Another aspect of the british war debt, is that it was carried for hundreds of years. Rolling the specific consols into a unified public debt and then eradicating it wiped out the history of people sitting on long-tail bond payments from wreakage of the South Sea Bubble onwards.
Basically, until they rolled them up you could have a stable (if low rate of return) income denominated in Napoleonic war debt, if you wanted it, right up into the modern (1980s) era
[edit: actually consols == consolidated fund == prior consolidation of these historic debts. gilts were from time to time issued, like Churchills '27 issue for the WW1 debt ]
Apparently there was a weird set of loans the UK took from the US during WW1 where the US put a moratorium on repayments during the Great Depression, and then loan payments never restarted:
> These loans remain in limbo. The UK Government's position is this: "Neither the debt owed to the United States by the UK nor the larger debts owed by other countries to the UK have been serviced since 1934, nor have they been written off."
In other tangentially related long term British loan debt news:
It was only in 2015 that, according to the Treasury, British taxpayers finished ‘paying off’ the debt which the British government incurred in order to compensate British slave owners in 1835 because of the abolition of slavery. Abolition meant their profiteering from human misery would (gradually) come to an end. Not a penny was paid to those who were enslaved and brutalised.
The British government borrowed £20 million to compensate slave owners, which amounted to a massive 40 percent of the Treasury’s annual income or about 5 percent of British GDP. The loan was one of the largest in history.
> The British government borrowed £20 million to compensate slave owners, which amounted to a massive 40 percent of the Treasury’s annual income or about 5 percent of British GDP. The loan was one of the largest in history.
I wonder how that compares (perhaps as percentage of GDP or per capita or so) to the expenses of the American civil war.
With the forenote that I'm opposed to slavery, British companies and wealthy individuals purchased (or owned) copper from Welsh mines (or some other commodity) which they traded in Africa with African nations in exchange for humans (who were purchased already 'enslaved') and then either further traded in the Americas to plantations or used directly in plantations owned.
This was a large and complex business enterprise and didn't involve formal enslavement by the British Government.
The Abolition referenced above was the British Government outlawing slavery within its territories and by its citizens - as an act of Government it was only supported on the promise of slave owners (which included nice little old widowed grannies of modest means with a 2/6 th share in a slave left by an uncle) being recompensed for their forfeited property.
The funds that flowed to former British slave owners went on to establish canals, factories, rail lines, develop colonies in Australia, etc.
From that it follows that everyone whose property rights were created by the British government owed tax to Britain on that property. Ergo, the American Revolutionaries were in the wrong and the U.S. owes Britain substantial reparations for property theft and non-payment of taxes.
Funny you should mention that. My mother was an ardent CP-GB member in the 40s and 50s and persuaded her mother to burn her share certificates in Baku Oil on the grounds the revolution would never pay out and it was a capitalist evil.
In the 1960s, There was a partial rapprochement with the west and the USSR paid out holders of shares in Baku Oil fields, if they could produce the paperwork...
Ya know it sounds funny but it seems to me that it is a fundamental principle they the larger a body of humans under consideration is, the slower everything will move. For example a small startup with 15 developers often is able to add features and move faster to capture a market than a massive lumbering blue behemoth.
Thus if we were to reframe our understanding of timelines considering organization size.
Less than a few hundred people could be measured in time scales of a few weeks.
Large organizations with thousands of people change and move on time scales of years or decades.
Then understandably nations would often move on the time scales of centuries to do things, simply because of inertial forces.
I wonder how much of the discontent and mudslinging that now happens is a result of everything in our personal lives suddenly becoming faster without the rest of the human organizations surrounding it being able to speed up as well.
It's not all that funny, considering that the reason they were paying those reparations was the 'damages' inflicted upon French slaveowners by slaves freeing themselves.
It was all damages - lost property (land and slaves), deaths, lost profits, etc. It was a terrible but necessary sacrifice on the part of Haiti because it was the only way France would recognise their independence, which paved the way for other countries to do the same (but nobody was forthcoming on their own either out of fear of pissing of France or their own slaves/colonies rebelling).
France required compensation money in exchange for recognition of Haiti (which was Haiti's only choice at the time, nobody else wanted to recognise them). Because of course Haiti didn't have the money nor any realistic prospects of coming up with the money soon (not only was their infrastructure decimated by the slave revolts and civil war and revolution and various campaigns, their cash crops were only viable with slave labour, so unviable in the free Haiti), French banks provided loans at exorbitant rates to pay France. Those loans were the ones that Haiti was still paying, to French banks, not France the country. Banks have zero interest of forgiving loans, regardless of ethics, so it's not at all surprising they never did.
consider that some countries have a larger bureaucracy/democracy than others, it may be that dictatorships with few people in thr actual inner circle of power can adapt faster than those countries that have to persuade their constituency and find consensus before making a move.
