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How the Bank of England abandoned the gold standard: The metal simply ran out
The metal ran out again in March 1968 and forced the closing of the London Gold Pool. Someday the metal will run out one more time.
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By James Titcomb
The Telegraph, London
Wednesday, January 7, 2015
The circumstances leading up to the Bank of England's abandonment of the gold standard in 1931 have been detailed by letters between the bank and the government from the period, which were released today.
Amid the Great Depression, during which many countries around the world sufferered economic turmoil, investors in Paris and New York lost confidence in the pound.
At the time, sterling was pegged to bullion. This meant that the pound was worth a fixed amount compared to other currencies and gold itself. In order to ensure that sterling retained its value, the Bank of England was obligated to exchange gold for pounds at the specified rate.
However, as political turmoil engulfed the UK, the country's first national government -- a coalition between Labour and the Conservatives -- presided over a budget crisis that triggered a run on the pound.
Minutes from the bank's court in 1931, published today, detailed how foreign exchange reserves were being drained to such an extent that the gold standard had to be abandoned. ...
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