Monetary Policy and European Reconstruction, 1920–8

Abstract

In the years 1920–8, Addis, Norman, Strong and Lamont sought to establish the same principles in international financial relations in Europe and Latin America on which Addis had long insisted regarding China — namely, that governments could not secure new loans without funding old debts and stabilising their currencies. The British believed that sound banking practices would enable London to re-establish itself as the centre of world finance.¹ As President of the Institute of Bankers, Addis became one of the leading spokesmen for deflation and stabilisation. But after his return from China, when the United States pressed the English to settle their debts, Addis began to recognise that deflation might cause economic hardship. To avoid a gold shortage and at the same time ensure stability in international exchange the financial experts at Genoa recommended the adoption of a gold exchange standard accompanied by central bank cooperation.

‘Do not be the Louis XVI of the monetary revolution.’ — Keynes to Addis, 25 July 1924

‘We feel in fact that America has pretty well let the world down.’ — Niemeyer, 19 May 1927