Benjamin Strong, Jr made few speeches and did not appear in public to wax theoretically on the ways of economics and high finance. He was J. P. Morgan’s workhorse, and he built his reputation and his fortune on the back of the House of Morgan.

Adeline Torrey Schenck married a railroader and small-farmer named Benjamin Strong, and together they had four sons and a daughter. Her forceful personality befitted Adeline, the daughter of a prominent Presbyterian writer, theologian and minister, and her four sons continued the tradition of prominence in their respective fields. The oldest was a Princeton graduate who earned a PhD from Columbia University and became a professor of neurology at the College of Physicians and Surgeons. Her second son became the vice president of the American Radiator Company and partner in the engineering firm of Meyer, Strong and Jones. Her youngest boy went on to a highly successful career in medicine and psychiatry after earning degrees from Princeton and the College of Physicians and Surgeons.

Adeline’s third son Benjamin, Jr, was left no choice but to forego college because of a lack of financial stability in the family at the time of his high school graduation. Yet, he went on to become the governor of the New York branch of the Federal Reserve and one of the most powerful and influential men in the Unites States.

In 1891, at the age of 18, Benjamin Strong, Jr left the family home in Montclair, New York, to seek his fortune in finance. After being quickly fired from his first job for of all things, poor penmanship, he entered the financial firm of Jessup, Patton & Co., which became John Patton & Co., and then Cuyler, Morgan & Co. He started as a clerk, and by 1900 Strong was representing international investors in real estate and securities ventures. Basically, he was a stock and real estate speculator.

He left Cuyler, Morgan, & Co. at 26, to join the Atlantic Trust Company, which in 1903, became the Metropolitan Trust Company. He married Margaret LeBoutillier, started a family, and soon settled in the prominent New York City suburb of Englewood, New Jersey.

Cameron’s Brexit gamble made waves in Warsaw. The United Kingdom has been Poland’s long-time ally in the European Union and NATO, and Warsaw did not want to see London leave the EU.

The UK supported the eastern enlargement that paved the way for Polish membership of the EU in 2004. Warsaw and London have also taken a firm stance towards an increasingly assertive Moscow and pushed for sanctions after Russia invaded Crimea. Both countries also worked hand in hand in favour of further liberalization of the single market. Every relationship has its ups and downs, however, and so does the Polish–British partnership. The UK was one of the three EU member states (next to Sweden and Ireland) that opened its labour market for Poles and other central Europeans immediately after enlargement. The sharp inflow of EU migrants from central Europe contributed to an anti-migration narrative in the UK. Poland, under then prime minister Donald Tusk (the current European Council president) and his successor Ewa Kopacz, held it against the British government that it at times portrayed central Europeans in the UK as benefits scroungers.

But these tensions did not stand in the way of a pragmatic collaboration between Warsaw and London. From the earliest period covered in this book, many in Poland felt that Brexit would put this cooperation at risk. For Warsaw, the UK’s departure from the EU would shift the balance of power towards Germany and France. The exit of the largest non-Euro member would also make the non-Euro group less influential and bring increased pressure on Warsaw to adopt the euro. Poland is legally committed to joining the Eurozone, but its public has opposed the accession. Warsaw is in no rush therefore to adopt the common currency.

CHANGE OF GUARD IN POLAND: BAD NEWS FOR THE EU ENTHUSIASTS BUT GOOD NEWS FOR CAMERON

Warsaw wanted to help David Cameron keep the United Kingdom in the European Union but was reluctant to support reforms that would undermine its standing in the EU. Under Tusk and Kopacz, Warsaw relied on a partnership with the EU’s supranational institutions in its European policy.

The United Kingdom’s decision to leave the European Union will reshape the EU and, in particular, the EU’s institutions. The European Parliament will lose 73 British members. The Commission will have one Commissioner fewer and will have to deal with the more than 1,000 British nationals it employs. The Council of the EU will see a change in its balance of votes – and consequently in its voting patterns. The Economic and Social Committee and the Committee of the Regions will lose their British members, and the future of thousands of Britons working in the wider EU policy-making community has become uncertain.

