Currency Devaluations of the 1930s
September 30, 2012
For some reason, I have the urge to work on this topic a little
more. I made available the raw data here:
15, 2012: Foreign Exchange Rates 1914-1941
The basic story of this time period, 1920-1940 is something like
this: A lot of currencies left the gold standard during WWI,
including the U.S. to a small degree. Some then had hyperinflation
in the early 1920s. During the mid-1920s, these currencies are
repegged to gold. The Great Depression begins. I thought Germany was
the first of the big countries to devalue in August of 1931, but it
turns out that was wrong. Germany's government defaulted on its debt
that month, and imposed heavy currency controls, but the currency
was not (officially) devalued. Thus, Britain was the first of the
big countries to devalue, in September 1931. Because the British
pound was the world's premier international currency, much like the
dollar is today, many countries followed Britain's lead and devalued
simultaneously or soon after. Japan followed in December 1931,
basically to return the yen exchange rate to its pre-devaluation
These are annual averages, which unfortunately do not capture some
of these events well. The September 1931 devaluations, for example,
get averaged into 1931, so the 1931 averages show only a slight
decline for the full year. The U.S. devalues in 1933 of course, and
repegs to gold in 1934 at $35/oz.
I suppose some of the points made here are that most countries
devalued their currencies around the late 1931 timeframe, if not
earlier in some instances. This put "beggar thy neighbor" trade
pressures on all the non-devaluing countries. When the world's
premier international currency, in this case the British pound, is
devalued, usually there are a lot of copycats. The result is that
nearly all countries also devalued, if only to restore exchange
rates to somewhere near their pre-devaluation levels.
I'll have the remainder of the countries next week.
Argentina devalued alongside Britain in late
1931, and again in 1934.
Australia devalued in August 1931.
Austria devalued alongside the U.S. in 1933-34, but not to the
Belgium devalued alongside the U.S. in 1933-34, but not to the
Then as now, Brazil never had much committment to a stable
British India followed the British pound, rising in value in the
early 1920s and then devalued in September 1931.
Bulgaria maintained its currency value throughout the period.
Canada, not surprisingly, shows a combination of both the British
and U.S. patterns, devaluing in September 1931 and again in
1933-34, although not the same magnitude in both cases.
Chile had several currency depreciation events.
China was on a silver standard, not a gold standard, and the value
of the currency fell vs. gold as a result of the falling value of
silver vs. gold. In the late 1930s, the currency was further
devalued as the government printed money to pay for war with
Japan. This resulted in hyperinflation in the 1940s.