Reading notes : Lords of Finance (part 2)

Intro : War, as we see it, not only is a battle of human, weapons, but also a battle of economy.

Keynote:
1. Uk, Austria, German, France, Russia are interrelated that , European credit system rely on each other, and London, as a center of finance , provide credit to Europe and America.

2. When war break out, possible that Uk banker loose everything. London had to suspend stock exchange.

German :
1911 Agadir crisis, German decided to confront France over the occupation of Morroco, stopped by the ability of Banks to finance a European War.

Several measure taken, build up gold reserve, reduce deposit by foreign investor.

Us :

As outbreak of war, Us was the Largest importer of capital in the world.

Central bank in America, twice in 1791-1811, 1816-1836, then 70 years without central bank until October 1907 when a bank run occur.
Glass bill, the creation of twelve local federal reserve bank, and a board of federal reserve elected by president . But New york remain largest and dominant( 2.5 times second large Chicago , 10 times smallest Minneapolis . )

The Balkan crisis at 1914, July cause a public panic, a bank run.
However, Banque De france had the largest gold reserve in the Europe, around 800million of bullion.

General mobilization in france. Meanwhile, the gold reserve in Paris was move to other place.

1914- 1918

Everyone thought war will end soon when the source of finance dry up.
However, this is not a case when over 18 million people mobilize at the end of 1915.

The three way Government finance their war
1. Taxation ( Uk)
2. Bond sells ( france )
3. Printing more money.

In Uk, Banks were founded in 1694 war time to finance the war of the league of Augsburg against France.

For all the country involve in war, one of the measure taken to finance their war is by printing money , however as currency notes in circulation increase, this tends to bring inflation as more money after the same goods.
The notes circulate in war double for uk, tripled for France. Which bring equivalent inflation.

German raised 10 % of 47 billion spent on war on tax, with no supplicated financial market, rest of it funded by printing money . ( fourfold in market circulation )



In Us,
The war demanded U.S supply and materials, which in turn cause a large deposit of gold, more money circulate lead to a boom .

After the war, the position Of Us economy to the rest of world change. Where Fed reserve, which dunnot act actively financing government bills of the war, maintain its credibility and largest gold reserve to play the key role in restoring of gold standard.