some reason, I have the urge to work on this topic a little more. I made
available the raw data here:
April 15, 2012: Foreign Exchange Rates 1914-1941
The basic story of this time period, 1920-1940 is something like this: A lot
of currencies left the gold standard during WWI, including the U.S. to a
small degree. Some then had hyperinflation in the early 1920s. During the
mid-1920s, these currencies are repegged to gold. The Great Depression
begins. I thought Germany was the first of the big countries to devalue in
August of 1931, but it turns out that was wrong. Germany's government
defaulted on its debt that month, and imposed heavy currency controls, but
the currency was not (officially) devalued. Thus, Britain was the first of
the big countries to devalue, in September 1931. Because the British pound
was the world's premier international currency, much like the dollar is
today, many countries followed Britain's lead and devalued simultaneously or
soon after. Japan followed in December 1931, basically to return the yen
exchange rate to its pre-devaluation level.
These are annual averages, which unfortunately do not capture some of these
events well. The September 1931 devaluations, for example, get averaged into
1931, so the 1931 averages show only a slight decline for the full year. The
U.S. devalues in 1933 of course, and repegs to gold in 1934 at $35/oz.
I suppose some of the points made here are that most countries devalued their
currencies around the late 1931 timeframe, if not earlier in some instances.
This put "beggar thy neighbor" trade pressures on all the
non-devaluing countries. When the world's premier international currency, in
this case the British pound, is devalued, usually there are a lot of
copycats. The result is that nearly all countries also devalued, if only to
restore exchange rates to somewhere near their pre-devaluation levels.
I'll have the remainder of the countries next week.
devalued alongside Britain in late 1931, and again in 1934.
Australia devalued in August 1931.
Austria devalued alongside the U.S. in 1933-34, but not to the same
Belgium devalued alongside the U.S. in 1933-34, but not to the same
Then as now, Brazil never had much committment to a stable currency.
British India followed the British pound, rising in value in the early 1920s
and then devalued in September 1931.
Bulgaria maintained its currency value throughout the period.
Canada, not surprisingly, shows a combination of both the British and U.S.
patterns, devaluing in September 1931 and again in 1933-34, although not the
same magnitude in both cases.
Chile had several currency depreciation events.
China was on a silver standard, not a gold standard, and the value of the
currency fell vs. gold as a result of the falling value of silver vs. gold.
In the late 1930s, the currency was further devalued as the government
printed money to pay for war with Japan. This resulted in hyperinflation in the 1940s.
(This item originally appeared at http://www.newworldeconomics.com/archives/2012/093012.html
on September 30, 2012.)