Britain’s decision is near-universally seen as a negative one for the EU, although opinion is also united in thinking it will likely be much worse for the UK. There was little the EU institutions could do to avoid this scenario, however: the UK was the main actor and the room of manoeuvre for EU institutions was limited. How, then, did the European Commission, the European Parliament and the Council act and react during this process triggered by one of the EU’s member states?

From the moment the then UK prime minister, David Cameron, informed his counterparts of his intention to hold an in/out referendum and to renegotiate the UK–EU relationship up until the day he lost the referendum, the EU institutions played, at best, the role of a supporting actor. But, once the fate of the UK’s membership had been sealed by the vote, the EU institutions took centre stage in order to strengthen the unity of the 27 remaining member states. The UK progressively and rather quickly became de facto a “third country” for the EU. This was aided by the sense of distance that had been created during the referendum campaign, which the EU institutions felt was fought on misinformation and with only a half-hearted endorsement of EU membership by many key British political actors.

This chapter retraces the process that transformed a complicated but mutually beneficial relationship into a lose–lose situation, characterized by a rapidly growing estrangement between both sides.

In these days of YouTube “New World Order” videos and illuminati chasers, a book on the Federal Reserve could be misconstrued as yet another conspiracy theory to add to the pile of blogs and web sites that choke our mainframes. This is not one of those books, and I am not one of those historians. You will find no satanic rituals, pentagrams, or lizard people from outer space here. You will find the Federal Reserve, money, politics, power, and the men who controlled them all.

I love the United States of America. I think a democratic form of capitalism is the best economic system for any nation. I like, in theory, what Wall Street provides the average American investor, as well as the corporate structure. I invest in the stock market, I own real estate, and I am even a private lender. The idea of an opportunity to better an individual’s economic condition is one of the American ideologies that make this nation such a great place. However, this system can be and is abused on too many occasions, and that concept was the inspiration for my research.

I am against cupidity and the reckless nature in which those who are possessed by it slash and burn as a means to dictatorial or oligarchical ends. I am against the total lack of transparency and the destructive forces of corporate consolidation and monopolization that kills the spirit of free enterprise in this country. The scourge of deregulation since the Reagan years that has given Wall Street banking institutions a free pass to cannibalize their own market through derivative investment, synthetic portfolios, and notional commodity fixtures is an insult to average American investors and exemplifies the weakness and the culpability of the government, which was organized to protect them.

This book is about power. Those who possess it and those who channel it to the reservoirs of consolidated gain. This process has been going on since the pharaohs of ancient Egypt. However, in this country, around the turn of the twentieth century, a politician, an economist, and a few Wall Street bankers overthrew the entire monetary system of the United States of America and produced an entity that for the benefit of the select few who built it, would wield more economic power than any other of its kind.

INTRODUCTION

For Estonia, Latvia and Lithuania, domestic and international policies are informed disproportionately by questions of the existential threat of neighbouring and openly irredentist Russia. The responses of the three Baltic states to the United Kingdom’s renegotiation, referendum and vote to leave have followed this logic. Indeed, the UK was a major power in each of the two strategic tracks that all three countries had used to make their removal from the Western security umbrella as unlikely as possible, namely NATO membership and rapid and deep integration into all European Union initiatives.

We argue that the similar existential threats shared by the three, and resultantly similar strategic approaches, have been mirrored in their fairly common responses to Britain in the period covered here. Above all, the three states were keen not only to maintain the UK’s security contribution across the Baltics but also to safeguard the integrity and unity of the EU. Strategically, Estonia, Latvia and Lithuania have – with success, thus far – aimed to ensure that the two issues are kept as separate as possible, most pertinently by keeping military commitments out of EU–UK negotiations.

