Oil Becomes the Weapon, the Near East the Battleground
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This memo dealt with the ‘Effect of War on Our Gold Reserves.’ Blackett writes, It is of course impossible clearly to forecast what would be the effect of a general European war in which most of the Continental countries as well as Great Britain were engaged, leaving only New York (assuming the neutrality of the United States) among the big money markets of the world available from which gold could be attracted to the seats of war. Equally astonishing, in light of Britain’s decision to go to war that fateful August 4, was a letter from Sir George Paish to Lloyd George dated 2 A.M., Saturday morning, August 1, 1914: Dear Mr. Chancellor, The credit system upon which the business of this country is formed, has completely broken down, and it is of supreme importance that steps should be taken to repair the mischief without delay; otherwise, we cannot hope to finance a great war if, at its very commencement, our greatest houses are forced into bankruptcy.2 Specie payments (gold and silver bullion) were promptly suspended by the Bank of England, along with the Bank Act of 1844. This decision placed large sums of gold into the hands of the Bank of England, in order that Britain’s government could finance food and war matériel purchases for the newly declared war against Germany. Instead of gold, British citizens were given Bank of England notes as legal tender for the duration of the emergency. By August 4, the British financial establishment was ready for war. But, as we shall soon see, the secret weapon was to emerge later: the special relationship of His Majesty’s Treasury with the New York banking syndicate of Morgan. OIL IN THE GREAT WAR Between 1914 when fighting began and 1918 when it ended, petroleum had emerged as the recognized key to success of a revolution in military strategy. In the age of air warfare, mobile tank warfare and swifter naval warfare, abundant and secure supplies of the new fuel were becoming increasingly essential.
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