How the Times Change

Thursday, March 05, 2009
It's funny for Gordon Brown to state in his sycophantic speech before a joint session of Congress, "American bonds are unbreakable," when during the early 1800s America could barely sell its bonds to the British. London was the center of world finance at that time. Quoting the "House of Morgan":

"British bankers cursed America as a land of cheats, rascals and ingrates. State defaults also tainted federal credit, and when Washington sent Treasury agents to Europe in 1842, James de Rothschild thundered, 'Tell them you have seen the man at the head of the finances of Europe, and that he has told you they cannot borrow a dollar. Not a dollar.'"

America had rebelled against Britain's taxes and economic tyranny, but long after independence it depended on Britain for loans. British banks funded the construction of early infrastructure and even loaned America money for the Louisiana Purchase.

Back then America was the equivalent of a third-world debtor nation. Now American bonds (T-bills) are probably the most sought-after asset in the world. It can't sell enough. The country can thank J.P. Morgan for that. His family set up shop in London and wooed the British bankers. By 1900, America had seized the reigns of world finance, with J.P. Morgan in the saddle.

It's an overarching story of the 18th and 19th century: power evacuating the United Kingdom and gravitating around the United States. The story came full circle today when Britain's Prime Minister Gordon Brown brown-nosed the American Congress like a middle-manager blubbering fulsomely for a promotion.