High Bank rates triggered a deflationary spiral in 1920s Britain

Evidence

High rates persisted throughout the decade, with the result that currency in circulation dropped impressively, falling by almost 21 percent from 1920 to 1929. One must consider that high bank rates in a time of falling prices were much higher in real terms, since they had a large deterrent eff ect on investment by creating expectations of falling prices and thus falling profi ts. Th is was the typical defl ationary spiral that haunted Britain for the decade. — Clara E. Mattei, The Capital Order, 1697

Categorization

• XREF: This deflationary spiral mechanism connects to the broader austerity-as-class-weapon thesis — the chapter’s core argument that monetarist austerity deliberately crushed wages and investment. — connects to: Swedish austerity in the 1920s produced the greatest slump in the nation’s history — Mark Blyth, Austerity: The History of a Dangerous…, 520; Fed rate hikes in 1928 reversed capital flows and triggered austerity in Germany. — Mark Blyth, Austerity: The History of a Dangerous…, 502; British austerity culminated in forced departure from the gold standard in 1931 — Mark Blyth, Austerity: The History of a Dangerous…, 517 (+6 more)

Broader Connections

• British monetary austerity after 1920 produced an unhealthy quasi-equilibrium for a full decade #corroborates (0.90) — Clara E. Mattei, The Capital Order, 1731
• Deflation increased the wealth of British financial asset holders #expands (0.85) — Clara E. Mattei, The Capital Order, 1697
• Britain pioneered austerity in 1920 and Mussolini’s Italy followed in 1922 #responds-to (0.75) — Clara E. Mattei, The Capital Order, 820