Reconstructing the Facade

Barry Eichengreen

in Golden Fetters

Published in print July 1996 | ISBN: 9780195101133
Published online November 2003 | e-ISBN: 9780199869626 | DOI:
Reconstructing the Facade

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This chapter (like the previous one) looks at the fiscal war of attrition that fueled inflation in the 1920s; here, inflationary chaos elsewhere in Europe is contrasted with the experience of countries that repelled the inflationary threat. The different sections of the chapter discuss the first (failed) attempts to restore the gold standard after World War I and the failure to provide a framework for international cooperation, deflationary paths (in Britain, Sweden and the Netherlands), inflation (in Belgium), the inflationary crisis in France, and the enduring effects of these. Recovery was more rapid in countries that experienced inflation and depreciation (notably France, Belgium, and Italy) than in those that had pursued deflation in order to stabilize their currencies and restore the prewar gold price. In countries where the fiscal war of attrition had been most destructive, political leaders and their constituencies insisted on going to exceptional lengths to prevent the ceasefire from breaking down. The gold standard was the white flag emblematic of the truce, and policy makers continued to wave it even after political economic circumstances had changed fundamentally and an entirely different policy response was required.

Keywords: Belgium; Britain; currency stabilization; deflation; economic policy; economic stabilization; Europe; France; gold standard; inflation; interwar period; Netherlands; Sweden

Chapter.  16402 words.  Illustrated.

Subjects: Economic History

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