Well yeah, there's no doubt that dictatorships/autocracies are faster at implementing bad ideas. That's the whole point of democracies/bureaucracies: to have a chance to weed out the obviously bad ideas before people are harmed.
- Tsar-era government debt had understandingly been repudiated by the communist government and mostly traded as a collector's item, with individual bonds framed or used as bathroom wallpaper or just chucked out. But enough of it was still in peoples' hands that the USSR had to pay it off before they could get access to to debt markets in the 80s.
- IG Farben shares continued to be listed and traded into the 21st century. I remember in the 80s a few crass English friends of mine who worked in the City bought and sold some shares, mainly amused that a Reichsmark-Sterling exchange rate was still available and in fact fluctuated, entirely for the trading of this one "asset".
Similar bonds were also raised for the Napoleonic and Crimea wars and back to the South Sea Bubble crisis of 1720 and have been cancelled or converted in some way over the years.
See also The Lancet's updating of their original 1858 obituary of John Snow:
> Dr John Snow: This well-known physician died at noon, on the 16th instant, at his house in Sackville Street, from an attack of apoplexy. His researches on chloroform and other anaesthetics were appreciated by the profession.
versus the 2013 one:
> The journal accepts that some readers may wrongly have inferred that The Lancet failed to recognise Dr Snow's remarkable achievements in the field of epidemiology and, in particular, his visionary work in deducing the mode of transmission of epidemic cholera.
It's pedantic to say, but, based on what they said, their original was not incorrect, simply less exhaustive than it could have been. It could (and, seems to) be that the fellow's work on anaesthetics was seen as more important than his work on cholera. Given the (often overlooked) importance of modern anaesthetics, I can easily believe this.
"Barrack Obama passed away on Jan 20th; Obama was a senator from Illinois and the author of several best-selling books" is also correct. At some point an omission is so glaring that it becomes egregious.
That said, I believe the significance of Snow's 1854 findings were not yet widely appreciated in 1858, and in this case the omission in the original obituary seems understandable and reasonable.
I believe in this case that the reference to "noon, on the 16th instant" is referring to the 16th day of the month, not the minute after 12:00 - so, he died at noon on June 16. Encyclopaedia Britannica lists his date of death as 16/06/1858 (https://www.britannica.com/biography/John-Snow-British-physi...)
Being minute-level precise about quantities that can't be known to the minute isn't exactly something to point to to suggest that their other coverage was uncharacteristically sloppy.
The Lancet isn't saying that the inference was wrong but that the conclusion of the inference is wrong. There's not really a better way to say that; "some readers may have inferred, wrongly" is synonymous, and "may have inferred that the Lancet, wrongly" implies that the Lancet failed to recognize these achievements, which it did not (it merely failed to mention them).
- "Dr John Snow: This well-known physician died at noon, on the 16th instant, at his house in Sackville Street, from an attack of apoplexy. His researches on chloroform and other anaesthetics were appreciated by the profession."
Interesting to contrast this with the modern version, on Wikipedia:
- "Snow suffered a stroke while working in his London office on 10 June 1858. He was 45 years old at the time.[38] [...] It has been speculated that his premature death may have been related to his frequent exposure and experimentation with anesthetic gases, which is now known to have numerous adverse health effects. Snow administered and experimented with ether, chloroform, ethyl nitrate, carbon disulfide, benzene, bromoform, ethyl bromide and dichloroethane during his lifetime.[40]"
This is one of the reasons I love reading British publications like the FT, Economist etc. While they are serious publications, at the same time they do not take themselves too seriously. They seem to be keenly aware of their standing and how they (and their readers) are perceived and communicate this in subtly humorous ways.
Come to think of it, this seems to go for basically all British people I know.
There is some British humour to this, but I think this is FT taking themselves seriously.
It's an old case, but timely and relevant. The story, now being old and quaint, provides a lower complexity, lower stakes model for monetary actions of the present.
> Along with its correction, the paper adds this note:
>> "The same edition of the paper also demonstrated a good understanding of the FT's readership, noting with 'interest' and 'encouragement' that champagne production had not been affected by the Great War effort."
"John Maynard Keynes, the economist who famously advocated for public spending to stimulate economies during recession, knew about the deception, the researchers say. In a memo marked "Secret" he called it "a masterly manipulation," while also warning that it was not sustainable in the long run."
