Exchange Rates and the Financial Press September 1931 – April 1932 Christopher Godden




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Secondary Sources

Balachandran, G. (1996) John Bullions Empire: Britains Gold Problems and India Between the Wars, Richmond: Curzon Press


Broadberry, S.N. (1986) The British Economy Between the Wars: A Macroeconomic Survey
Dimsdale, N.H. (1981) ‘British Monetary Policy and the Exchange Rate 1920 – 1938’, Oxford Economic Papers, 33, pp. 306 – 349
Dornbusch, R. (1976) ‘Expectations and Exchange Rate Dynamics’, Journal of Political Economy, 84, pp. 1161 – 1176
Eichengreen, B. (1992) Golden Fetters: The Gold Standard and the Great Depression, 1919 – 1939, New York: Oxford University Press
Pollard, S (1969) The Development of the British Economy, 1914 – 1967 (2nd edition). London: Edward Arnold (Publishers) Ltd
Williamson, P. (1992) National Crisis and National Government: British Politics, the Economy and Empire, 1926 – 1932, Cambridge: Cambridge University Press


1 The Economist (26 September 1931), p. 546

2 Pollard, S (1969) The Development of the British Economy, 1914 – 1967 (2nd edition). London: Edward Arnold (Publishers) Ltd, p. 228; Dimsdale, N.H. (1981) ‘British Monetary Policy and the Exchange Rate 1920 – 1938’, Oxford Economic Papers, 33, p. 329. Both Broadberry and Eichengreen have interpreted these dramatic movements as an instance of exchange rate “overshoot”, with the differential adjustment speeds of asset market relative to goods markets causing the exchange rate to deviate (“overshoot”) its long-run purchasing power parity equilibrium value. See, for example, Dornbusch, R. (1976) ‘Expectations and Exchange Rate Dynamics’, Journal of Political Economy, 84, pp. 1161 – 1176; Broadberry, S.N. (1986) The British Economy Between the Wars: A Macroeconomic Survey, p. 127; Eichengreen, B. (1992) Golden Fetters: The Gold Standard and the Great Depression, 1919 – 1939, New York: Oxford University Press, p. 302, n.28. The rudimentary principles of this idea may be found in the following quote, written by Noel Hall in 1935. See Hall, N.F. (1935) The Exchange Equalisation Account, London: Macmillan, p. 3

3 Eichengreen, B. (1992) Golden Fetters: The Gold Standard and the Great Depression, 1919 – 1939, p. 303

4 The Economist (26 September 1931), p. 548

5 Einzig, P. (1932) The Tragedy of the Pound, London: Kegan Paul, Trench, Trubner & Co Ltd, p. 135

6 Gregory, T.E. (1932) The Gold Standard and Its Future, London: Methuen & Co. Ltd (2nd edition), p. 68

7 Jones, J.H. (1931) ‘The Departure From Gold’, The Accountant, 85 (31 October), pp. 567 – 568. Given this threat, J.H. Jones believed it was necessary for Britain to speedily abandon the cost of living as the regulator of wages and salaries, and only allow wage adjustments sufficient to “remove excessive inequalities.” Such a policy would, he argued, secure confidence in the world as to Britain’s intentions, and so prevent any further depreciation of the exchange. Precisely how Jones proposed to assess any “excessive inequalities” by abandoning a cost of living measure is unclear.

8 The Economist (26 September 1931), p. 553

9 The Times (6 October 1931), p. 12, c. B

10The Times (7 October 1931), p. 19, c. C

11The Economist (3 October 1931), pp. 594 – 595

12Williamson, P. (1992) National Crisis and National Government: British Politics, the Economy and Empire, 1926 – 1932, Cambridge: Cambridge University Press, p. 455

13The Economist (31 October 1931), p. 795

14Gregory, T.E. (1932) The Gold Standard and Its Future, p. 68. Another example was offered by D.H. Robertson, and concentrated on the detrimental effects arising from an essentially negative view of patriotism. Robertson suggested that government expenditure cuts (and in particular the effects on teachers’ salaries) would awaken “a sense of patriotic guilt” amongst the better off members of the community, so leading them to reduce their consumption of domestically produced goods and services. Although unconnected with the question of the exchange rates, the fact that Robertson expressed this view in the context of the post-September 1931 environment serves to reinforce our own awareness of the importance that contemporary writers attached to the theme of patriotism. Robertson, D.H. (1931) ‘The Economic Situation’, Cambridge Review, 53 (23 October), pp. 48 – 49

