This is where I came in. Then as now, nations' currencies were stuck together, but the glue was failing. Central banks and their governments would hurry to the creaking structure's rescue until their efforts became more desperate and their success more problematic. Half a century ago, the euro's troubles were foreshadowed when the pact that fixed the world's exchange rates slowly came apart. For the pound and for the British economy, one crisis succeeded another, and after the pact dissolved the worst was still to come.
The pound is and was the Bank of England's promise to pay, and Forest Capie's history can be read as an account of the attempts to keep that promise, in the two decades when its value collapsed. His predecessor, John Fforde, wrote of the Bank's post-war years in elegant Bankese, the only Indo-European language not to be written on the lines but between them. Over 822 pages he allowed readers to work out that, when the Bank was formally taken into public ownership, nobody asked what it was now supposed to do. So it got on with its work and did not invite questions. "The Bank is a bank", said Governor Cobbold, "and not a study group."
Capie picks up the story as the questions begin to be asked. Harold Macmillan, newly installed as prime minister, sets Lord Radcliffe to say how the economy ought to be managed. Soon enough Lord Justice Parker is set to investigate a sudden rise in Bank rate: did the news leak, who might have profited by it? His inquiry made the Bank's directors look like a City coterie. As Bagehot would have said, he let daylight in on magic. Parker found no evidence of a leak, but Capie, on good authority, says that there was one: "Lord Kindersley was very lucky."
Macmillan as a young radical (or Tory wet) had seen the Bank as a malign influence. Now he parts with all three of his Treasury ministers — later to be canonised as monetary martyrs — and sets course towards growth and full employment. Radcliffe's prescriptions are nebulous but attach little weight to money. Inflation is to be held down, first by persuasion and then by controls. The banks are asked to ration credit. Keynes's name is invoked, and sometimes taken in vain. Every so often a sterling crisis comes along to blow these policies off course. They are then resumed, by successive governments, but more rigorously. When inflation finally hits 26 per cent and sterling goes into free fall, statutory controls set limits on pay, prices, dividends and, of course, foreign exchange.