The misdeeds of Montagu

The misdeeds of Montagu Dec 19, 2013 4:39:28 GMT -5

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Post by Gerard on Dec 19, 2013 4:39:28 GMT -5

Based in Basel, the Bank for International Settlements is an exclusive club for central bankers. Thirteen of them spend up to six week-ends a year there, enjoying intimate conversations, safe in the knowledge that no minutes will be taken and no leaks tolerated. Their main subjects of conversation, according to one of them, Mr. Brod the Hungarian, are the quality of the food and the stupidity of Finance Ministers.

The Bank was established in 1930 by Montagu Norman of the Bank of England and Hjalmar Schacht of the German Reichsbank. Mr. Adam LeBor has now written a book about it, wherein he at last gives us the murky story of the Bank of England's rôle in assisting Hilter's Germany to help itself to Czechoslovakia's gold reserves. In 1939, conscious of the threat from Germany, the National Bank of Czechoslovakia transferred its fifty tons* of gold to two accounts at the Bank of England; one of twenty-seven tons in its own name, and a second, comprising twenty-three tons, in the B.I.S. account, imagining it would be safe there. But they had reckoned without Montagu Norman!!

When the Germans did invade, they ordered that the Czech gold be transferred to the Reichsbank account in London. Czech assets had already been blocked by the British government, which protected the gold in the National Bank's account; but Norman unilaterally sanctioned the transfer of the gold in the B.I.S. account to the Reichsbank, insisting that no government had the power to intervene in any B.I.S. business.

During the war, the B.I.S.-Nazi relationship remained strong. The B.I.S. continued until the end of the conflict to credit Germany's account with looted gold, a good deal of it Jewish. At the Bretton Woods conference in 1944, a motion to liquidate the B.I.S. was proposed, and supported by the Amercians. But Keynes the clean-limbed English homo-sexualist lost his temper and threatened to leave. A compromise motion was accepted, calling for the liquidation of the B.I.S. at "the earliest possible moment." Now, seventy years later, we still await the arrival of that moment. Montagu, noted for his somewhat raffish and arty appearance, was in 1944 conveniently raised to the peerage as Baron Norman of St Clere in the County of Kent.

For all this information - some of it very useful indeed - we are grateful to Mr. Fay the Antipodean cricket fanatique. "Ownership" is such a fluid concept is it not?

* [Actually fifty tons is not all that much in the present day and age. I personally have sixty-five!]

The misdeeds of Montagu Dec 19, 2013 6:42:55 GMT -5

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Post by Deleted on Dec 19, 2013 6:42:55 GMT -5

If I may address your final question directly, Gerard:

Dec 19, 2013 4:39:28 GMT -5 Gerard said:

' ... "Ownership" is such a fluid concept is it not?'

If ownership is to be exchanged, it has to be a fluid concept. Having taken part in some of these conversations at the Bank for International Settlements (BIS), Gerard, I can at least confirm that the quality of food was indeed discussed in Basle. If money cannot be exchanged for (the ownership of) food, for example, what use is it?

BIS

Writing in the FT earlier this year, Claire Jones reported that the BoE helped sell looted Nazi gold. The Bank of England played a vital role in one of the darkest episodes in central banking history, facilitating the sale of gold looted by the Nazis after their invasion of Czechoslovakia in 1939. According to a hitherto unpublished history of the BoE’s activities in and around the second world war, the UK’s central bank sold gold on behalf of the Reichsbank – which Germany’s central bank had seized from its Czech counterpart – after the UK government had frozen all Czech assets held in Britain following the Nazi invasion.

In March 1939, gold valued at the time at £5.6m – worth £736.4m in today’s prices – was transferred from the National Bank of Czechoslovakia’s account at the Bank for International Settlements, the so-called central bankers’ bank, to an account managed on behalf of the Reichsbank. Claire concluded thus:

' ... The BoE, which then held the chair of the Basel-based institution through Otto Niemeyer, the director in charge of its overseas and foreign department, stored much of the BIS’s gold in its vaults at Threadneedle Street. That the BoE held the gold caused controversy after the story broke in the British media in May 1939.

The history, written by BoE officials and completed in 1950 but never published, also records that the UK central bank sold gold after this date on behalf of the Nazis – and without waiting for the consent of the British government – on the back of pressure from the BIS.

“There was a further gold transaction on the 1st June [1939] when there were sales of gold (£440,000) and gold shipments to New York (£420,000) from the No. 19 account of the BIS This represented gold which had been shipped to London by the Reichsbank,” the history said.

“This time, before acting, the Bank of England referred the matter to the chancellor, who said that he would like the opinion of the law officers of the Crown. On the BIS enquiring, however, what was causing delay and saying that inconvenience would be caused because of payments the next day, the Bank of England acted on the instructions referring to the Law Officers, who, however, subsequently upheld their action.”

The documents also show that Montagu Norman, then governor of the BoE, was opaque in his communications with John Simon, the chancellor at the time, when pressed on whether the central bank still held the Czech gold.

“On 26th May the chancellor wrote to the Governor asking whether the Bank of England still held the Czech gold, as the information might help him to answer questions in the House. The Governor in his reply (30th May) did not answer the question, but pointed out that the Bank held gold from time to time for the BIS and had no knowledge whether it was their own property or that of their customers. Hence, they could not say whether the gold was held for the National Bank of Czechoslovakia.” '

We sometimes may have to sup with the devil, Gerard, but do we ever really know who (s)he is?