Returning to gold required deliberate deflation in post-WWI Europe.

Evidence

The United States emerged from World War I stronger than ever. The main combatants—France, Germany, and Britain—returned much weaker. The European states sought a return to the gold standard as a way to restore the prosperity of the old era. There were just two issues about how to do this. First was whether to reestablish parity at pre-war levels, which would require significant austerity to get domestic prices down to where they needed to be, or to aim for new lower parities that would better reflect the actual conditions of these war-battered economies. The second issue was intimately related: how to cope with demands from these newly democratized populations for compensatory policies that would make this adjustment all the more difficult. These countries, and several more, opted for the hard road, and it would take years of grinding austerity to get them back on gold. Germany returned to gold in 1924, Britain in 1925, and France in 1926. Once they got there, as we shall see, things only got worse. — Mark Blyth, Austerity, 499

Categorization

• XREF: The parity-choice framing (restore prewar parity via austerity vs. devalue) is the same choice set Eichengreen and other interwar monetary historians foreground; connects to broader gold-standard literature. — connects to: Pegging currencies to gold eliminated the need for interpersonal trust in international trade. — Mark Blyth, Austerity: The History of a Dangerous…, 487; 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 (+3 more)

Broader Connections

• Britain’s gold-standard return demanded prolonged deliberate deflation #corroborates (1.00) — Clara E. Mattei, The Capital Order, 995
• Austerity is voluntary deflation achieved by cutting state budgets to restore competitiveness #expands (0.80) — Mark Blyth, Austerity, 25