I could not help noticing the hypocrisy of him. Also when I read the end of the paragraph I chuckled recalling his famous "In the long run we are all dead"
Anyone with knowledge of how government finances work knows that the central bank will never allow a bond auction to fail, and the central bank will never bounce a treasury cheque.
underwriting happens. sometimes its banks. sometimes its the (state) bank.
if there was a time the ruling classes would argue for lies in the national interest, its war time.
I cannot imagine a government embarking on war who would say "well.. we asked you to fund it, but alas, the city said we're losing so the bond wasn't there and we've decided to cancel the war"
Sort of reminds me of the claim made by FDIC that they can back up all accounts in SVB. Maybe they can, but it's mainly the illusion that maintains the economy.
One thing crypto has been good for is it made us think critically about why money actually is. It's all a matter of faith and believing someone else will value it in the future...or a military will tell you to value it. Gold has the same issue; its intrinsic value is somewhere around silver or copper.
Once you think about currencies this way, you realize that while crypto could be used as a currency, it isn't; its a speculative investment, like a digital beanie baby.
No, money is suppose to exist as solid green paper. The value is imaginary but its existence is physical.
The bank and government claim that if I want my money they can give me my money in green physical paper bills because it exists in the bank.
Problem is that it's a lie. That's why bank runs are possible. And the current bank runs ends with another institution taking over and articulating the same lie.
There are a lot more bank deposits than green paper.
It's similar to how banknotes originally were 1:1 correlated with physical gold (or whatever) in the vault, then banks realized they could lend out more notes than they have gold in the vault.
Very similar situation with electronic vs paper dollars.
Most bank deposits are created out of thin air by commercial banks when they make loans. There isn't enough paper money to cover all those deposits.
Depositors can be made whole without receiving little green pieces of paper.
Checks, account transfers, wire transfers, etc.
There is no fundamental limit on the Federal Reserve to create (or destroy) money as needed. The Fed, as other central banks, does however exercise that power very judiciously, and with specific targets (inflation, unemployment) as its foundational charter.
Note that both inflation and unemployment are not assessed by the Fed, but by an independent federal department, Labour. It's a classic instance of not giving a single entity control over both the means of control and the measurement of success.
> Depositors can be made whole without receiving little green pieces of paper.
However, in principal The bank promises redeemable cash, that's why people stay in banks. But it's a lie. Again bank runs exist because of this lie.
Everybody knows the Fed screws it all up. A wire transfer among competing banks would make the competing bank demand that the other bank redeem the transfer in green paper money.
However, because the Fed is the bank of banks, it just becomes number a change on the balance sheet of the fed.
Bank deposits are not all financial wealth, though they're a substantial share of it. Even given that, the facts, from the US Federal Reserve (it runs both FRED and currency.gov), are that there is nearly ten times the amount of financial wealth in bank deposits as there are green pieces of paper representing that wealth.
Federal Reserve Notes are currency used for some forms of financial transactions. They are not equivalent to the total amount of financial wealth, most of which is noted in accounts of various types.
You might also want to familiarise yourself with the various measures of money supply (spoiler: it's not little green men, erm, pieces of paper):
All money has value for one reason: because people think it's valuable. It doesn't matter if it's cigarettes in prison, giant stone discs in Micronesia, or bits on a server owned by your bank.
The value of money is a human construct, much as the meaning of words is.
There's a widespread misperception that money is some physical entity. It is not.
A description I've come to use is that money is the medium of greatest acceptance within a given market or region. Note that money need not be paper notes, coins, or even any sort of government issue. There's an excellent 1945 paper on the economic organisation of a POW camp which describes how an economy based largely on cigarettes and various Red Cross ration items emerged amongst Allied prisoners of Germany during WWII:
In particular, it looks at what problems money can solve (and what happens when there's an insufficient money supply --- in this case, cigarettes), as well as those it cannot (an insufficiency of goods generally to transact).
At various points in time, clams, beaver pelts, cowhides, knives, massive multi-tonne stones (<https://www.npr.org/sections/money/2011/02/15/131934618/the-...>), letters of credit, and cryptographic hashes have served as money. In mediaeval Europe, Roman coins were long used in trade, well after the Roman empire itself had fallen. In parts of the world, US dollars are a preferred currency even outside the 50 states and US territories, with several countries officially adopting the US dollar as their own national currency: <https://www.investopedia.com/articles/forex/040915/countries...>.
William Stanley Jevons defined what to him were the vital set of properties required of money in Money and the Mechanism of Exchange (1877): utility/value, portability, indestructibility, homogeneity, divisibility, stability, cognixability.