Baltic reaction to the UK’s renegotiation, referendum and vote to leave has not been solely in security terms, however. The second major concern has been the future of the free movement of goods, capital and labour, particularly the latter, because of the large communities of citizens from the three Baltic states living in the UK. The reaction of the three states has also been partially informed by their nature as eastern, pro-free-market and small member states, particularly so after the referendum, as they turned their gaze towards the possible political dynamics of the post-Brexit EU. Overall, the potentially destabilizing security implications of Brexit for the EU and NATO meant that, as Article 50 was triggered, the three Baltic countries all sought a speedy, amicable and legalistic resolution of negotiations between the two parties that minimizes disruption to the status quo ante Brexit.

ESTONIA

When, in October 2015, the Estonian prime minister, Taavi Roivas, met with David Cameron he made it clear that “Estonia and the UK have a similar understanding of the changed security situation – we are very close allies in both NATO and the European Union”.

If Alexander Hamilton, Richard Nixon and Al Capone had a love child, he would be Senator Nelson W. Aldrich. The London Times called him, “the general manager of the United States”. Writer for The Cosmopolitan, David Graham Philips, described him as, “the organizer of treason”. The New York Times called him, “… pretty close to being the most powerful man in the United States” and “a disgusting hypocrite”. And author Ron Chernow described him as “the Czar of the Republican party and the maestro of the smoked-filled room”. Probably guilty of all these dubious distinctions, Nelson Aldrich’s political power, banking and economic erudition, spectrum of friends that included the most powerful men in the world, and predilection for corruption made him the perfect political representative for the enclave of financial demigods who christened the US Federal Reserve System.

Born in 1841, Nelson Wilmarth Aldrich grew up in East Killingly, Rhode Island. He attended the local elementary school and went on to East Greenwich Academy for a year. Aldrich family lore tells of a time when Nelson was nine years old and his mother gave him money to buy lunch and go to the circus. He went to the circus, but skipped lunch and used that money to buy a copy of The Tinker’s Son, or I’ll Be Somebody Yet, a kind of self-help book, but not one for a nine year old.

He was fascinated with the preachers in his East Killingly church. He noted the influence that oration commanded over people. A young Aldrich “… felt an uncontrollable yearning to become at some time a public speaker, to wield myself this wonderful power.” His Calvinist upbringing was no doubt a part of his license for control and privilege. John Calvin preached that every man’s goodness or evil is predestined, and the more successful he is – the more God has favoured him. The poor are obviously sinners, doomed to hell and the rich are obviously deemed by God to be good, as their status and class in life on earth attest.

Since the charter for the Second Bank of the United States expired in 1836, the country had been without a central banking organization. With the Civil War of the 1860s, the Long Depression of the late 1800s and two silver panics, the country was arguably in need of an economic upgrade. Although central banking was still seen as an unconstitutional taboo at this point, American citizens and most of their representatives in the Senate and Congress succumbed to a gradual and controlled redirection towards a central banking system early into the new century, carefully steered by Wall Street bankers.

The idea for a central bank began early in the turn of the century. What would become of those ideas would be the Federal Reserve System, which was not federal in the least and barely a reserve. It was (and still is) a union of private banks that abandoned any scant gold reserve requirements they had originally set for themselves. Some historians, economists, sociologists, bankers and businessmen see the Federal Reserve as representative of the demise of free enterprise and the competition of businesses in the American marketplace. When the Federal Reserve was born, President Woodrow Wilson said about it, and the rise of immense corporations, “The old time of individual competition is probably gone by. It may come back; I don’t know; it will not come back within our time, I dare say.”

Banking was not always like that. Before the Federal Reserve’s existence, Clearing House Loan Certificates were the things that kept the country afloat during a panic. They were highly touted by bankers as an effective means of thwarting economic disaster in times of crisis. The loan certificates lightened the load of a plummeting money supply, “like the emptying of barrels of oil from a storm distressed ship”. During a panic, people hoard their money and bank reserves empty out rapidly. So the banks were issued, by the New York Clearing House Board of Directors, these certificates in lieu of actual money.

