11.1 - IR concentration 430-6 32 warren hall Politics and...

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IR concentration 430 -6 32 warren hall 11/01/07 Politics and the International Monetary System 4 Periods of International Trade 1. The Classical Gold Standard System (1870-1910) -London-world’s international financing center -Golden Age of International Financing -myth -no such thing as an automatic, apolitical Gold Standard system -states are very alert to the exchange of gold -interest rate policy to discourage outflow of gold -countries devalued their gold, rather then ship more gold out -system managed by central banks led by Great Britain -smoothly run, but not automatic -crashes with WWI 2. Interwar Chaos Prewar Crises: -suspended the link between currency and gold -in favor of unlinked paper notes -politicization of currency -prior to WWI monetary policy was left to the cfntral bankers -WWI gets governments more involved in regulation of currency -wartime inflation -print more money to pay for the war -also tax citizens, borrow money -huge increase in currency causes long lasting effects -people start to worry about returning to the gold standard -scarcity of gold compared to newly printed money -different levels of inflation in different countries -destroys the established exchange rates -total reassessment required after WWI Post-WWI:
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