International Financial Cooperation
IN THIS chapter we shall be concerned with the major developments in the field of international financial cooperation during the interwar period. Since United States monetary policy during the 1920's was dominated largely by the Federal Reserve System, international financial cooperation was chiefly a matter of cooperation between the Reserve system and foreign central banks. With the advent of the New Deal, the balance of power in the monetary field shifted to the Treasury Department, and that agency has remained dominant in the international monetary field to the present time.
Although United States monetary policies were determined almost exclusively with reference to domestic business conditions, there were several important instances of international monetary cooperation in the 1920's. The United States as the only major country on the gold standard in the immediate postwar period was anxious to see the world return to gold as rapidly as possible. One form of central-banking cooperation was represented by actions on the part of the Federal Reserve System which sought to reduce the inflow of gold. In 1924, the Federal Reserve authorities adopted a policy of monetary ease ostensibly as a means of helping Britain to return to the gold standard in 1925.1 Again in 1927, the Reserve authorities after consultation with the heads of the central banks of England, France, and Germany decided upon a policy of easy credit conditions in the United States in order to reduce pressure on European currencies which had recently been stabilized.2 It is quite unlikely, however, that these actions would have been undertaken had there been strong inflationary pressures in the United States requiring opposite policies.____________________