War and Gold

Starred review from January 13, 2014
The title’s implications aside, this is really a history of money—thoroughly satisfying and remarkably accessible. Aiming to explain today’s international financial turmoil, British historian and Conservative MP Kwarteng (Ghosts of Empire: Britain’s Legacies in the Modern World) begins with Spain’s conquest of America and its resultant bonanza of gold and silver. This bullion allowed governments to pay for wars and bolstered the European nation-state, yet it also fostered inflation, deficits, and a vast expansion of paper money—the three sins of classical economics. Centuries of financial bedlam paused during the Victorian era of gold-based stable currency and balanced budgets, but two ruinous world wars resurrected deficits and unprecedented government spending. The 1944 Bretton Woods Agreement revived gold-based discipline, but its end in 1971 led to an explosion of credit, easy money, financial chicanery, the rise of Japan and the European Union(, the spectacular transformation of China, and the continued, if shaky, domination of a pugnacious, free-spending America and its dollar. While John Kenneth Galbraith’s 1975 Money: Whence it Came, Where It Went remains the subject’s touchstone, Kwarteng superbly brings that volume up to date in explaining the almost unexplainable. Agent: Georgina Capel, Capel & Land Ltd. (U.K.)