“… THE LATE AND DEEPLY DEPLORED MICHAEL COLLINS…”
Aug 27th, 2012 by Conor McCabe
I’m in danger of posting this entire book of evidence but this is a real beauty given the Michael Collins love-fest last week - from the evidence of Patrick J. Gaffney, general secretary and vice-president of the Financial Freedom Federation of Ireland. He’s talking about the decision to base the Irish pound on Sterling rather than on Irish bank deposits and he gave evidence on 5 July 1935:
Hi Conor,
Fascinating stuff, but I am a bit confused as to the meaning of the above passage. Rather than creating a national banking system, Collins went with Lord Fitzalan and committed the nation to a debt of €1m paper pounds. How was this an alternative and how did this work? Was Collins guaranteeing debts incurred under the previous regime or was he securing a new loan? And how did this facilitate such a free flow of capital out of the country?
Sorry for the barrage of questions, but I am genuinely interested. As a disclaimer, my familiarity with Irish history is limited to whatever was on the Junior Cert. syllabus. Apologies if I am asking about something notorious or blindingly obvious.
Hi RosencrantzisDead, good question! I’m still working my way through the material but I do know that the Bank of England said that Ireland had two options: it could follow the South African route and form its own central bank or it could remain within the Sterling area with monetary policy set by London, and it went with the latter (and a parity link not a floating link as well) and my feelings on the matter are that it did so because such a link suited the banks as it kept the value of paper assets secure.
For those whose wealth was not stored within or earned from paper assets, though - i.e. the real economy - it a disaster.
The minutes of evidence of the currency commission are fascinating as you have people time and again pointing out that monetary policy was geared towards the interests of private bankers and not the State. Ireland doesn’t get its own cewntral bank until 1943 and doesn’t break the parity link with Sterling until 1979.
After I wrote the comment, it occurred to me that a sterling parity might be like the much maligned Argentinian policy of linking the peso to the US dollar. If I recall, it was a failure to deal with that parity in a timely manner that led to money fleeing the country in great volumes. I suppose that might be me answering the last last question I asked. Keep it coming. Great stuff.
There’s a similar problem being played out now with the Euro, at its most acute in Greece, where those whose wealth is in paper are basically calling the shots. Devaluation is a problem for everyone but the costs of keeping a state linked with an overvalued currency falls on wage labour and gov. spending on social infrastructure.
I’m not sure the Financial Freedom Federation would a good guide to the banking system. I remember correctly from looking at some files on them way back in the National Archives they seemed to be under the impression members of one ethnic group in particular controlled the banks.
They’re not the only ones saying this Brian,you’ve got pretty much everyone who’s not an Irish banker saying it - from the Bank for International Settlements in the 1920s to the Ibec Report in 1951 - even the Bank of England suggested that the Free State should consider following the South African model of a central bank and flexible sterling area membership. You have Cathal O’shannon saying this, William O’Brien and the trade union movement as well.