1949 sterling devaluation

Currency crisis The devaluation of sterling in 1949 (or 1949 sterling crisis) was a major currency crisis in the United Kingdom that led to a 30.5% devaluation of sterling from $4.03 per pound to $2.80 on 18 September 1949.Schenk Catherine R. The decline of sterling: managing the retreat of an international currency, 1945-1992 2013 Cambridge University Press 978-0-521-87697-1 934197928United Kingdom House of Commons Sterling Exchange Rate 28 September 1949 468 160 Winston Churchill Leader of the Opposition Although the devaluation was made in the United Kingdom, more than 19 countries had currencies pegged to sterling and also devalued. Historical context The devaluation, unlike the competitive 1931 sterling devaluation, was done in cooperation between all European nations.Borio Claudio E. V. Toniolo Gianni https://worldcat.org/oclc/441324822 One hundred and thirty years of central bank cooperation: a BIS perspective 2006 Bank for International Settlements, Monetary and Economic Dept 41 441324822 There was a general understanding among European nations that the sterling was overvalued and would need to be devalued. The IMF was in favour of a devaluation and wanted it to happen to allow other European currencies to also devalue.James Harold https://worldcat.org/oclc/760694324 International monetary cooperation since Bretton Woods 1996 International Monetary Fund 0-19-510448-X 92 760694324 The timing of the devaluation remained unsure, in part because Chancellor of the Exchequer Stafford Cripps opposed devaluation.Gordin Michael Red Cloud at Dawn: Truman, Stalin, and the End of the Atomic Monopoly 2009 Picador New York 978-0-374-25682-1 227 This led to progressive pressure on the currency, up to a breaking point forcing the British government to devalue. The fundamental cause of the devaluation was a structural trade deficit of the United Kingdom with the United States. But in the short run, speculation also played a role. As there were capital controls in place, speculation could not take place through regular currency markets as speculative purchases of currency were forbidden by the controls. Instead, speculative pressure mounted through leads and lags.Einzig Paul https://worldcat.org/oclc/249886 Leads and lags: the main cause of devaluation. 1968 Macmillan 249886 Decision The decision to devalue the pound was made in Cripps’ absence (he departed for a sanatorium in Switzerland in July 1949). The decision was taken by Minister of Fuel and Power Hugh Gaitskell, Economic Secretary to the Treasury Douglas Jay, and then-President of the Board of Trade (and future Prime Minister) Harold Wilson; the three moved for devaluation within days of Cripps’ departure, and he only heard of the decision through a letter from Clement Attlee in August. Consequences The immediate consequences of the devaluation were that other countries, many in the sterling area, followed suit. Australia, Burma, Ceylon, Denmark, Egypt, Finland, Greece, India, Iraq, Ireland, Israel, Netherlands, New Zealand, South Africa and Sweden all also devalued their currencies by 30.5%. France, Portugal, Belgium and Canada devalued their currencies slightly less than the UK did. According to Larry Elliott (economics editor of The Guardian), the devaluation "highlighted Britain's diminished world status".Larry Elliott Larry Elliott Devaluation did break Britain - but now it could be its salvation https://www.theguardian.com/business/2008/dec/16/devaluation-credit-crunch-recession The Guardian 12 January 2023 16 December 2008 The devaluation was an important consideration during considerations within the United States government over whether to announce the detection, earlier that month, of the Soviet Union’s successful test of their first nuclear weapon. US President Harry S. Truman was aware of the test as early as 9 September, but elected to delay the announcement until after 18 September, in part to avoid the panic that was expected to ensue if announcement of the test preceded the devaluation. The devaluation also laid the ground for negotiations that would lead to the European Payments Union (EPU).Bordo Michael D. Eichengreen Barry https://worldcat.org/oclc/781253309 A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform. 2007 The University of Chicago Press 978-0-226-06690-5 781253309 See also Sterling crisis (disambiguation) list of sterling crisis articles References Category:September 1949 in the United Kingdom Category:1949 in economic history Category:Economic crises in the United Kingdom Category:History of pound sterling Category:Financial crises in the United Kingdom