Currency Stabilization: the Keynes and White Plans

Login or Register to leave a comment.

Sign-up for free weekly updates from ForeignAffairs.com.

PUBLICATION in April by the American and British Treasuries of plans for monetary stabilization after the war has launched a debate that will continue until a decision has been reached. This is a fine example of the democratic process. Both Treasuries have emphasized the tentative character of the proposals and have invited comment from any quarter. The plans have been announced as the work of technical experts. Dr. Harry D. White, Director of the Division of Monetary Research of the Treasury, is the author of the American plan and Lord Keynes, now serving as an adviser of the British Treasury, the author of the British plan. The discussions thus far both between the two Governments and with the other allied and associated governments have been entirely through the medium of technical experts. The Governments themselves remain uncommitted. Although the American plan has been presented by Secretary Morgenthau to the appropriate committees of Congress and there has already been some preliminary discussion of both plans in the British Parliament, it seems probable that the legislative phase of the debate will not get seriously under way for some time. At the appropriate stage, presumably, public hearings will be conducted by our Congressional committees.

All this contrasts most favorably with our lack of planning for monetary stability after the last war and gives ground for hoping that we may avoid another long period of currency demoralization. The world's monetary experiences in the period between the two wars are too familiar to require more than the briefest summary. The suspension in 1919 of the measures taken during the war to peg sterling and other currencies revealed fully the breakdown of the international gold standard which the war had produced and introduced a period of the wildest currency disorder. Depreciation of European currencies, combined with the general political and economic uncertainty, led to those erratic flights of capital which throughout the inter-war period continued to be perhaps the chief impediment to the establishment of international monetary stability. The disorder of the early twenties was marked especially by the great inflation which ended in the complete destruction of the German and other currencies of Central and Eastern Europe and by the slower and milder inflation in France, Belgium and Italy...