What factors led to the 30% devaluation of pound sterling in 1949?
score:5
This is a fascinating question. There are short, simple answers:
The great devaluation of 1949 - 30% Post war, Britain was heavily indebted to the USA. Despite a soft loan agreement with repayments over fifty years, the pound remained once again under intense pressure In 1949 Stafford Cripps devalued the pound by over 30%, giving a rate of $2.80 The Saturday Economist
Unfortunately, those don't reveal much.
There are also lengthy answers filled with editorial opinion that perhaps aren't illuminating to those who aren't familiar with either the political or economic predjudices of the author.
At the time, Britain was a signatory to the Breton Woods System, under which all the signatory nations attempted to peg their exchange rates relative to one another. In order to maintain the relationship between exchange rates, Britain had to buy and sell pounds sterling, using the gold and silver reserves stored at the Bank of England.
Why was there pressure on the pound sterling? Simply people wanted less Pounds Sterling and more dollars; they were selling Pounds Sterling to buy dollars. In order to prop up the value of the Pound Sterling the BoE was forced to buy Sterling. (Currency is a good like any other; when there are more sellers than buyers, the price falls; when there are more buyers than sellers, the price rises. If you want the price to rise, you're going to have to pay more than market price for the good). BoE had no other currency reserves, so it had to trade specie (gold & silver) for currency (Pounds Sterling). There is a limit to how long they can do that.
The problem with the Breton Woods System (if I can try to express it in a few sentences) is that the political goal of managing exchange rates was divorced from the real meaning of the exchange rates. Britain could no longer maintain the unrealistic value of the pound sterling and had to devalue.
The value of money is ultimately what you can buy with it. If I want to buy British goods, I need to pay in Pounds Sterling. If I want to buy American goods, I need to buy in US Dollars. If American goods are more desireable than British goods, I'll sell my Sterling to buy dollars. Treaties among politicians are helpless against the force of the invisible hand.
Upvote:5
I think the loss of British Empire about that time had something to do with that. If you have fiat currency, valued primarily on the perception of your total assets, and you loose a large portion of those assets, you'd better voluntarily adjust your exchange rate or face devaluation due to loss of trust in your currency by other players.
More post
- 📝 Was Germany's "Fall Blau" plan in the Soviet Union partly aimed at Mediterranean neutrals or Japan (a neutral vis-vis the Soviets)?
- 📝 How strong a land force did Germany need for a conquest of the British Isles in the summer of 1940?
- 📝 What gave rise to the widespread popularity of coffee?
- 📝 Was there the concept of paternity leave in Spain in 1913?
- 📝 Why was the Kashmir issue not completely solved at the end of Bangladesh Liberation War of 1971?
- 📝 How reliable and accurate is the Nuremberg Chronicle?
- 📝 How accurate are ancient history busts?
- 📝 Was WW2 necessary for Germany economically?
- 📝 Besides the Hebrews, were there any other ancient cults that used salt in animal sacrifices?
- 📝 Was Germany responsible for WW1?
- 📝 Why didn't Japan adopt western utensils?
- 📝 What factors led to much higher US war bond sales and participation rates in WWII over that of WWI?
- 📝 Were any of the early settlements in America attacked from the sea?
- 📝 Would a common person in the 18th century have heard Mozart's music during his lifetime?
- 📝 Have there been any nuclear accidents in the US at nuclear facilities which were not "commercial"?
- 📝 Why didn't France and the UK invade Germany in September 1939?
- 📝 What were the potential consequences of Israel's strike on the Osirak reactor?
- 📝 Why do we study Mughals as part of medieval history of India and European conquest as modern India?
- 📝 Why did the Middle Kingdom stop building pyramid tombs?
- 📝 Was the "music man" on target with his claims of "pool" being trouble in 1912?
- 📝 How is the Byzantine(Eastern Roman) different from Western Roman?
- 📝 Who voted against German reunification, and why?
- 📝 Has a CIWS system ever shot down a missile in combat?
- 📝 Why were Austria-Hungary's Slavic minorities put into multinational states?
- 📝 Would a leader in a monarchy be able to hand their reign over to someone else?
- 📝 How much smaller were medieval farm animals in England than today?
- 📝 In British heraldry, what happens when a woman with a coat of arms marries someone without?
- 📝 Were early accounts of ancient child prostitution accurate?
- 📝 What does Spivak mean by "epistemic violence" in her paper "can the subaltern speak"?
- 📝 Why didn't Japanese attack Soviet Union simultaneously as the Germans?
Source: stackoverflow.com
Search Posts
Related post
- 📝 What factors led to the 30% devaluation of pound sterling in 1949?
- 📝 What Factors Have Led to the Duration of US Copyrights Continuously Increasing?
- 📝 To what extent did Gandhi affect the factors that led to the partition of India?
- 📝 What were factors that led to a decline in bond yields during World War II given that the opposite should have happened?
- 📝 What were the factors that led to stagflation in the United States during the 1970s?
- 📝 What factors led to the rise of political parties in the United States?
- 📝 What factors led to the US government issuing nutrition guidelines in 1916?
- 📝 What are the factors that caused the new world civilizations to be less technologically advanced than the old world?
- 📝 What led some people to (correctly) believe that there was no land under the ice cap at the North Pole?
- 📝 What was the pound (unit of weight) initially equal to?
- 📝 What led to the first fight in the American Civil War?
- 📝 What are the text and subtext of this 1949 Soviet cartoon?
- 📝 What factors enabled Europe to conquer almost the whole world?
- 📝 What events led to the fall of the Zhou Dynasty during the Warring States period?
- 📝 What led to the creation of Belgium?
- 📝 What were the key factors to the fall of domestic socialism in the USA?
- 📝 What factors related to the Eastern Crisis contributed to the outbreak of World War 1?
- 📝 What were the factors that caused the world to move away from the Gold Standard in the 20th century?
- 📝 What led Extremadurans to take a leading role in the conquest of Spain's territories in the Americas?
- 📝 What factors discouraged the Nazis from focusing all their forces on the Caucasus region during Operation Barbarossa?
- 📝 What led to American air superiority over the Axis in World War II
- 📝 What factors led to much higher US war bond sales and participation rates in WWII over that of WWI?
- 📝 What technological/economic factors triggered the Industrial Revolution?
- 📝 What factors contributed to Jews moving out of the Middle East?
- 📝 What are the safeguards in the German constitution of 1949 against dictatorship?
- 📝 What were the factors that aided Margaret Thatcher in her victory against the trade unions when her predecessors failed?
- 📝 What factors contributed to the popularity of Eastern cultures in the USA in late 20th century?
- 📝 What particular watershed events led to the War of the Roses?
- 📝 What Factors Contributed to the Success of Certain "Long March" Strategies?
- 📝 What factors led some South American governments to be sympathetic to Nazi war criminals?
