chapter  IX
12 Pages

The Defence of Sterling

IN the previous chapter we dealt with the errors and omissions committed previous to the financial crisis. Let us now examine the steps that were taken after July 1931 in defence of sterling. If it was difficult to take any preventive measures against an unforeseen danger, it was even more difficult to do the right thing in the throes of the crisis. It would have been indeed impossible to expect any monetary expert to avoid committing errors in such a situation where neither past experience nor technical knowledge nor imagination were of much help. The psychological factor became of such predominant importance that the technical effects of any proposed measure as compared with its psychological effect was negligible, and no human being could possibly foresee the psychological reaction of any step or decision. Every decision was in reality a leap in the dark, and its consequences could not possibly be calculated. In such circumstances it would be unfair to adopt a too

critical attitude towards the mistakes that were undoubtedly made. It is easy to be wise after the event, and anyone who wished to find fault with the measures taken between July and September to defend the pound would have an easy task. But the events of those three months should be examined in a constructive and not in a critical spirit. As we said in the previous chapter, in discussing the errors and omissions of which the authorities were accused, our object is not to criticize but to provide material with the aid of which the occurrence of similar mistakes might possibly be avoided.