Bob Ivry is a senior editor of enterprise news for Bloomberg News, in New York City. Bob and I met through a mutual friend at Bloomberg when she found out about my interest in writing a book about the Federal Reserve. Bob and I corresponded and found that our interests were more aligned than we thought a journalist’s and a historian’s would be. After a couple of meetings and great conversation, Bob agreed to an interview for this book. The reason I was so interested in his story was the fact that Bob’s partner at the time, Mark Pittman was the only person to ever sue the Federal Reserve Board, and after his death in 2009, Bob took his place.

After a series of “crappy” jobs, which Bob believes gave him more insight into the real world than some journalists who get more traditional work right out of journalism school, Bob started out reading the news at KPFA radio in San Francisco. He was the sports guy for the San Francisco Bay Guardian, worked at the San Francisco Examiner, and made his way to the east coast as the movie reviewer for the New Jersey Record. After his first year there, 9/11 happened. Bob asked to do a story on the security of a nearby nuclear power plant, and the editor gave him the go ahead to work on it with a lead investigative reporter. The running joke in their offices was that this reporter was less than thrilled to share such an impactful story “with the fucking movie reviewer”. Bob’s foray into the field of investigative reporting brought him, in 2006, to the real estate team of Bloomberg News – when the banking collapse of Wall Street started to reveal itself, and Bob, furthering his education at Bloomberg, became a part of history.

The interview began with Bob refuting the most common misconception about the Fed; that it is part of the government. It is, as Ivry put it, “of the banks”. This is a particularly important distinction for journalists and members of the public who are trying to obtain information regarding currency, monetary and banking matters.

Chronology

No issue in peacetime has preoccupied the Irish elite and public to the same extent as the United Kingdom’s renegotiation, referendum and vote to withdraw from the European Union.

Although the Irish Republic’s accession to the then European Economic Community helped it move away from its dependence on the UK, the two countries have maintained close economic, social and political relations. They have also cooperated on many issues relating to the Northern Ireland peace process. The Common Travel Area that Ireland and the UK share – which allows for free movement and establishment across Ireland, the UK and some UK dependencies – has existed for nearly a century. The frictionless borders that came about as a consequence of the end of the Northern Ireland conflict, as well as joint membership of the EU and its customs union, have contributed to turning the islands that the United Kingdom and the Irish Republic share into an inextricably linked social space, ensuring that the two countries’ present and futures are entwined. The result is that the two countries share far more convergent interests than divergent ones.

It should come as little surprise, then, that the prospect of the UK’s renegotiations, and David Cameron’s ill-fated promise of a high-risk referendum on EU membership, was not warmly received in Dublin. Indeed, Irish policy makers recognized early on that both of these developments had the potential to fundamentally alter the nature of the bilateral relationship. Neither was seen as conducive to the furthering of mutual interests. Although the issue did not truly enter the public consciousness until the referendum campaign in 2016, the UK’s EU membership renegotiation and the potential for withdrawal were taken seriously by policy makers and analysts from the very beginning.

BACKGROUND

To understand why Brexit carries such importance in Ireland, it is necessary to briefly examine British–Irish relations in the EU context.

On 1 January 1973, fifty years after gaining independence, Ireland became a member of the EEC in the company of the UK and Denmark. The decision to join had been less an ideological conviction, however, and more an exercise in realpolitik: if the UK chose to join the EEC then Ireland had no option but to follow suit.

The Panic of 1907 was the economic shock that sent waves of banking reform throughout the country. It was responsible for American politicians and Wall Street bankers beginning to work together to find solutions to the rigid American monetary system. The 1910 meeting on Jekyll Island, the Aldrich Bill of 1911, and the Aldrich–Vreeland Emergency Currency Act of 1908, and the Federal Reserve Act were all responses to the Panic and its fallout. “Central” and “Banking” were two dirty words before 1907. But, the Panic changed that forever.

