Welcome back, team! In this episode of Dave Talks Politics, hi, I’m Dave, and I’ll be talking politics. Today, team, let’s talk about the shift from the Bank of England’s dominance with the British pound as the world’s reserve currency to the rise of the Federal Reserve and the US dollar—facts first on how it happened, then some hypotheses on powerful interests behind the scenes, and comparisons to the pre-1946 BOE era.
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**1. FACTS ON THE BANK OF ENGLAND AND POUND DOMINANCE**
1. The Bank of England was founded in 1694 as a private joint-stock company—merchants loaned the government money for wars, getting a charter to issue notes and act as lender.
2. It was privately owned by shareholders until nationalization in 1946—profits went to owners, but it served as the government’s banker, managing debt and currency.
3. The British pound sterling became the world’s reserve currency in the 19th century—backed by the gold standard, the British Empire’s trade networks, and London’s financial hub.
4. By the early 20th century, the pound was held by central banks globally for trade settlements, reserves, and stability—reflecting Britain’s economic and imperial power.
5. World Wars eroded this: WWI forced Britain off gold temporarily, WWII depleted reserves—pound devalued in 1949, signaling the end.
6. Pre-1946, BOE’s private structure meant shareholders (merchants, financiers) had influence through ownership, but government directed policy via borrowing needs.
**2. FACTS ON THE FEDERAL RESERVE ESTABLISHMENT**
1. The Federal Reserve was created in 1913 via the Federal Reserve Act—after banking panics like 1907 exposed vulnerabilities in the US system.
2. It’s a hybrid: 12 regional Reserve Banks owned by member commercial banks (who buy non-voting stock), overseen by a Board of Governors in Washington, appointed by the President and confirmed by Senate.
3. Key players: Woodrow Wilson signed it; influences from bankers like Paul Warburg (who helped draft), J.P. Morgan’s associates, and politicians like Carter Glass.
4. The Fed’s structure balances public oversight (Board sets policy) with private input (banks elect some regional directors)—profits go to Treasury after dividends to member banks.
5. Unlike BOE’s early private model, Fed was designed as quasi-public from start—independent in operations but accountable to Congress.
6. Today, Fed is not “owned” by private interests in the full sense—member banks hold stock for operational purposes, but can’t sell/trade it or control policy; Board dominates.
**3. FACTS ON BRETTON WOODS AND THE DOLLAR’S RISE**
1. Bretton Woods Conference in 1944 (44 nations) created the post-WWII monetary system—US dollar became central, pegged to gold at $35/ounce.
2. Other currencies pegged to the dollar—US committed to convert dollars to gold for foreign governments, making dollar the reserve currency.
3. This formalized the shift: Pound weakened by wars, US emerged with 2/3 of world gold reserves and industrial might—dollar overtook pound by 1950s.
4. System ended in 1971 (Nixon closed gold window)—dollar floated but remained dominant reserve (~60% today) due to US economy, markets, and stability.
5. BOE’s pound lost reserve status as empire declined; Fed’s dollar gained from US ascent—Bretton Woods institutionalized it.
6. No direct “handover”—organic shift driven by economic realities, but conference sealed dollar’s role.
**4. HYPOTHESES ON POWERFUL INTERESTS AND CONTROL**
1. Jekyll Island meeting (1910): Bankers like Warburg, Aldrich (Rockefeller in-law), Strong (Morgan ally) secretly drafted Fed blueprint—hypothesis: Powerful families shaped it for control.
2. Ownership conspiracies: Some claim Fed “owned” by Rothschilds, Rockefellers, Morgans via member banks—stock gives influence, but facts show Board overrides.
3. Enduring control: Hypotheses suggest families/funds lobby Board appointments, influence via Wall Street ties—e.g., Goldman Sachs alumni in key roles.
4. Behind closed doors: Fed creation seen as bankers’ coup to centralize power—avoid panics but ensure profits; similar to BOE merchants funding wars for gains.
5. Today: No direct family control (public Board), but hypotheses point to indirect sway through campaign finance, revolving doors—Fed decisions favor finance elites.
6. Evidence thin: Official structure is public; conspiracies often overstate—Fed accountable to Congress, audited (partially), but opacity fuels theories.
**5. COMPARISONS BETWEEN BOE PRE-1946 AND FED CONTROL**
1. Both started private: BOE fully private until 1946 (shareholders profited, influenced lending); Fed hybrid—banks own regional stock but policy public.
2. Powerful interests: BOE merchants (Houblons, Godfreys) shaped for war finance/profit; Fed bankers (Morgan, Warburg) pushed for stability but centralized control.
3. Reserve currency role: BOE’s pound backed empire; Fed’s dollar backed US power—both gave elites leverage over global finance.
4. Nationalization shift: BOE 1946 ended private ownership (state control); Fed never fully private—hypotheses say elites adapted via influence, not ownership.
5. Enduring parallels: BOE pre-1946 shareholders lobbied policy; Fed today, elites allegedly steer via networks—both show finance’s subtle hand over governments.
6. Key difference: BOE’s private era direct (dividends to owners); Fed’s “independence” shields from politics but opens to elite capture hypotheses.
**BOTTOM LINE**
The British pound’s reserve status shifted to the US dollar via Bretton Woods in 1944, as WWII weakened Britain and elevated America—BOE pre-1946 was privately controlled by merchants profiting from debt, similar to hypotheses of powerful US families shaping the 1913 Fed for influence. Facts show Fed’s public Board dominates today, but theories suggest enduring elite sway via networks—comparing to BOE, control evolved from direct ownership to indirect market power. In the mercantilist race, resource leverage like this matters—deregulate, reshore, compete or lose edge to China’s scale.
Talk soon!
