2014: China Doesn't Need Much Gold To Create a
Gold-Based Dollar Alternative
Foreign Exchange Rates 1913-1941 #3: The Brief
Rebuilding of the World Gold Standard System
April 20, 2014
Today, we continue our investigation of currency history in
the 1914-1941 period.
6, 2014: Foreign Exchange Rates 1913-1941 #2: The Currency
Upheavals of the Interwar Period
March 30, 2014: Foreign Exchange Rates 1913-1941: Just
Looking At the Data
As befits a Latin American country within the U.S. sphere of
influence, Colombia's history mirrors that of the U.S.
dollar. However, when the U.S. devalued in 1933, Colombia
concurrently devalued even farther.
Czechoslovakia didn't devalue alongside the British in 1931,
but the devaluation of the U.S. dollar in 1933 was too much.
Czechoslovakia undertook a small devaluation at that time,
and another in 1936, perhaps in response to the devaluation
of the French franc. The German military occupied
Czechoslovakia in 1938.
Denmark shows a combination of British and U.S. influences.
After floating during and after WWI, the krone was repegged
to gold in 1926 at the prewar rate. Britain repegged at the
prewar rate in 1925, and France (and Belgium) repegged at a
devalued rate in 1926. The krone followed the British pound
lower in 1931, devaluing alongside such that the krone/pound
rate did not change. (Probably, Denmark was using a British
pound currency board type arrangement at the time.) The U.S.
devaluation in 1933 prompted Denmark to devalue a bit
alongside, although this was preceded by slippage against
the British pound in 1932. After that devaluation, Denmark
returns to a British pound peg, but by this time the British
pound was a floating currency. The British pound devaluation
in 1940 was not followed by Denmark.
Befitting a British territory, the Egyptian pound remained
pegged to the British pound throughout this period. This
meant that the Egyptian pound was devalued in 1931 and
became a floating currency afterwards, mirroring Britain.
Finland followed Britain's lead. The markka floated vs. the
British pound in the early 1920s, but Britain's return to
gold in 1925 apparently inspired Finland to do the same.
Britain's devaluation in 1931 was followed almost
immediately afterwards by a devaluation in Finland, of
slightly greater magnitude than the British devaluation.
Afterwards, the markka was pegged to the British pound,
which meant that it was a floating currency vs. gold.
Britain's devaluation in 1940 apparently led to a bit of
indecisiveness with Finland, which eventually decided to
stick to gold (or the U.S. dollar) instead. Finland was
invaded by the Soviet Union in 1939, but fought off this
invasion. This prompted an alliance with Germany. Germany's
invasion of Russia in 1941 prompted Russia to invade Finland
As before, I find this strangely satisfying. I get a sense
of the turmoil and chaos of that time period.