Over the Christmas and New Year break, I finishing reading Till Time’s Last Sand, British historian David Kynaston’s masterful history of the Bank of England, covering its first 320 years since its establishment in 1694, when incidentally it became the second central bank in the world, as Sweden’s was established over two decades earlier. Hat tip to Nicholas Gruen who tweeted on central banks recently: https://twitter.com/NGruen1/status/947352667512119296.
The book covers the bank’s origin as the banker to the British Government and its evolution into “a great engine of state”, as Adam Smith described it. During its long history, the bank has helped the British Government finance its budget in peace and wartime, and it also helped finance colonial development, including that of Queensland’s in the 19th century. The book tells the story of, among other pivotal events, the bank’s nationalisation in 1946, its experiments with monetarism in the 1970s and 1980s, its eventual independence to fight inflation on its on terms, and its controversial response to the financial crisis. It is a comprehensive history, with a wealth of fascinating information including, for example, the attempted shooting in 1903 of Bank Secretary Kenneth Grahame, who later wrote The Wind in the Willows.
The book contains a brief but interesting reference to Queensland. In the 19th century the Bank of England managed the Queensland Government’s borrowings from the London market, and in the late 1880s it became very concerned about Queensland’s rapidly growing public debt, which it was finding increasingly difficult to market. In 1888, the bank’s Governor Sir Mark Collett told the Queensland Government representative in London that he should advise the state government it needed to reduce its borrowing requirement. Certainly, Queensland’s public finances were in a parlous state at the time. In his biography of Sir Thomas McIlwraith, The Queensland Caesar, former Queensland Attorney-General Denver Beanland noted that, by 1890, Queensland had the highest public debt in the British Empire, at around £70 per capita, compared with Canada’s £12 per capita, for example.
The book contains many interesting stories about the bank’s employees, their day-to-day work, and how they came into the bank. For much of its history, the old boys network and family connections were relevant, and apparently proficiency in cricket was highly desirable. Kynaston is excellent when it comes to the human dimension, if not the economic dimension, which I’ll come to below. His description of the bank’s legendary governor of the first half of the twentieth century, Montagu Norman, is excellent. Norman is presented warts and all. With Norman, the facts speak for themselves. Norman’s extraordinarily poor judgment was demonstrated by his advocacy for Britain’s disastrous return to the gold standard in 1925, his unauthorised visit to Nazi Germany in early 1939, and the bank’s transfer of gold belonging to the Czechoslovak National Bank to the Reichsbank, after Nazi Germany’s invasion of Czechoslovakia in March 1939, just six months before the start of the war (see this BBC report).
As noted in a highly critical Guardian review of the book (Till Time’s Last Sand review – a bloodless history of the Bank of England), Kynaston tends not to include much of his own emotion or opinion in the book. This is most apparent in his discussion of recent bank history, and he could be accused of going soft on former Governor Mervyn King, who incidentally had requested the author to write the history. You may recall King was heavily criticised for the bank’s role prior to and in the early days of the financial crisis from many commentators, including a former member of the bank’s own Monetary Policy Committee David Blanchflower (see this BBC Report for example). The bank King led was accused of failing to understand the full magnitude of the risks to the financial system and the wider economy that started appearing in the second half of 2007. Kynaston notes the criticism that was made of King at the time, but his own opinion is unclear.
Perhaps Kyanston felt unqualified to offer opinions on economic issues, not being an economist. Robert Skidelsky made a similar comment in his review of Kynaston’s book. While I would have liked the book to discuss important contemporary issues in central banking, such as the debate over inflation versus nominal GDP targeting or the implications of cryptocurrencies such as Bitcoin, I can understand the author was not well placed to provide this commentary. Overall, this is an outstanding history of an incredibly important institution, and I can highly recommend it to readers interested in economics, banking or British history.