London: Pandora’s Box
But, what is to be the fate of the great wen of all? The monster, called, by the silly coxcombs of the press, 'the metropolis of the empire?
William Cobbett, Rural Rides
The starting point for this note was a look at the world’s progress since its failure to wholeheartedly install Henry George’s ideas as unimpeachable orthodoxy; so, for the purpose of these notes, we need to reorient and remind ourselves where we are before we reach back into the past again.
In the last years of Henry George’s life, he had been supporting the presidential bid of William Jennings Bryan. The background to Bryan’s candidature was one of the final acts of a bitterly fought battle that had been raging on since America’s birth – indeed, had perhaps been the very cause of the rebellion of the American colony in the first place: this was the battle over money, what should be used for money, who should hold the monopoly to issue the country’s money, either the elected government or private banking interests. In the century that Henry George lived, this seems to have been the political question. So, briefly, we have to delve into the past to get some idea of the story.
In the newly-born America, the story around money is dynamic and dramatic; in its first century and a half or so, ownership of the magic baton that makes money changes hands no less than seven times, presidents and central bankers wresting it from each other over the years in a storm of bitter words and alleged murders. In particular, some of the most celebrated American presidents, the kind that get their faces carved into mountainsides, were at the forefront of this battle. The history of the first century and a half of American history is seen by some as a battle for the soul of the revolution, to save it from what they saw as the corrupting influence of organised international money.
The story we’ve been following and trying to get a sense of is that America’s birth and development were in large part shaped by the attempts of European old money to subvert it and control it, Britain and the powerful European nations having long succumbed to the control of central banks.
London, following the 16th century post-Reformation financial reforms of Henry VIII, had been the crucible which forged the mechanisms which have driven the development of the modern age. In and around London’s ancient square mile, the great money trick which would capture the world was being conjured.
Goldsmiths had safes, and in the 17th century they were a good place to store gold, particular when there were autocratic kings around. And the goldsmiths would give out receipts for the gold, and these receipts became used as paper money. It wasn’t long before goldsmiths stumbled upon the realisation that, since only a few people would collect their gold in any time period, if they were to issue more receipts, notes, for the gold they held, none would be any the wiser, and they would be much the wealthier. From that realisation, it’s a question of how far you go.
This reading of how it all started is a commonplace in economic textbooks, that fractional reserve lending was something that they found they could get away with and that this was a scam, this was essentially fraud; fraud which before long becomes legitimised. This was the birth of what came to be called fractional reserve banking.
Definitely don’t want to be too diversionary, having taken a diversion from the 20th century to look at the historical development of money matters, but we couldn’t pass by the 17th century without noting the beginning of a process - more dark acts cooked up in London - that we’re still only dimly aware of and which we will return to properly on the second album.
In 1604, the first Parliamentary Inclosure Act was passed, and began a process of enclosing the commons, stealing what even William the Conqueror had considered common. The process took off in earnest in the following century, and by 1914, 5,000 different Parliamentary Acts of Enclosure were passed, one every three weeks or so for three centuries, imposing legal property rights on common land, enclosing nearly 7 million acres, around 11,000 square miles (Wales is about 8,000 square miles.) This was a legal land grab which dispossessed the rural population and engineered the social history of Britain, an act of lawless law, as John Clare termed it in his poem, The Mores.
Back to London and money. In 1688, William, Prince of Orange of the House of Orange-Nassau and Stadtholder of the Dutch Republic – the Stadtholder was a uniquely Dutch idea, a type of de facto hereditary head of state and somehow a crowned figure in a republic – added to his titles the crowns of England, Scotland and Ireland, becoming King William III of England and personally uniting the nations of the Britain Isles with the Dutch Republic for 14 years. During William's reign the political entity of Britain came into being and, significantly, London was united with Amsterdam, which was certainly an influence on London.
Amsterdam was the world’s most developed centre of trade and finance as the Dutch Republic went through its golden era, and much of what would become modern business practices had been developed here. (Interestingly, the Dutch also levied a width tax on houses, which was the architect of Amsterdam, and, by the by, Dutch municipalities raise a land value tax to this day.)
The VOC, Vereenigde Oostindische Compagnie, the Dutch East India Company, had come into being in 1602, at about the same time as the Honourable East India Company out of London, and would follow a similar career, conquering and ruling territories in Asia, which later became the Dutch East Indies, just as the British Empire would later take over the rule of the Honourable’s private empire in India. The VOC would eclipse the Honourable in traffic with the east, and shipped back five times the loot that even the Honourable had brought back to Britain. Amsterdam became immensely wealthy.