I disagree with him on the first property. Money may have an intrinsic value (as with gold or specie), but need not. In particular, the intrinsic value of money is inverse to the trust in the monetary authority itself. That is, in a low trust financial system, money typically consists of or is backed by some physical store of value. In a high trust financial system, currency tokens need have no fundamental utility (as with paper banknotes or digital accounts), but rather there is a trust in the system as a whole to function predictably and reliably.
The value represented by money is one that is socially, legally, and economically recognised. It's ultimately a tokenisation of credit and wealth. It is not directly tied to any physical characteristics (though as a medium of exchange it can be traded for any given physical commodity or service). That's not "imaginary" in the same sense that other social conventions such as which side of the road to drive on are not imaginary. Which side to drive on is entirely arbitrary as an initial social choice, but once that side has been chosen there are very real consequences to flouting the convention.
Even more to the point is how money is a sort of illusion : it's a signal that allows for better allocation of real (and imaginary) resources in the economy.
Better question on that front is how it’s legal. It’s not what congress passed or the FDICs charter / mission statement. So it’s kinda just “we’re doing it, even if it’s illegal”
Kinda like how they gave everyone a year or more where they could live in a place without paying rent via some BS CDC power that didn’t exist.
> Better question on that front is how it’s legal.
Because, when, after allowing FDIC broader discretion to decide how to resolve bank failures so long as at least insured balances were covered from the creation of the FDIC, Congress narrowed that discretion in 1991 by adopting the least-cost rule which normally prohibits FDIC from committing more from the Deposit Insurance Fund than necessary to cover insured accounts, they also permitted the FDIC to choose a higher-cost resolution when the required set of officials certified the existence of a systemic risk. (The system risk provision itself precedes the least-cost rule, but when the least-cost rule was adopted, the procedure for systemic risk waa changed and the system risk privision was made an exception to the least cost rule.)
The legal loophole is that it's essentially a levy on the (other) banks, not the taxpayer. The comedy, of course, is that "bank customer" and "taxpayer" are more or less the same set of people.
Kind of, but I don’t pay any fees for my bank account(s) and I don’t expect to in the future, even with the small insurance rate increase levied by the FDIC to cover making SVB depositors whole. Making loans with my money is profitable enough for my bank that they don’t need to charge fees.
Many banks these days have zero commission brokerage accounts, in which you can hold T-bills or money market funds. Not a lot of reasons to use a "savings" account.
I'm not sure why you're being so disingenuous here. It's painfully obvious there's a difference between costs invoked by best-practices and regular business operations and costs invoked by another bank making bad decisions, going bust, and then the other banks' customers having to pay that difference.
Making an argument that we should all eat this cost to avoid contagion, etc. might hold some water (and the Fed was stuck between a rock and a hard place), but let's not pretend it's not a cost we're all eating, on top of it being an inflationary move.
FDIC has broad authority to issue advance dividends on uninsured deposits, based on their estimate of what they will be able to recover from asset sales.
FDIC determined that a 100% advance dividend was appropriate, but merchandised it in a way that allows the receivership bank to continue operating as normal.
The explanation I heard was congress gave FDIC some vague exceptions to its charter because congress knew these sort of actions are politically toxic, but economically necessary(ish).
I wonder why they bothered going through with the fake bond purchase, rather than simply manipulate the published numbers of bonds sold? Unless the Bank was also keeping it a secret from central government?
It was a real bond purchase. The money just came from the Bank of England reserves, and the BoE was private at the time (although had very strong links to the Government).
Eg: The episode marked an important step on the Bank’s transformation from private institution to a central bank.. A decade after the Armistice, the altered role of the Bank prompted creation of a Parliamentary commission to examine its functions, ultimately setting it on a path to nationalisation
According to one bitcoin maximalist[0] this was the real origin of fiat currency.
I’m not sure I understand everything that is said nor fully believe, given that it’s a bitcoin maximalist dumping on fiat currency, but what I took away was that the english pound was redeemable for gold. When they did this fake bond purchase, they just minted new pounds (that didn’t have gold backing it) and used that to buy back these bonds in secret.
This is significant because there was a fear of a bank run in England at the start of the war where everyone was afraid that this would happen. The Bank of England had to assure everyone that they wouldn’t do this to stop the bank run - and so, when they actually went ahead and did it, they kind of had to keep it secret
As best historians can determine, fiat currency originated in 11th Century China; with absolute confidence we can say it didn’t originate in 20th Century Britain.
> As best historians can determine, fiat currency originated in 11th Century China
This is untrue; for example, fiat currency was already in use in Seleucid Persia (which began in the 4th century BC).
It wouldn't be even minorly difficult to turn up other examples; any time there's a fixed exchange rate between coins of different metals, one of those coins is fiat.
