Chapter

Cracks in the Facade

Barry Eichengreen

in Golden Fetters

Published in print July 1996 | ISBN: 9780195101133
Published online November 2003 | e-ISBN: 9780199869626 | DOI: http://dx.doi.org/10.1093/0195101138.003.0008
Cracks in the Facade

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This is the second of three chapters that consider the operation of the reconstructed gold standard system following World War I. It analyzes the role of the gold standard in the onset of the Great Depression and shows how, in turn, the slump undercut the foundations of the gold standard system. The first section of the chapter looks at the setting, and the second at the three options available to heavily indebted countries: the orthodox response – to boost exports and limit imports, cut public spending, raise taxes (especially import duties), and apply export bounties; action to suspend export debt service to devote foreign exchange to essential imports; and action to suspend the gold standard. The next three sections look at Australia as a prototypical primary producer – the first country to suspend the gold standard, the suspension of the gold standard by Argentina, Brazil, and Canada, and the situation in Germany. The last two sections discuss the acceleration into Depression, the US policy response, and European repercussions.

Keywords: Argentina; Australia; Brazil; Canada; Europe; Germany; gold standard; Great Depression; interwar period; reconstructed gold standard; responses to debt; suspension of the gold standard; USA

Chapter.  16554 words.  Illustrated.

Subjects: Economic History

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