Future of the Pound
WHEN the gold standard was suspended, many people, as we observed before, regarded it as a permanent departure from gold, but others went to the opposite extreme in considering it as a purely temporary measure which would soon be followed by stabilization at a lower level. The latter imagined that once sterling had declined to a level at which the cost of production in Great Britain could become competitive with that in other countries, the exchange would be stabilized at once. The favourite figure at which sterling was expected to be stabilized was originally about four dollars. It was taken for granted that the official monetary policy aimed at stabilizing as soon as possible and at as high a level as possible. When in October sterling showed signs of recovery, and, after having dropped down to about $3.5°, was beginning to approach $4, it was believed in many quarters that stabilization was only a question of weeks. The view was widely held that, as soon as the
General Election was over, the National Government would take a definite decision as to the rate and date of stabilization. When the Election was over, however, sterling began to decline instead of continuing to rise as it was expected to do as a result of the Government's victory.