Sterling v. Gold
DURING the few years previous to the suspension of the gold standard it appeared as if all civilized and semi-civilized countries would adopt the gold standard before very long. Practically every country which was on a gold basis before the war returned to the gold standard, or adopted the gold exchange standard, between 1925 and 1930. Countries such as the members of the Latin Monetary Union, where silver coins played a subsidiary role before the war, demonetized silver completely. Most countries of Latin America which were on an inconvertible paper currency in pre-war days stabilized their currencies in relation to gold. Silver was being gradually abandoned by all countries of the East with the exception of China; and even the Chinese Government had decided in principle that it should adopt the gold standard as soon as possible. Although the system adopted by many countries on a gold basis was that of the gold exchange standard, this was generally re-
of their currencies to the same extent as that of sterling. This does not mean that they deliberately abandoned the gold standard in order to safeguard the interests of their export trade. As it was obvious that the contraction of their British market would eventually force them off the gold standard in any case, they preferred to abandon the gold standard rather than to use up their resources in vain attempts to bolster up an untenable position. Thus, within a few days of the suspension of the British gold standard, the three Scandinavian countries followed suit. Their currencies were quoted for some time at a premium against sterling, but by the middle of October they were around their old parities. The Finnish mark followed the Scandinavian currencies after a few weeks of vain attempts to maintain its stability. Thus, practically the whole of Northern Europe showed its willingness to link its currencies with sterling. The Portuguese escudo remained stabilized in relation to sterling; it would have been indeed futile to try to maintain its stability in relation to gold, as the bulk of Portugal's export trade gravitates towards Great Britain. In December, Japan suspended the gold standard, and the yen depreciated approximately to the level of sterling. There is reason to believe that, before very long, several other countries will join the group.