Palladin of Gold

(See front cover)

"He is a man who might have stepped out of the frame Of the portrait of the most handsome courtier who ever graced the court of a queen." Thus has Chancellor of the Exchequer Philip Snowden described the Empire's most important bachelor, potent patrician Montagu Collet Norman, Governor of the Bank of England.

Every courtier must have his queen, and Bachelor Norman's is a fussy old lady in a mythical lace cap--a sort of financial Queen Victoria. Her age is 235. In the bustling City of London she has been affectionately called for generations "The Old Lady of Threadneedle Street." In all her life she has never kept a favorite as long as the nine years she has kept Montagu Collet Norman. Courtier Norman was defending his Old Lady against concerted attacks on her gold reserve--especially against the attacks of ungallant Neighbor France.

Two policies which are really one have been the guiding principles of Governor Norman for the past nine years: 1) Deflation of pound sterling after the Wartime period of inflation; 2) absolute maintenance of the pound on a gold basis once deflation was achieved (TIME, May 4, 1925). Under Governor Norman's aegis a gold reserve of -L-150,000,000, in the vaults of the Bank of England, was inaugurated, on the advice of the Cunliff Currency Commission that such a reserve was "desirable" (i. e. indispensable in the Commission's opinion) if the gold parity of the pound was to be maintained. The seriousness of the situation, last week, may be judged from the fact that for the first time since the Cunliff Minimum was laid down, the Old Lady's gold-in-pocket fell below the "desirable" limit.

Of course the Old Lady's purse was not plump one morning and lean the next. Such epochal movements of gold bullion are necessarily slow. All summer airplanes have been hopping off gold-laden from England. Many winged to Germany, attracted by legitimate opportunities for high return offered in the Reich, where the discount rate of the Reichsbank stood at 7 1/2%, a potent magnet. But even more gold planes sped to France, and that was passing strange. With the Bank of France's rate at 3 1/2%, the zeal of that institution to acquire and hold gold bullion was regarded in London as distinctly ominous. Was the explanation that France --on the eve of The Hague Reparations Conference--was amassing a spectacular gold reserve, swelling her credit to proud, unwonted dimensions, and generally preparing to overawe the Conference with a display of her fiscal might?

At the Bank of England, in his quiet sanctum, Montagu Collet Norman sat one morning last week, and probably he stroked in anxious meditation his courtly Vandyke beard. Invisibly the battle of gold was on. It was a question whether to call out the ordinary reserves--whether to raise the rediscount rate of the Bank of England.

Such a step would put a heavy strain on British industry. Legitimate and necessary business borrowing within Great Britain would be regrettably curtailed by so high a rate. When the news flashed from Manhattan that the U. S. Federal Reserve Bank had unexpectedly boosted its rediscount rate a full percent, to 6%, it was clear that something must be said or done.

What Governor Norman did was more dramatic in its manner than its substance. He deliberately broke a rule which he has observed inflexibly for nine years--the rule that the Governor of the Bank of England must never make a candid, unofficial, human declaration of anything touching his high and august policy. If John Pierpont Morgan should suddenly open the door of No. 23 Wall Street and cry out a reassurance in time of crisis, his colleagues could scarcely be more astounded than were the associates of Montagu Collet Norman at what he did last week.

Although a statement from the Governor was not even remotely expected, the lobby outside his office had gradually filled with a crowd of discount brokers, stock brokers, bankers. They were nervous, and the Bank of England seemed a good, reassuring place to stop a bit and exchange notes. Suddenly the door of the Governor of the Bank of England opened and he stood, tall, commanding on the threshold. "What are you waiting for?" asked Montagu Collet Norman. "There will be no change in the Bank of England rate this week!"

Governor Norman then stood there for several minutes, answering questions, guardedly. He let the impression be gathered that there would be no rise in the Old Lady's rate for a month, at least. Confidence returned to the City in a strong tide, and a cheerful story began going the rounds, being believed. It was recalled that the Old Lady's champion, on the most recent of his annual visits to the U. S., had perfected certain arrangements for a huge defensive credit in Manhattan. Officials of the U. S. Federal Reserve Banks refused last week to deny the story.

Almost simultaneously with Governor Norman's dramatic threshold statement his Old Lady's purse became substantially heavier with gold for the first time in over a month. While being called upon for only -L-126,512 in gold, she was able to acquire in open market gold to the tune of -L-860,200, mostly from South Africa. If the Bank of England continued to advance on this new incline of progress the Cunliff Minimum would soon be restored. With the gold situation easing, the Old Lady's champion turned his thoughts to cotton and reparations, sped up to Edinburgh, Scotland, for a conference with Prime Minister James Ramsay MacDonald.