Assessing the Impact of World War I on the City of London
The interwar years saw the rise of New York to challenge London as the world's leading provider of financial services.� This paper will show that the current explanations fail to identify a key factor in New York's rise.� The City was prevented from operating a full capacity by a capital issues embargo, imposed by the Bank of England to support the pound.� As a result, New York was able to enter the sector with little competition from London, and expand rapidly to issue over half of the global capital exported abroad in the 1920s.� Without the embargo, this would not have been possible, as the London merchant banks were the most productive producers in the industry, a position built up over the previous half century.� This result challenges the consensus that the return to gold was good for the City.� The merchant banks suffered and lost business, suggesting that this policy was even more disastrous than is currently thought.
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