The commonly known story of the Panic is that in October 1907 an attempt by an overzealous Wall Street banker to corner the copper market led to a run on many major banks. The effects of the run caused a panic that reverberated throughout Wall Street and the rest of the US banking and manufacturing industries. At the height of the Panic, J. P. Morgan stepped in to aid the banking community and quell the massive drop in bank reserves and avert market collapse. He was touted as a true patriot and selfless beacon of financial hope for the country.

Compared to the panics of 1837, 1857, 1873 and 1893, the Panic of 1907 was by far the most volatile. The major companies that were affected included Amalgamated Copper, US Steel, and the railroads of New York Central, Pennsylvania, Reading, Southern Pacific and Union Pacific. The market began to drop ten months before the actual panic, with tremendous stock disposals throughout the span of January to October 1907. From 18 February to 14 March, the market dropped 29 points. In March, Secretary of the Treasury George B. Cortelyou provided a stimulus of $71 million after the first large drop in the market. The New York bankers were expecting much more, so they were unable to hold off the second hit that occurred in August because of the mass buying of low-priced securities in March and the subsequent short sales over the summer. The fall of 17 points that followed from 29 July to 15 August hurt even more because the securities that were purchased low in March were now even more undervalued.

Historians often argue about what single civilizing occurrence had the most impact upon the history that succeeded it. The invention of the plow in ancient Egypt comes to mind. Or, it could be argued that the printing press was the largest historical game-changer. In terms of industry, the Sumerian ziggurat must be on the list, or for societal order, Hammurabi’s Code, which first systematized the law in ancient Babylon. In the modern era, the invention of the home computer must be in the conversation, as well as the smart phone, perhaps.

However, there is one historical event, which to an economic historian can be argued as the most impactful on all of human kind. Everything else pales in comparison to the change brought about in the social, legal, cultural, military, labour, gender, and any other compartment of the historical landscape by one single innovation: the invention of money. Money is the greatest civilizing factor in history, and its existence remains the cornerstone of all power throughout history. Without money, nothing is possible, and for those who have most of it, anything is possible.

Before currency, the barter system was the means for purchasing goods and services. We would trade things like wheat and wood, goats and oxen, for other things like pottery and jewellery, oats and daughters. But the problem with many of the things we would trade like wheat, oats, oxen, and even daughters is the fact that they all die. Goods and services were greatly limited by the fact that they did not last long. The wealth of an individual could not be measured by his ownership of goods or his ability to produce. Even property was subject to the weather, the elements, and population adjustments.

Then, around 1100 BCE, in the era of the Palestinian civilization, a society of people in modern-day central and western Turkey, changed history forever. The ancient Lydians perfected the metallurgy of gold, silver, copper and bronze and became the first to mint coins from these metals and to create the first uniform accounting and record keeping system for the purposes of disseminating currency.

INTRODUCTION

Belgium, the Netherlands and Luxembourg share a common history of close ties to Britain and pioneering European integration. All three governments went into exile in Britain during the Second World War. It was in London that they sowed the first seeds of European integration, by signing the Benelux monetary agreement of 21 October 1943. A Customs Convention followed in 1944, leading to the creation of the Benelux Union. Later, all three states became founding members of the European Economic Community.

Geographic proximity has meant that the Benelux countries share close political, economic and military links to the United Kingdom. Despite these commonalities, their perspectives on the UK and Europe differ. The Netherlands has a strong Atlanticist tradition and limited appetite for European federalism and is sceptical about Franco-German dominance in Europe. Luxembourg has a continental mindset, however, and favours deeper EU integration. Belgium stands somewhere in between, while also facing a complex domestic political landscape. The level to which Eurosceptic movements play a role in domestic politics also differs among the three.

With sizable financial sectors and large trade and investment flows between Britain and the Benelux countries, there is a lot at stake during the Brexit negotiations. The three countries are among the most exposed to trade disruption from a “hard Brexit”, but they may also attract new post-Brexit business. Politically, Brexit has raised different questions in Brussels, Luxembourg and The Hague about the direction of Europe and European Union reform.

