The International Law and Politics of the Financial and Monetary System
Chapter 7: From World War I to World War II
After World War I states vied to bring back economic normalcy by returning to the gold standard. That proved to be a quixotic exercise as their gold reserves were too small to support all the money they had printed during the war. As a result, states obsessed with amassing gold by undervaluing their currencies and increasing their exports. Other states with overvalued currencies retaliated by raising trade barriers. Another issue that hung over states during this period was the reparation payments owed by Germany to France and the UK for its instigation of World War I. The UK and France needed the money from these reparation payments to pay back their debt to the United States as they had borrowed heavily from it to finance the war. These chaotic economic conditions, infused by the spirit of revenge and retaliation, were further exacerbated by the Great Depression. As traditional diplomacy failed, war became the way of score-settling among states.
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