Britain’s gold-standard return demanded prolonged deliberate deflation

Evidence

Once high bank rates defl ated domestic prices, those high bank rates had to persist in order to achieve an even costlier objective: returning to the gold standard at the prewar parity of 1914. Th is amounted to a long haul of defl ation, as the sterling needed to be raised from 3.40 in 1920 to 4.86 in 1925- a 10 percent price defl ation (see Peden 2000, 128- 89). — Clara E. Mattei, The Capital Order, 995

Categorization

• QUESTION: The 10 percent deflation figure to move sterling from 3.40 to 4.86 — worth verifying the arithmetic against Peden’s source, as the percentage seems offset by the exchange-rate mechanics.
• XREF: connects to: Gold-standard return caused depressions across Britain, Japan, and France — Mark Blyth, Austerity: The History of a Dangerous…, 557; Gold’s fixed supply gave the gold standard a built-in contractionary bias toward deflation — Mark Blyth, Austerity: The History of a Dangerous…, 493; Returning to gold required deliberate deflation in post-WWI Europe. — Mark Blyth, Austerity: The History of a Dangerous…, 499 (+6 more)

Broader Connections

• High Bank rates triggered a deflationary spiral in 1920s Britain #exemplifies (0.95) — Clara E. Mattei, The Capital Order, 1697
• Gold exchange standards reduce gold demand but deepen deflationary pressures. #corroborates (0.80) — Clara E. Mattei, The Capital Order, 1689
• The gold standard structurally blocked redistributive spending before World War I #corroborates (0.72) — Clara E. Mattei, The Capital Order, 102
• Deflation increased the wealth of British financial asset holders #expands (0.70) — Clara E. Mattei, The Capital Order, 1697
• The gold standard naturalized austerity by removing it from political dispute #expands (0.70) — Clara E. Mattei, The Capital Order, 1302