gov finances and the gold standard

downfall of the economy

• the economic problem faced by britain in the end of the war in 1918 influenced policies introduced in 1920 and 30s

• after the brief post war boom due to the inflationary policies introduced by the coalition government, there was a slump

• prices fell and unemployemnt rose

• the value of britains overseas trade declined : the volume of industrial output fell, as did profits

• as a result of the falling off of businesses and the increasing bill for unemployment benefit, governement revenue fell

geddes report

• acting on the geddes report of 1922, the governemnt impposed severe spending cuts

• another measure was the safeguarding of the industries act of 1921,which was designed to allow the imposition of duties on imported goods that threatened britains key industries

• it was hugely controversial as it heralded the ending of free trade and a move towards trade protection

• the overrall effect of the slump was a contracting economy

winston churchil

• in 1925, winston churchill,chancellor of exchequer in baldwins conservative government,took the decision to return back to the golden standard

• britain had bee on the golden standard for much of the nineteenth century , but it came of in 1914 as a precautionary measure , to stop people hoarding gold sovereigns and to protect britains gold reserves

• in 1919, the gov decided to stay off the gold standard for a further six years to aid financial recovery

return to the gold standard

• in 1925 there were strong arguments for and against a return

• the economy had stablised and although prices were still falling, wages were fairly steady

• a return to the GS was perceived as a return to normality and would boost the economy and stimulate competition and would encourage new industries

economist j.m keynes

• he argued that returning to the gold standard would be deflationary and would increase unemployment and industrial unrest

• the real problem was the return at pre war parity which meant that the pound was overvalued

• this made british goods expensive t buy , crippled the export market and slowed down post war recovery in trade

• in 1929, when the wall street crash occurred, one of the consequences was that foreign investors withdrew gold from britain , threatening the collapse of the british banking system