money.
For reasons which we find baffling today, when Great Britain went back on gold after WWI, they resumed the old exchange rate (pounds sterling to ounces of gold) despite the fact that their money supply had greatly increased. This had the inexorable effect of causing massive deflation (I call it the Great Deflation). All other nations used a similar exchange rate due to the (former) primacy of Great Britain in trade. It was a fiasco, and the primary cause of the Great Depression.
The so-called "easy money policy" of the New York Fed during the mid-1920's was an attempt to help Great Britain get back on gold.
Interestingly, both Hayek and Keynes warned that the Great Deflation would happen. Churchill was an admirable man, but he made a lot of stupid mistakes. This was, in my opinion, his worst. In fairness to Churchill, I think he was given bad advice by his economic advisors. The mistake was his to make, as he was Chancellor of the Exchequer.
One of the most fascinating tidbits of history, in my opinion, is that Churchill was at the New York Stock Exchange on the day of the Great Crash. I suppose you know that Hoover demanded that the Fed burst the 1929 bubble, it did not happen spontaneously. The Brits were unhappy because the bubble was sucking up all the liquidity. I expect that Churchill felt a great deal of satisfaction at the time. |