15Shortly before the election, G.D.H. Cole published an article refuting the “charges of cowardice and irresponsibility” levelled against the Labour Party, and the “reckless propaganda” regarding the dangers of inflation should Labour with the general election. See Cole, G.D.H. (1931) ‘The Danger of Inflation’, New Statesman & Nation, 2 (24 October), pp. 505 – 506

16Gregory, T.E. (1932) ‘Whither The Pound?’, Nineteenth Century, 111 (April), p. 433. In retrospect, it is probable that support for the National Government was also influenced by the electorates’ growing acceptance of protectionism, and the expectation that Britain would contract preferential arrangements with the Dominions.

17The Economist (31 October 1931), p. 794

18The Economist (31 October 1931), p. 794; The Economist (7 November 1931), p. 851; Einzig, P. (1932) The Tragedy of the Pound, p. 170

19Dearle, N. B. (1929) An Economic Chronicle of The Great War For Great Britain and Ireland 1914 – 1919, London: Humphrey Milford p. 321

20Jones, J.H. (1931) ‘The Fall in Sterling’, The Accountant, 85 (12 December), p. 764; Jones, J.H. (1932) ‘The Rise in Sterling’, The Accountant, 86 (12 March), p. 328

21Daily Mirror (1 December 1931), page 3

22Daily Mirror (2 December 1931), page 3

23The Times (1 December 1931), p. 20, c. A. Since the reduction in the exchange value of sterling after 21 September 1931 had reduced the value of sterling debts, it could also be argued that there had been an inter-temporal shift in the demand for foreign currencies. Foreign debtors who experienced this favourable, yet wholly unexpected, opportunity provided by the departure from gold, and who had the opportunity to purchase sterling, may have done so in excess of what they would other wise have bought, thereby supported the exchange. This idea, suggested by T.E. Gregory, raises the possibility that the sterling-dollar exchange had actually been prevented from falling further between September and December 1931, as well as, ceteris paribus, prevented from rising further than it would have done in the early months of 1932. See Gregory, T.E. (1932) The Gold Standard and Its Future, p. 68

24The Times (1 December 1931), p. 20, c. A

25The Times (2 December 1931), p.19, c. B

26The Times (2 December 1931), p. 19, c. B

27The Times (1 December 1931), p. 20, c. A. The fiduciary note issue had been increased from £260,000,000 to £275,000,000 under authority of a Treasury Minute dated 1 August 1931.

28The Times (2 December 1931), p. 19, c. B

29The Times (5 December 1931), p. 16, c. A

30Einzig, P. (1933) The Comedy of the Pound, London: Kegan Paul, pp. 48 – 49

31The following examples are taken from Einzig, P. (1933) The Comedy of the Pound, pp. 50 - 53

32The Times (5 December 1931), p. 16, c. A

33The Times (4 December 1931), p. 19, c. C

34Jevons, H.S. (1931) ‘Letter – Value of the Pound’, The Times (5 December), p. 6, c. B

35The Times (7 December 1931), p. 20, c. B

36The Times (8 December 1931), p. 14, c. G. The Transport and General Workers’s Union has consented to the reduction at a special delegate conference in London on 7 December 1931.

37The Times (Thursday 31 December), p. 17, c. A

38The Times (10 December 1931), p. 20, c. A

39The Times (12 December 1931), p. 16, c. A; Daily Mirror (12 December 1931), p. 30, c. A

40The Times (15 December 1931), p. 19, c. A; Daily Mirror (15 December 1931), p. 18; The Economist (19 December 1931), p. 1162

41By January 1932, the Times reported that the situation regarding the whole question surrounding the fiduciary note issue was “now better understood on the Continent.” The Times (21 January 1932), p. 17, c. A

42The Times (24 December 1931), p. 20, c. A

43The Times (Thursday 31 December), p. 17, c. A

44Hirst, F.W. (1934) The Consequences of the War on Great Britain, London: Humphrey Milford, p. 224

45Daily Mirror (1 January 1932), p.2. Exchequer returns for the first three-quarter of the financial year ending 31 December 1931 revealed a deficit of £203,753,000. However, this deficit was due entirely to the fact that approximately three-quarters of the income tax and surtax yield was not received until the final quarter of the financial year (ending in March 1932).