This chapter looks at the way in which the three Benelux countries have approached the British renegotiation, the subsequent referendum debate and the run-up to the Brexit negotiations. Each country section is structured in the same way, exploring the three phases mentioned above. A conclusion follows, outlining commonalities and differences in how they approach Britain’s departure from the EU.

THE NETHERLANDS

“Brexit has created a shockwave, and we don’t yet know exactly what the consequences will be,” Mark Rutte, the prime minister of the Netherlands, declared in response to Britain’s vote to leave the EU (Rutte 2016). The Dutch government was unequivocal: Brexit is bad for business, bad for European politics and bad for the position of the Netherlands in the EU.

To understand Brexit requires not only an analysis of the result of the 23 June 2016 referendum or of the politics of the United Kingdom. We also need to look at how the other 27 member states and European Union institutions responded to it. UK–EU relations are, like any relationship, a two-way thing. By looking at how the rest of the EU responded to the renegotiation, the referendum campaign and its result we can gain a fuller appreciation of Brexit. As this book has shown, Brexit can be set against longer-term trends in EU–UK relations and has been shaped by, and in turn shaped, the national politics of 27 other member states and those of the EU’s institutions. The book has also shown how Brexit fits into a series of changes shaping the EU, Europe and, in turn, the UK.

This concluding chapter gives a brief overview in three sections of some of the key points from the book. It begins with an overview of how the rest of the EU have viewed EU–UK relations historically, before looking at the more recent developments of the renegotiation, referendum and reaction to the vote to leave, up to the triggering of Article 50. The second section looks at five themes notable throughout the book: the impact of the Brexit debate on populism and Euroscepticism; economic calculations; the importance of the UK; how significant a crisis Brexit is to the EU; and, finally, what lessons the rest of the EU have drawn from Brexit. The final section looks to Europe’s post-Brexit future, touching on debates that are ongoing as this book goes to press. Based on the analysis of how the EU responded to the renegotiation, referendum and result, what options are on the table for the future of EU–UK relations? Based on these recent events, what are the prospects for negotiating a new relationship? Finally, and most importantly from the perspective of the rest of the EU, how will Brexit play into reshaping the remaining EU as it moves forward?

INTRODUCTION

While the Nordic countries share many similarities, there are also significant differences between them. These similarities and differences are also present in the field of foreign policy, including in their relationships with the European Union and the United Kingdom. Denmark and Sweden took part in the creation of EFTA with the UK and others in 1960, whereas Finland became an associate member of EFTA in 1961 and a full member in 1986. Denmark followed the UK closely in its attempts to become a member of the EEC in the 1960s and became a member with, and because of, the UK in 1973. The UK’s rapprochement with the EEC from the 1960s played into the debate about membership in Sweden, but the Swedish government decided against an application for membership as this was seen as incompatible with Sweden’s status as a non-aligned state. In Finland, the EEC membership debate started in earnest only after Sweden announced its intention to apply for membership. The Finnish and Swedish memberships of the EU in 1995 were closely linked to their redefinition of non-alignment after the Cold War and were not in any direct way related to the position of the UK.

As militarily non-aligned states, Finland and Sweden are not members of NATO. Denmark, on the contrary, has been a member of NATO since 1949 and has worked with the UK in multilateral military operations; during the lengthy military operations in Afghanistan and Iraq, Danish forces cooperated closely with the British. Finland and Sweden have taken part in NATO operations as partnership countries, and both have recently taken steps to intensify their cooperation with NATO.

The three countries also have different statuses within the EU. Finland, often said to be the most pro-integrationist of the three, is the only Nordic country to have adopted the euro. Denmark, in contrast, has opt-outs in four areas: European citizenship, defence, cooperation in justice and home affairs and the third stage of EMU, therefore not participating in the euro. Sweden does not have a formal opt-out but, as a result of a referendum in 2003, does not participate in the euro either.