Which is wrong - the Romans realised that money should carry the face value of the coin over its commodity value, enforced by the power of the state (and taxation). It was kind of forgotten in the middle ages, when coin was a weird hybrid of its face value and its commodity value (much of the monetary shenanigans for hundreds of years was concerned with maintaining face value in light of fluctuating commodity prices).
Of course the issued correction was rather new in 2017, the report it corrected was what was 103 years old. But I guess only overly pedantic souls like myself get bothered by stuff like that.
I think being a programmer messed me up for a while in that it made me overly precise like this. I had to consciously learn to turn it off in normal conversation.
100 year old events allows us, to some extent, to sidestep some of the deep feelings monetary discussions tend to evoke. These things recur. Tricks from the Napoleonic wars are reused during WWI. WWI lessons form the basis of WWII's monetary systems, which lead pretty directly to modern monetary systems and theories.
This event is not at all unrelated to the new deal, allied WWII monetary policies, lend lease, the marshall plan, Keynesianism, New Keynesianism (eg Friedman/monetarism) and into the present day.
the Bank(ers) ... purchased the securities in their own names with the bonds then held by the Bank of England on its balance sheet. To hide the fact.. bonds were classified as holdings of 'Other Securities' in the Bank of England's balance sheet rather than as holdings of Government Securities."
The BoE prints £350m of bonds. The BoE sells £100m to the public. BoE declares/lies that they successfully sold all £350m. The BoE buys the outstanding £250m of bonds itself using a virtual credit line backed by BoE bonds. Once the final transaction is completed, £250m of new money exists in government accounts and can be used to fund the war.
This is exactly how UK/US/Etc government deficits work today. Bonds are created. Some are sold. The rest is bought (or kept) by the Fed/BoE itself. The "deception" allows order to remain in the banking world while also allowing governments to fight the war/depression/deficit.
These days, the outright lies are not strictly necessary. Instead, we rely on complexity of ritual, bureaucracy and bond market transactions to "cover our tracks." One thing that has changed in society (if not in central banks and treasuries) is that "what gives money value" has become a non-question. I think that was different 100 years ago.
The researchers write: "The long-held laissez-faire principles of the Liberal and Conservative parties were thus sacrificed to raise the capital upon which the War's outcome depended."
This is a cliche. During the great irish famine 70 years prior, both the King and Prime Minister were involved in almost identical schemes. There are lots of examples.
To me, the odd part is that we can't play it straight and admit that governments invent money... or that it's OK that they do. Every policy that relates to banking, central banking, money printing or such requires some sort of lie. Just like now, FDIC bails out ostensibly uninsured accounts/banks. This seemingly has to come with an assurance that it's not what it looks like... even though it obviously is.
IE, it's not weird that money works like this. It is weird that we have to pretend like it doesn't.
Maintaining the illusion that the government operates like a household is all part of the economic theatre that underpins much of fiscal and monetary policy. The moment sufficient people realise that money can be created for whatever the government needs, people will start asking why then can it not be created to benefit society in general. It's getting increasingly untenable as people realise that there is always money available to bail out this or that bunch of wealthy influentials.
>> the illusion that the government operates like a household
That's one way of putting it, though kind of specific to current discourse. You might also say the "illusion" that a central bank is just a bank. You could say the the "illusion" is that banks are firms, providing financial services for profit like any other type of service.
In times past, the "illusion" was that banks are "fully backed and solvent." It's hard to pin down exactly what the "deception" is. Almost always, it involves surprisingly moralistic language.
Our generations' "bailout story" is that bailouts are necessary for stability. But... the problem with bailouts is "moral hazard," which in current language means specifically "externalized long-tail risk." These moral hazards are what (in the current story) cause bank failures in the first place. The business cycle has been reduced to a banking cycle, and it's now described as a cycle of moral failures.
In truly modern (postmodern?) fashion, these days everyone sees that there's a lie, but no one agrees on what the lie is.
I would suggest that the heart of the problem is substitution of value with money. It's the same mistake the mercantilists made, but particularly ridiculous with fiat currencies.
“Happy” as in satisfied or content, not as in joyous. e.g. “I’m happy to throw out the trash for you”, doesn’t mean you’ll be smiling the whole way through (unless you’re some kind of weird trash fetishist)
Basically, until they rolled them up you could have a stable (if low rate of return) income denominated in Napoleonic war debt, if you wanted it, right up into the modern (1980s) era
[edit: actually consols == consolidated fund == prior consolidation of these historic debts. gilts were from time to time issued, like Churchills '27 issue for the WW1 debt ]