European powers suspend gold for WWI
Within weeks of the outbreak of World War I in August 1914, Britain, France, Germany, Russia, and Austria-Hungary had all suspended domestic gold convertibility. The suspensions were explicitly temporary — 'for the duration' of the war. In practice, only Britain and the United States ever returned to the pre-war gold standard, and Britain's return in 1925 lasted only six years before collapsing in September 1931. Germany, France, and most others used the wartime suspension as cover for permanent departures from the gold standard or — in Germany's case — for outright hyperinflation. The 'temporary' suspension became permanent for most of continental Europe.
John Maynard Keynes called the gold standard a 'barbarous relic' in his 1924 book Monetary Reform, arguing against Britain's planned return to the pre-war parity. Churchill (then Chancellor) ignored him and restored the pound at the pre-war rate in 1925. The resulting deflation contributed to the 1926 General Strike, and the restoration collapsed in 1931 — exactly as Keynes had predicted.
04 · Wartime Suspensions
In the 19th century, wars became the standard trigger for currency debasement. The U.S. Civil War introduced paper greenbacks; the Franco-Prussian War forced France off silver; the Russo-Japanese War pushed Russia off gold. The pattern was always the same: suspend metallic convertibility at the start of the war, over-issue paper during it, then fight a losing political battle over whether to return to the old standard. The United States returned to gold in 1879 — at great political cost. Argentina, Russia, and several European countries never fully returned. By 1914 the monetary system was held together by a gold standard that everyone knew was one war away from collapse.
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