Britain Return to Gold in 1925

Economic History The Gold Standard, like the Exchange Rate Mechanism, ensures immutable exchanges and economic discipline. Why, then, was there so m any(prenominal) criticism of the surrender to gold in 1925? In March 1919, the large plenty deficit and low level of gold reserves resulted in formal abandonment of the gold stand by the UK. On Apr. 28, 1925, Churchill announced in his Bud require speech that there would be an immediate return to gold at pre-1913 parity. Reddaway (Lloyds Bank Review, 1970) expresses in his article that returning to gold at $4.76 was a chastening of the committee that they had non done enough research and had not have enough consideration and look at former(a) countries apart from the US. The committee failed to take account of prices in any external country apart from USA and also apply the wrong indices (wholesale price) for their calculation and hence derived the wrong result.

The policy annunciation in 1919 of the intention of returning to pre-1913 gold standard was alike to the announcement of a contractionary monetary policy. Under flexible ER regime of 1919-1925 contractionary monetary policy is expected to result in an appreciating of nominal ER, deflate the price level (given high commit of inflation after the First World War) and improving competitiveness. However, because the ER is determined in an asset market that adjust comparatively quickly, we would expect to observe an appreciation of the real ER in the short-run whereby the ER deviates from the PPP equilibrium. According to Keynes If you want to get a full essay, order it on our website: Orderessay

If you want to get a full essay, wisit our page: write my essay .