A Comparative Chronology of Money

Monetary History from Ancient Times to the Present Day

1920 - 1938

© Roy Davies & Glyn Davies, 1996 & 1999.

Based on the book: A History of Money from Ancient Times to the Present Day by Glyn Davies, rev. ed. Cardiff: University of Wales Press, 1996. 716p. ISBN 0 7083 1351 5. (Page numbers in the 3rd edition published in 2002 may be slightly different).

1860-1921 Number of banks in the US increases by over 19 times
During the same period bank numbers fall in other advanced countries but in the US a peak of nearly 30,000 is reached in 1921.

p 490-491

1865-1926 The Latin Monetary Union
This comprises France, Italy, Belgium, Switzerland, and later Greece. The gold and silver coins of each country are legal tender throughout the union. The union has faded away by the 1920s before its formal ending.

p 443,492-493,557

1873-1924 The Scandinavian Monetary Union
Denmark, Sweden and Norway form a monetary union similar to the Latin one but with gold as the standard for their currency.

p 356,443

1920 Keynes publishes his Economic Consequences of the Peace
He argues against German war reparations and in favour of mutual cancellation of Allied war debts.

p 376-377,518

1920 Japanese economy enters a chronic depression
By 1920 the boom generated by the First World War has petered out and a depression starts.

p 585

1921 Note issuing by commercial banks in England ceases
Fox, Fowler & Co. of Wellington, Somerset, the last note-issuing country bank in England and Wales is taken over by Lloyds. However Scottish banks continue to issue their own notes.

p 320,375

1921 The Imperial Bank formed in India
It is formed by the merger of the three presidency banks. The Imperial Bank performs some of the functions of a central bank and so some of the relevant recommendations of the Chamberlain Report of 1913 are partly and belatedly put into effect.

p 623-624

1922-1923 Germany suffers from hyperinflation
The situation gets so bad that wages are paid as frequently as twice a day to give people a chance to spend them before the notes lose their value. Other countries agree to ease the burden of war reparations. A new, interim currency, the Rentenmark, secured on mortgages on land and industrial property, restores stability.

p 377,572-574

1923 Tokyo earthquake
On 1 September an earthquake kills around 140,000 people and devastates large parts of Tokyo and its port, Yokohama. The Bank of Japan coordinates the activities of the main banks to finance reconstruction.

p 585

1924 Germany adopts the Reichsmark and returns to the gold standard
The Reichsmark, which replaces the Rentenmark, has a value equivalent to the pre-war gold mark.

p 574

1924 US Federal Reserve System adopts easy money policy
The decision is taken in order to combat a decline in business activity and to encourage international capital flows. This action helps Britain to import enough gold to return to the gold standard the following year.

p 506

1925-1926 Florida land boom
Massive speculation in land in Florida is halted by devastating hurricanes in September 1926. Subsequently the interest of speculators moves to the stock market.

p 508

1925 Britain returns to the gold standard
Keynes argues that the value of sterling has been fixed at an unsustainably high rate.

p 375,378

1926 General Strike in Britain
The over-valued pound and the attempt to reduce prices and wages to compete overseas provoke a general strike.

p 379

1927 New York Federal Reserve Bank cuts rediscount rate
The rate is cut from 4% to 3½% partly in order to help Britain to stay on the gold standard. However the supply of credit is eased just as a speculative boom is starting on the stock market.

p 509

1927 Canadian ban on potlatches is strengthened
The 1876 act proscribing potlatches has proved ineffective and therefore a new act stipluating maximum and minimum prison sentences is passed.

p 12

1927 Japanese financial crisis started by a run on the Bank of Taiwan
Taiwan became a Japanese colony in 1895 and therefore the crisis spreads to Japan. As many as 37 Japanese banks are closed, at least temporarily.

p 585

1927 Japanese Banking Act
This act, passed in response to the crisis of the same year, tightens up the definition of a bank and prohibits banks from engaging in non-banking business.

p 585-586

1928 France returns to the gold standard
Silver convertibility is no longer guaranteed, ending France's attachment to bimetallism. Gold convertibility is only for wholesale transactions of a minimum of 215,000 francs.

