In 1914, Britain, hard pressed to finance its fighting forces, adopted measures to discourage demands for gold, thereby abandoning the gold standard in everything but name; meanwhile, the value of a pound in dollars sank from $4.86 to a 1920 low of $3.20. In an effort to recoup its lost glory, Britain resumed a full gold standard in 1925, tying the pound to gold at a rate that restored its old $4.86 relation to the dollar. The cost of this gallant overvaluation, however, was chronic depression at home, not to mention the political eclipse for some fifteen years of the Chancellor of the
...more
