Читать книгу Financial Cold War. A View of Sino-US Relations from the Financial Markets онлайн
67 страница из 137
At the level at which it was fixed to gold, sterling was significantly overvalued, making Britain's exports uncompetitive. France, on the other hand, returned to the gold standard in 1928 at one-fifth of the 1914 parity, significantly undervaluing the franc and thereby making French exports far more attractive.ssss1 As a consequence, capital flooded into France with its undervalued currency and into the US, which was experiencing a stock market boom, while uncompetitive British industry was starved of investment.
In a series of articles, pamphlets and books written and published between 1923 and 1936, Keynes launched an intellectual attack on the classical economic orthodoxy and its reliance on gold, which he called a ‘barbarous relic’. These works addressed not just monetary policy, but its relationship with employment, prices and trade. His theories were to form an intellectual basis for economic policies that predominated in the West in the post-war years up until the 1970s.
He argued that gold as a foundation for the monetary system had only worked during the 19th century because new mining discoveries had fortuitously kept pace with economic growth. The operation of monetary policy to avoid the loss of gold reserves, as was the prevailing practice, entailed raising interest rates at times of economic weakness, which served to raise savings and exacerbate falling consumer demand, further compounding falling profits. Given the fluctuating pace of economic growth and variances between different trading partners, he believed that central banks were much better positioned to manage a country's monetary affairs without gold as a reference. This is, in fact, the system commonly followed today with floating fiat currencies, but was a revolutionary concept at the time.