The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin Read Free Book Online

problems it was created to solve still remained. The Swedish parliament realized it needed to replace the bank with
something—
ideally, something that would be under tighter government control and more stable.
    The Swedish government was, for its era, uncommonly democratic. There were four estates represented in parliament—the nobility, the merchant class, the clergy, and the peasantry. It was the nobility and the merchants who were most eager to rebuild a central bank. After all, such an institution would benefit them most, allowing more availability of cash and the smoother flow of commerce. But after the Palmstruch debacle, they believed it needed the explicit financial and legal backing of the government. These bank supporters eventually persuaded the clergy, the intellectuals of the day, to their side. The peasants represented in the Riksdag were a tougher sell. They didn’t want to give the government’s financial backing to an entity that would primarily benefit the upper classes. More important, the peasantry also submitted to the government that it had “ no understanding of the matter ” and that “the other good gentlemen of the other Estates may do what seems best to them in the case and what for them could be beneficial, but allow the peasant to be free from such things as he does not comprehend.”
    So they did. The wealthy, the business interests, and the intellectuals combined to create the world’s first true central bank, without the participation of the working class. The Bank of the Estates of the Realm set up shop in a palace in central Stockholm in 1668. It would later become the Sveriges Riksbank, which remains the central bank of Sweden to this day.
    It wouldn’t be the last time that a central bank would be established with something less than enthusiastic endorsement from the working class.
    •   •   •
    W hile Sweden was at work setting up a modern financial institution, modern science was quickly overtaking the ancient study of alchemy. For centuries, across Europe and in the Islamic world, mankind had sought ways to turn mundane materials into far more precious gold and silver. In the medieval world, alchemists included everyone from garden-variety con artists to skilled technicians of metallurgy to some of the most brilliant scientists of the day. Sir Isaac Newton, it was once said, was not in fact the first modern scientist, but the last of the alchemists. (This was said, as it happens, by an economist of wide-ranging intellectual interests named John Maynard Keynes.) Alchemists were an insular group, speaking a language that outsiders couldn’t grasp and disdainful of the uninitiated. Those outside the club viewed it as a shadowy cabal.
    As it turns out, though, mankind didn’t need a magic potion to create gold from thin air. As Johan Palmstruch and the Swedes had discovered, all it took to create wealth where there had been none was some paper, a printing press, and a central bank, imbued with the power from the state, to put it to work.

THREE
    The First Name Club
    T he mustachioed man in the silk top hat strode to his private railcar parked at a New Jersey train station, a mahogany-paneled affair with velvet drapes and well-polished brass accents. Five more men—and a legion of porters and servants—soon joined him. They referred to each other by their first names only, an uncommon informality in 1910, intended to give the staff no hints as to who the men actually were, lest rumors make their way to the newspapers and then to the trading floors of New York and London. One of the men , a German immigrant named Paul Warburg, carried a borrowed shotgun in order to look like a duck hunter, despite having never drawn a bead on a waterfowl in his life.
    Two days later, the car deposited the men at the small Georgia port town of Brunswick, where they boarded a boat for the final leg of their journey. Jekyll Island, their destination, was a private resort owned by the