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Bank of England. As early as its first interim report in the
summer of 1918, and confirmed by its final report the following
year, the Cunliffe Committee called in no uncertain terms for
return to the gold standard at the prewar par. No alternatives
were considered.10 This course was confirmed by the VassarSmith Committee on Financial Facilities in
1918, which was
composed largely of representatives of industry and commerce, and which endorsed the Cunliffe
recommendations. A
minority of bankers, including Sir Brien Cockayne and incoming Bank of England Governor Montagu
Norman, argued for
an immediate return to gold at the old par, but they were overruled by the majority, led by their economic
adviser, the distinguished Cambridge economist and chosen successor to Alfred
Marshalls professorial chair, Arthur Cecil Pigou. Pigou argued
for postponement of the return, hoping to ease the transition
by loans from abroad and, particularly, by inflation in the
United States. The hope for U.S. inflation became a continuing
theme during the 1920s, since inflated and depreciated Britain
was in danger of losing gold to the United States, a loss which
could be staved off, and the new 1920s system sustained, by
inflation in the United States. After exchange controls and most
other wartime controls were lifted at the end of 1919, Britain,
not knowing precisely when to return to gold, passed the Gold
and Silver Export Embargo Act in 1920 for a five-year period,
in effect continuing a fiat paper standard until the end of 1925,
with an announced intention of returning to gold at that time.
Britain was committed to doing something about gold in
1925.11
The United States and Great Britain both experienced a traditional immediate postwar boom, continuing
th
Brothers, 1936), pp. 9091; and Chandler, Benjamin Strong, p. 105. The
massive U.S. deficits to pay for the war, were financed by Liberty Bond
drives headed by a Wall Street lawyer who was a neighbor of McAdoos
in Yonkers, New York. This man, Russell C. Leffingwell, would become a
leading Morgan partner after the war. Chernow, House of Morgan, p. 203.
29Rothbard, The Federal Reserve, p. 114; Chandler, Benjamin Strong,
pp. 9398. While some members of the Federal Reserve Board had heavy
Morgan connections, its complexion was scarcely as Morgan-dominated
as Benjamin Strong. Of the five Federal Reserve Board members, Paul M.
Warburg was a leading partner of Kuhn, Loeb, an investment bank rival
of Morgan, and during the war suspected of being pro-German; Governor
William P.G. Harding was an Alabama banker whose father-in-laws iron
manufacturing company had prominent Morgan as well as rival
Rockefeller men on its board; Frederic A. Delano, uncle of Franklin D.
Roosevelt, was president of the Rockefeller-controlled Wabash Railway;
Charles S. Hamlin, an assistant secretary to McAdoo, was a Boston attorney married into a family long connected
with the Morgan-dominated
New York Central Railroad and an assistant secretary to McAdoo.
Finally, economist Adolph C. Miller, professor at Berkeley, had married
into the wealthy, Morgan-connected Sprague family of Chicago. At that
period, Secretary of Treasury McAdoo and his longtime associate, John
Skelton Williams, comptroller of the currency, were automatically