Reihan Salam: How Partisan Demographics Shape Policy Thinking
Noah Smith: The Behavioral Finance Case for Buying Gold: Noted for July 31, 2013

Philip Aldrick: Was Montagu Norman a Nazi sympathiser?: Noted for July 31, 2013

Philip Aldrick: Was Montagu Norman a Nazi sympathiser?:

Norman was Britain’s… central banker… for… 24 years until 1944…. But he was also an economic dinosaur…. Adam Posen, a former Bank’s rate-setter, has said that when he could not decide which way to vote he would look at the giant portrait of Norman hanging in the Monetary Policy Committee’s meeting room and ask himself “What would Montagu do?”. Then do the opposite. So Mark Carney’s decision to remove the heirloom [portrait]… was loaded with symbolic significance. What he could not have known, though, was that another--more damaging--gold scandal involving Norman was about to erupt…. The Bank revealed that it had helped the Nazis sell gold looted from Czechoslovakia in March 1939….

According to the documents, the gold was being held in the Bank’s vaults on behalf of the Bank for International Settlements (BIS)--the central bank for central banks. On March 21 1939, BIS requested the Bank transfer £5.6m of gold--£735m in today’s prices--from “Number 2 Account to Number 17 Account”. The Bank was “fairly sure” the transfer was from the National Bank of Czechoslovakia to Germany’s Reichsbank, the record states. But, regardless of its suspicions, the transfer was made that very same day. Over the following 10 days, the Reichsbank sold £4m of the gold, with the proceeds poured into Germany’s ongoing rearmament.

There is little doubt the Bank was aware…. The request came just days after Hitler had invaded Czechoslovakia, in direct breach of the Treaty of Munich…. Moreover, the request came from the then BIS president, J W Beyen, a Dutchman…. Had it wanted, the Bank could have blocked--or at least delayed--the request…. Yet it took the French to suggest barring the transfer of the looted gold…. Norman “declined” the request, taking the puritanical position that “it would be wrong and dangerous… to attempt for political reasons to influence the decisions of the president of the BIS”….

[Norman's] defence was that BIS rules had to be followed no matter what. He persisted with this absurd line even after war was declared on September 3. On September 4, he wrote to senior Treasury official Sir Richard Hopkins to warn that any deviation from the BIS rules “would offer hostile propaganda an excellent opportunity for criticism that, where it is in their interest, HM Government do not hesitate to disregard their international arrangements”….

The documents reinforce the impression that Norman was an inflexible aparatchik, but also renew questions about his suspected Nazi sympathies…. In January 1939, Norman went to Berlin to attend the christening of [Hjalmar] Schacht’s grandson, named Norman in his honour. Ahmed writes that Norman admired “Schacht, and during the early years of Nazi rule, even the achievements of Hitler--he is said to have told a Morgan partner that 'Hitler and Schacht are the bulwarks of civilisation in Germany’.” Schacht later turned against Hitler and was sent to Dachau in 1944 for suspected involvement in the attempt on the Fuhrer’s life. But he played a vital role in restoring Germany’s fortunes under the Third Reich….

[O]n May 26, the Chancellor of the time Sir John Simon, asked Norman if the Bank still had the Czech gold. Norman obfuscated. He “did not answer the question”, the record states. In fact, the Bank did have the gold. It never left the Bank’s vaults, but was simply moved from one account to another. Beyen later defended his transfer request in a chance encounter with the journalist who broke the story. Being remarkably disingenuous, Beyen claimed: “It is all technical. The gold never left London.”

More controversially still, on June 1, amid the political outcry, Norman conducted a further gold transaction on behalf of the Reichsbank worth £860,000 – without official clearance. “This time, before acting, the Bank referred the matter to the Chancellor, who said that he would like the opinion of the law officers of the Crown,” the record says. “On the BIS enquiring, however, what was causing the delay and saying that inconvenience would be caused because of payments the next day, the Bank acted on the instructions without referring to the law officers.” Norman defended his actions by claiming the law officers later supported the decision.

History has not been kind to Norman, whose dandyish eccentricities such as disappearing on long cruises under the pseudonym Professor Clarence Skinner during crises did not enhance his reputation.