Bytheway & Metzler, Central Banks and Gold

Central Banks and Gold: How Tokyo, London, and New York Shaped the Modern World (Cornell University Press, 2016) by Simon James Bytheway and Mark Metzler is an academic study that covers the period between the late 1890s and the 1930s. Although it’s no page turner, by relying on extensive archival research and bringing Japan into the picture it highlights some hitherto unknown aspects of the international central banking system.

Here are a few bullet points.

In the 1890s Great Britain was the world’s largest creditor country, replaced by the United States in 1914. In the 1980s Japan replaced the U.S. as the world’s largest creditor country and remains so today.

The Bank of England and the Bank of Japan “secretly developed a close form of cooperation in the early years of the [nineteenth] century. … [F]or much of the period from 1896 to 1914, the BoJ was the Bank of England’s largest single depositor. The Bank of England’s ability to maintain its global financial position during the decade and a half before 1914 was supported by its ability to manage these Japanese funds and quietly to draw on them in moments of need.”

In early 1915, well before the United States entered World War I, American private banks, backed by the Federal Reserve Bank of New York, “began to finance the enormous military purchasing programs run by the British and French governments in the United States.”

“Every truly major international financial crisis of the era—1907, 1920, 1929—appeared first in Tokyo, having an onset some three to six months earlier than in New York and London.” Tokyo markets were “a sensitive leading indicator.”