The boom of a century ago was checked by British self-harm – a story set to be repeated
Britain’s return to the gold standard in 1925 has become a byword for a self-inflicted economic fiasco. The idea was to seek stability by fixing a price for an ounce of gold on demand – trade and confidence in sterling would flood back and Britain would continue with the roaring 20s, the boom that followed the First World War and the 1918 flu pandemic.
However, the exchange rate was pitched so high that industry, instead of seamlessly adjusting its prices and costs, was devastated. The consequent public austerity, deflation and attempted wage cuts triggered mass unemployment and the General Strike.
No advanced country has ever tried to borrow so much for so long – and at the same time so ruptured its trade relations