The VOC’s lucrative trade had stimulated the establishment of the Amsterdam Stock Exchange, not quite the oldest in the world but in terms of activity, volume and facility, the first real operating stock exchange in the world and corporate shares started trading there in 1607. And the Amsterdamsche Wisselbank, the Amsterdam Exchange Bank, was established in 1609, a proto-central bank. Bills of credit, foreign exchange markets, all these things were being developed here.
And the Dutch invented the speculative financial bubble, creating an extraordinary tulip mania over tulip bulbs. By 1637, the height of mania, a single tulip bulb of a certain type was worth ten years' good wages. There’s many scholars who say it didn’t happen anywhere near as manically, just a sensational idea that became popularised two centuries later in literature, the way things can. And for some it’s a colourful example on the recurring theme of financiers pumping up a bubble and choosing a moment to burst it, catching everyone’s assets as they float down.
In 1694, King Billy, as he is known in some parts, needed money and invited gold traders and others to set up the first Bank of England, and thus legitimised fractional reserve banking (which also went on in Amsterdam though officially frowned upon and seen as risky.) They wasted no time in lending on a fraction, and in what was to become a tradition for central bank inaugurations, the founders, not actually having the amount of money they had agreed to put up to buy into the bank, lent themselves the money using money created against the money that they had come up with. It’s priceless. In this way, they bought control of the richest, most powerful, most risk-free business in the world.
William Paterson, one of the founders of the Bank of England, seemed to know what he was on to, and he baldly stated it:
The bank hath benefit of interest on all moneys which it creates out of nothing.
Or did he? No one can find a source for the quote. But what is for sure is that when you hath such a benefit, London was a great place to be. England, soon to become Britain, went off to war more or less continuously from now on, building up a vast global empire, and a vast debt.
What a place London has been in history: fractional reserve banking; the central bank (actually not the first, but the model for all to come); the first corporation-for-profit (multi-national and loot plundering to boot); and a century and a half later Karl Marx came to London and wrote Das Kapital. London has been something of a Pandora’s box in the world and no mistake.
London was also the place where The London Times ran a five-page special on Progress and Poverty.
The City of London, for many centuries, has very much been the place to get business done. In the 00s, American companies would get deals signed off here which they couldn’t get signed off in the States. It’s been a place a Third World dictator might salt some billions away, maybe his return on giving away his nation’s assets to an multinational company.
The City of London Corporation has a fascinating history going a very long way back, and it’s an amazing secret that we actually have, as some have it, almost a state within a state in Britain; a state within, and having much influence over, a state. The Magna Carta of 1215 proclaimed that:
The city of London shall enjoy its ancient liberties.
This is a brief look at the City of London Corporation, who have an agent in Parliament called the remembrancer, a role dating back to 1571.
This is an article about London now, the city that ate itself, and refers to a quote from Tony Travers of the LSE:
London is the dark star of the economy, inexorably sucking in resources, people and energy. Nobody quite knows how to control it.
And its property prices are sucking money out of the economy. It can seem now like a deposit box for stolen wealth, busily socially cleansing itself of non-millionaires.
The Bank of England was added to the city with ancient liberties and went on to become the model for all the other central banks which international bankers have had set up, and just about every state in the world today has one, the Bank of Wherever. It will look and sound like it’s part of the state and will be generally perceived to be that, but it will actually be a private affair, that controls the monopoly on issuing currency for debt and the money supply of wherever. It will probably be anonymously owned, possibly by the same groups that own the Banks of Everywhere Else. That’s the story we’ve been exposed to.
In Europe, powerful banking interests had become stupendously wealthy – wealth to shame kings, developing a vastly lucrative model of lending money to perpetually warring states, readily funding both sides in conflicts, and building up enormous power and influence over events. There’s a famous story that is frequently recounted about how one of the age’s infamous masters of international banking took possession of most of the London Stock Market in the aftermath of the Battle of Waterloo, and ultimately the Bank of England. The story of the events of the day around Waterloo and a speedier boat and horses than the British Army could muster, was upheld by an American judge a century later when challenged by the group involved.
The way the story is presented, the emergent America was a clear threat to the interests of these European-based financial powers,. This breakaway revolutionary nation may have the potential to become an enormous power against their interests and ambitions. It may just become powerful enough to become a beacon against injustice. Of course, America did become so powerful in the world that the world looked to it and has been led by it. At its best, it has been a beacon against injustice, while becoming the source of much of it because its deals became corrupted and coopted. So much might have been different.
In the story we've been following, international bankers were busy subverting the threat of the American Revolution from the beginning.