The Gold Standard Illusion: France, the Bank of France, and the International Gold Standard, 1914-1939

The Gold Standard Illusion: France, the Bank of France, and the International Gold Standard, 1914-1939

The Gold Standard Illusion: France, the Bank of France, and the International Gold Standard, 1914-1939

The Gold Standard Illusion: France, the Bank of France, and the International Gold Standard, 1914-1939

Synopsis

'Mouré is the first historian to make such an extensive use of the archives of the Bank of France. He provides the reader with a well-balanced, complete and up-to-date review of the literature.' -EH. Net Book Review'Scholarly... Mouré tells the story with an impressive narrative verve and, unusually, tries to see the situation from a French perspective.' -Tim Congdon, Times Literary SupplementDid French gold policy cause the Great Depression? The Gold Standard Illusion draws on newly-available French records to test the gold standard interpretation of the Great Depression. It provides a history of French economic understanding, policy-making, and politics with regard to gold, monetary policy, and the key role of financial problems in political instability from 1914 to 1939.

Excerpt

The working of the pre-war gold standard and the development of modern central banking in the late nineteenth century form the essential backdrop to the inter-war struggle to restore stability and order to the world economy after the First World War. the gold standard was believed to be an ideal and natural system whose restoration was indispensable; the role of central banks received little debate in the inter-war years after an initial push to establish new central banks; their role was in a process of substantial evolution. Closer attention to pre-war experience might have shown that the gold standard was a recent and evolutionary system, and that central banks were undergoing significant development in terms of their responsibilities and practice. the classical era of the gold standard up to 1914 owed its stability to temporary, contingent factors that were altered radically by the war. the organization and the objectives of modern central banking and the international monetary system would be reshaped in a prolonged process of adjustment to wartime and post-war changes.

1.THE accidental gold standard

‘The world that disappeared in 1914 appeared, in retrospect, something like our picture of paradise.’ Policy makers after the First World War sought to recover the ‘normalcy’ of the pre-war era, a normalcy recalled with greater nostalgia than insight. in monetary affairs, normalcy meant restoring gold convertibility. in contrast to the monetary convulsions since 1914, the pre-war gold standard appeared an enviably stable, efficient, and secure system. Gold convertibility at fixed rates had provided exchange-rate and price stability, facilitating the tremendous expansion of international trade and payments of the late nineteenth century.

The gold standard that policy makers sought to restore—efficient, durable, and independent of historical circumstances—was an imaginary construct. the classical gold standard as it really worked has been subject to extensive analysis and debate since the 1930s, and has been revealed to be more complex, more asymmetrical in its operation (with the bulk of economic adjustment shifted to the periphery of developing nations by the wealthier and more financially advanced core countries), and more contingent upon

J. H. Jones, ‘The Gold Standard’, Economic Journal, 43, no. 172 (1933), 553.

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