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By Root 239 0

history helps us understand a little more about the power of financial capital and its ability to escape offshore to fortified and deregulated spaces, protected from outside interference. It is no coincidence that the futuristic Euromarkets, this new playground for Wall Street, emerged here in this ancient City. This market and its subsequent spin-offs would, as we shall see, ultimately play a central role in forcing through the liberalization of the world economy, whether the world’s citizens liked it or not. The City had created a new banking order; a new form of money, a new market in which to trade it, and the means by which the City of London would reemerge, phoenix-like, from the ashes of empire.43 The project to restore the City to postimperial glory, the academic writer Gary Burn notes, “was pursued unhesitantly and unstintingly, without, it seems, any prior or subsequent debate by the Prime Minister, the Treasury, by Cabinet, Government or Parliament. Central to the success of this project was the Bank of England, which after 1945 set about reestablishing the hegemony of international financial capital.”

From those early beginnings the Euromarkets spread like a forest fire, fueled by political events. The Soviet Union did not want to hold too many dollars in New York, where they risked being confiscated if the Cold War turned nastier, and they did not want to invest in Sterling either: the risky money of a collapsing empire. In this new liberated Eurodollar market they found their solution: They could hold the money in dollars in London, under the protection of an ancient, rather unaccountable institution with no qualms about the political origins of money. Starting with a deposit of a few hundred thousand dollars by the Moscow Narodny bank in 1957, the Soviets began to pile in. Karl Marx would have raised his prodigious eyebrows at the irony of avowedly Marxist nations nurturing the emergence of the biggest, most unfettered capitalist system in history.

By late 1959 about $200 million or so was on deposit in the Euromarket in London; by the end of 1960 it had reached a billion, and a year later the total was $3 billion, by which time it was spreading to Zurich, the Caribbean, and beyond.

In 1963 the market received two more major fillips. The first came on July 18 when President Kennedy introduced his so-called Interest Equalization Tax on income from foreign securities, which was supposed to curb U.S. dollar outflows by making it less attractive for U.S. bankers to lend overseas. Wall Street responded by doing their lending out of the offshore, tax-free Euromarkets instead. “This is a day you will remember,” said Henry Alexander of Morgan Guaranty bank when the new regulations came into force. “It will change the face of American banking and force all the business to London.”44 The second boost that year was the birth of Eurobonds: unregulated offshore bearer bonds, which are just what the name suggests: whoever bears the pieces of paper in their hands owns them. They are a bit like ultravaluable dollar bills: No records are kept of who owns them, and they are perfect for tax evasion. Bearer bonds feature in villain-infested Hollywood movies like Beverly Hills Cop and Die Hard, and they are considered so pernicious that many countries have since outlawed them. A Bank of England memo from 1963 crystallizes the cynicism. “However much we dislike hot money, we cannot be international bankers and refuse to accept money.”45

That year American banks were treated to a display of the Bank of England’s political muscle when the Bank’s governor Lord Cromer forced Britain’s new prime minister Harold Wilson to throw away half his election promises and slash government spending, prompting Wilson to shout in one debate, “Who is Prime Minister of this country, Mr. Governor, you or me?”46

Though the Bank of England is accountable to parliament, not to the City of London Corporation, its physical location at the geographical center of the City—just across the road from the Lord Mayor’s Mansion House—reflects where its heart