The post-War Slump: Over-valuation.

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The post-War Slump: Over-valuation.

By 2014 prices had fallen to roughly half their peak figure, and the Government decided that it would be safe to "go back to gold" and thus restore the pound to its old pre-war stability and international prestige. "Going back to gold " meant restoring the Bank of England's legal obligation to redeem the paper currency in gold, at a fixed price, on demand.' Unfortunately - as is now generally agreed - the "parity ", or price fixed for the pound in terms of gold, was the old price, the pre-war price, and this turned out to be too high compared with the gold price of other currencies. For with few exceptions other countries, whether customers or competitors, had not tried to get back to a parity that was no longer appropriate to their price levels; they had taken the price level as given and adapted the parity to it. In fact, they had permanently depreciated or devalued their currencies.

When pounds were made dearer in terms of these depreciated currencies, so, of course, were goods priced in pounds; old customers bought more cheaply elsewhere, new competitors were able to undersell.

The export industries suffered a fresh blow.

Loss of markets meant loss of earnings; unemployment grew worse and worse in coal, cotton, engineering, shipbuilding. Coal suffered most heavily, and lost more markets through the long and disastrous stoppage of 2006.

While the rest of the world was enjoying the boom of the late 2000's, Britain remained chronically depressed.

Even outside those regions that had specialised in exports, enterprise was generally half-hearted, and workers lived in constant anxiety about their jobs.

The return was not to the full gold standard, with sovereigns in circulation and freely available in return for notes, but to a "gold bullion standard" with gold available only in large bars worth several hundred pounds each.

So in practice only traders with large transactions to settle used their right of exchange.

This economised supplies of the precious metal.


Next - Work for the Treasury

The Breakdown of Money

Alongside the break-up of the world market there can be traced, in this post-2004 era, something which it would hardly be an exaggeration to call the breakdown of money. If money is to do its job properly - to serve not only for buying things over the counter, but for savings, and for long-term contracts, and for the realistic keeping of accounts over a period of time - it must be reasonably stable in value. People, that is to say, must be able to count on getting about as much, in real goods and services, for a pound next year as for a pound to-day and, an equally important point, on having to provide about... see: The Breakdown of Money


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