46The Times (Thursday 31 December), p. 17, c. A

47Daily Mirror (10 December 1931), p. 18

48The Times (2 January 1932), p.7, c. E

49The Times (5 January 1932), p. 12, c. E

50Daily Mirror (2 January 1932), p.4

51Daily Mirror (6 January 1932), p. 3

52The Times (11 January 1932), p. 12, c. G

53Daily Mirror (7 January 1932), p.7. A letter writer to the Daily Mirror a few days earlier had also suggested that income-taxpayers would pay quicker still if they could understand the income tax forms! (Daily Mirror, 5 January 1932, p. 7)

54The Times (15 January 1932), p. 9, c. B

55The Times (13 January 1932), p. 12, c. F

56The Times (13 January 1932), p. 12, c. F

57The Economist (16 January 1931), p, 114

58Daily Mirror (7 January 1932), p.18

59Einzig, P. (1933) The Comedy of the Pound, p. 57

60Gregory, T.E. (1932) ‘Whither The Pound?’, pp. 432 – 436

61The Times (21 January 1932), p. 17, c. A

62The Times (27 January 1932), p. 16, c. A

63The Economist (20 February 1932), p. 399

64We should note that Einzig’s representation of the City in these articles is by no means complete. One important element which received world-wide recognition, and which Einzig ignored, was London’s insurance market. The Economist provided an interesting over view of the relations between British insurers and their foreign clients following the fall in the value of sterling. See, The Economist (10 October 1931) pp. 649 – 650

65Einzig, P. (1932) ‘The Future of the London Bullion Market’, Banker, 21 (February), p. 237

66Foxwell, H.S. (1922) ‘The Pound Sterling’, The Accountant, 67 (25 November), p. 769

67Einzig, P. (1931) ‘Future of the London Exchange Market’, The Banker, 20 (November), p. 110

68Einzig, P. (1932) ‘Future of London’s Discount Market’, The Banker, 21 (January), pp. 34 – 36

69It is worth nothing that elements of this idea were provided in an article by Professor Charles Rist and published in the Economist in early October (thereby pre-dating the publication of Einzig’s articles). In his article, Rist acknowledged that investors were extremely apprehensive, but nonetheless argued that it would be “impossible for the world to do without the marvellous credit mechanism represented by the London market.” See Rish, C. (1931) ‘A French View of the Pound’, The Economist (3 October), p. 599

70The Times – 30 November 1931, page 20, column B

71Einzig, P. (1932) ‘The Future of the London Bullion Market’, p. 234; Jones, J.H. (1932) ‘The Rise in Sterling’, The Accountant, 86 (12 March), p. 328

72Balachandran, G. (1996) John Bullions Empire: Britains Gold Problems and India Between the Wars, Richmond: Curzon Press, p. 180

73Owing to Federal Reserve policy, Einzig did not believed that the New York market had seriously considered establishing an open gold market.

74 The Times (30 November 1931), p. 20, c. B

75 The Times (22 December 1931), p. 16, c. A and B

76 The Times (21 December 1931), p. 17, c. E

77Einzig, P. (1932) ‘The Future of the London Bullion Market’, pp. 234 – 236. Elements of these themes were repeated by Jones, who argued that while both America and France desired to possess the world’s most powerful financial centre, this desire was not equalled by their abilities or temperaments: America appeared unable to demonstrate the strength of her financial machinery, while France was dismissed due to her unwillingness to fully accept the responsibilities that such a position would entail. See Jones, J.H. (1929) ‘London and New York As Financial Centres’, The Accountant 81 (19 October), p. 459; Jones, J.H. (1931) ‘The Departure From Gold’, pp. 567 – 568

78Einzig, P. (1932) ‘Future of London’s Foreign Loan Market’, The Banker, 22 (April), pp. 21 – 23

79Einzig, P. (1932) ‘Future of London’s Foreign Loan Market’, pp. 21 – 23



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