Chapter 115 Currency War XIV

Keynes is a famous economist in history. He was well-known in the 1920s and was probably the most famous economic figure of this era. He was not only an important economic adviser to the British government, but also the chairman of the National Mutual Life Insurance Company. Its annual report to shareholders has always been a must-read and first-listened news for European financial professionals.

In addition, in 1919, he also attended the Paris Peace Conference as the chief representative of the British Treasury. At the Paris Peace Conference, he took a more pro-German stance and resigned from the position of representative of the conference because the amount of compensation from Germany was too huge. Later, he published a book "The Economic Consequences of Peace", which made a rather pessimistic forecast for post-war Europe. When this book was published, the British media called him a traitor because of his pro-German attitude, and the then Chancellor of the Exchequer, Austin Chamberlain, accused him of betraying the trust of his motherland.

But by 1923, the pessimistic predictions in this book were coming true! Instead of benefiting from punishing Germany, the European economy was heading for collapse because of it - Germany was an important engine of the European economy before the war, and losing Germany meant that the European economy lost at least one-third of its growth momentum. Moreover, there is a certain correlation between the German economy and the French and British economies.

The general strike caused by the occupation of the Ruhr area in France and Belgium not only caused the German economy to collapse, but also caused losses to the economies of France and Belgium. The Rhine River and the German railway system are important channels for international trade in Europe, and coke from Germany is also an important raw material for the steel industry in France and Belgium. Now they are all lost.

The tide of social revolution began to roll again in 1922 and 1923. This time, it was not Bolshevism that rose, but fascism!

As Keynes's predictions were fulfilled one by one, and the dispute between the "gold standard" and the "gold exchange" emerged, Keynes once again became the most influential economist in the UK. The so-called "gold standard" and "gold exchange" were actually behind the US dollar and the pound sterling competing for the status of international reserve currency.

Because the United States has the largest gold reserves in the world, it actively promotes the restoration of the gold standard so that the US dollar can replace the pound sterling. The UK hopes to consolidate the pound sterling's status as an international reserve currency by linking the currencies of European countries to the pound sterling and the pound sterling to gold.

Whether Germany can be saved is a touchstone of the two monetary rules of "gold standard" and "gold exchange".

At the same time as the political upheaval in Germany, an important meeting related to the future fate of the whole of Europe was also underway in the chairman's office of the National Mutual Life Insurance Company headquarters in London.

Only two people participated in this meeting, Keynes and Dr. Schacht who came from Germany.

"Mr. Keynes, I think you should be very clear that the economic problems facing Britain and Europe now cannot be solved by gold that does not exist. The gold you demanded from Germany does not exist, and the gold you owed to the United States has never existed either. During the World War, thousands of tons of gold were not shipped from New York to London and Paris, and the World War was not carried out by throwing gold bars at each other.

What you got from the United States were all kinds of materials, and what Germany owed was actually materials. Because we did not destroy your gold reserves, what was destroyed by the German war machine were houses, bridges, factories, roads and ships. Regardless of whether those things are worth 132 billion gold marks. I think what we need to come up with is the corresponding products that can be produced, not gold that does not exist at all... If you really want us to compensate, not the territories of the Ruhr and Saar regions, then let us start production!"

Dr. Schacht is also an eloquent economist, but what he is selling to Keynes is indeed Hirschmann's point of view - if Hirschmann is asked to build a complex mathematical model to prove some economic theory, he will definitely not be able to do it. But he proposed a very simple and very feasible solution.

Keynes showed a surprised expression, then frowned his thick eyebrows, "Dr. Schacht, can I understand it this way, you have to repay the war reparations of 132 billion gold marks?"

"Yes! Repay with equivalent German industrial products!" Dr. Schacht said, "Because these things exist."

"Industrial products?" Keynes said, "Do you have enough industrial products? You have lost 1/3 of the coal mines and 3/4 of the iron mines."

"The coal mines can be reopened, and the iron ore can be imported from Sweden!" Dr. Schacht said, "As long as we can issue a new mark pegged to the pound, it will be stable. Determine the German currency. And establish a more efficient and export-friendly industrial production, investment and consumption system... We can use German factories to produce enough industrial products. "

"This requires a lot of investment, right?" Keynes said, "Do you have so much money?"

"We can borrow from Britain," Schacht smiled slightly, "If there is a gold exchange system, the paper money you British print is capital! This is the power to dominate the world. Do you want to give this power to the Americans?"

"The United States is very powerful and very rich," Keynes said with a frown. "We still owe the Americans a lot of money."

Schacht snorted softly, "We Germans plus you British, the local population alone can exceed that of the United States. The total output of steel, coal, automobiles and ships of the two countries is no less than that of the United States, and the aircraft far exceeds that of the United States.

If we can establish a stable monetary system in Europe with the pound at its core. Let Germany, France, Italy and other European powers, under the leadership of the United Kingdom, speak to the Americans with one voice. The British Empire can settle war debts according to its own wishes, and can also establish a gold exchange currency system according to its own wishes. Isn’t this what Britain wants? "

"It sounds very attractive." Keynes was silent for a while. "Can I understand that Germany really wants to use industrial products to repay its debts?"

"Yes! We are really willing to pay it back."

"But you must first establish an economic system that can produce large amounts of industrial products... This system must be able to operate in a closed manner under state control and must be oriented towards exporting industrial products."

"Of course, otherwise how could there be excess industrial product exports?" Schacht paused, "But we are not pursuing a trade surplus. We just want to pay off the compensation as soon as possible and then live a good life... We will not accumulate Excessive gold, our exports are only to obtain the necessary resources to meet the most basic domestic needs and compensation needs. If there is a surplus, whether it is a trade surplus or an investment project surplus, the gold obtained will be given to the Bank of England in exchange for pounds. ! Because the pound is the guarantee for the issuance of new marks!”

This is indeed what Britain dreams of!

Keynes said: "But there is no more free trade and free economy in Germany!"

"If we want to implement free trade and free economy, we must hand over non-existent gold to France. Perhaps we can also accept assistance from Wall Street, hand over the right to issue German currency, and let the Americans manage the German economy. , borrowing money from the United States to repay the reparations, Mr. Keynes, I think you know the consequences of this!”

Keynes seemed to be visiting the president of the German National Bank and the members of the Industrial Promotion Council, and said in a casual way: "If the United States really controls the German economy, then the dollar will become the world currency, and Britain will never have one." Opportunities to win back the glory of the past...Okay, I can try to convince the Prime Minister. But nothing is perfect in the world. The items to compensate for the compensation cannot be all expensive cars, planes and ships, and raw materials such as coal and wood are still available. It must account for a considerable proportion. And the German government's finances, the German central bank, must be subject to our strict supervision. In addition, the Baltic mark must also be pegged to the pound."

"Okay!" Dr. Schachter breathed a sigh of relief, "This is exactly the plan we want!"

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