p 562

1928-1929 Stock Market boom in US
The Fed takes no effective action to stop the boom getting out of control.

p 509

1929 The Great Crash
The New York stock market crashes on 24 October. The Fed, whose easy money policy stoked the boom, now tightens credit causing a slump in the US economy.

p 509-510

1929-1930 The Great Depression
Widespread bank failures and the surviving banks' curbs on lending cause businesses of all kinds to go bankrupt. The US net national product falls by over half.

p 510

1930 Bank for International Settlements founded
Its initial task is to help with reparations and with large financial transfers for reconstruction. Later it plays a key role as a forum for central bankers.

p 378

1931 Report of the Central Banking Enquiry Committee in India
The Imperial Bank, which performs some of the functions of a central bank, is not allowed to issue notes, which have been a government monopoly since 1861. The Committee accepts the case for the creation of a proper central bank.

p 624

1931 Macmillan Report on Finance and Industry
The committee tends to side with bankers in the dispute over whether or not the banks are doing enough for British industry and criticises other countries for not adhering to the rules of the gold standard. However, it emphatically points to a lack (henceforth famous as the Macmillan Gap) in the long-term finance available for small and medium firms.

p 376,379-380

1931 Failure of the Austrian Creditanstalt Bank
A number of bank failures in Germany ensue and the resulting large international currency movements trigger off Britain's decision to abandon the gold standard.

p 381,575

1931 Därmstadter and National Bank collapses
As a result of the crisis German banks cut back on lending, leading to a steep rise in unemployment.

p 575

1931 US and France hold 75% of world's gold stock
This figure is reached by September. During the previous 6 weeks over £200 million worth of gold was withdrawn from London.

p 562

1931 Britain abandons the gold standard
This marks the beginning of the move from classical to Keynesian economics. The Commonwealth (except Canada), Ireland, Scandinavia, Iraq, Portugal, Thailand, and some South American countries follow Britain off gold.

p 380-382,387,604

1931 Japan abandons the gold standard
Japan's military actions along the Manchurian border with China frighten foreign creditors into withdrawing gold and are therefore partly responsible for the decision to abandon the gold standard in December.

p 586

1932-1941 Japan enjoys strong economic growth
Reflation and competitive devaluation stimulate production and exports with the result that Japan recovers rapidly form the world slump of the 1930s and is able to devote increasing resources to rearmament.

p 586

1932 Bank rate as a policy tool is abandoned by the Bank of England
Until the financial crisis the Bank of England has sought to control the monetary system by varying the interest rate it charges. After June 1932 bank rate remains unchanged for nearly 20 years, apart from a brief period just before and after the outbreak of the Second World War.

p 380,388

1932 The Great Conversion reduces the burden of Britain's national debt
The rate on over £2,000 million of loan stock is reduced from 5% to 3½%. Cheap money, and the effect of the world slump in reducing investment opportunities abroad, lead to a housing boom and investment in new industries, helping Britain to make a relatively early recovery from the Depression.

p 384-386

1932 Ottawa Agreement on Commonwealth Preference in Trade
This provides a more stable basis for trade arrangements than can be obtained elsewhere and strengthens the attractions of membership of the sterling area.

p 605

1932 President Hoover sets up the Reconstruction Finance Corporation
Its purpose is to provide emergency financing for US financial institutions and to help agriculture, commerce and industry.

p 511

1932 US Federal Home Loan Banks created
Eleven of these banks are set up to provide housing finance.

p 511

1933-1938 Housing boom in Britain
The bulk of construction takes place in the Midlands, London and the South East where most of the new, light industries are being established.

p 386

1933 Adolf Hitler becomes German Chancellor
The social turmoil resulting from mass unemployment leads to Hitler's installation as Chancellor. Thereafter Germany's financial system and the economy in general are geared to rearmament.

p 575

1933 Roosevelt becomes US President and launches his New Deal
Roosevelt's first action is to declare a national bank holiday closing every bank in the US. After a week the Federal Reserve Banks reopen and later other banks are allowed to reopen if investigators declare them solvent. This restoration of confidence in the financial system is a necessary preliminary to the New Deal involving aid to industry and agriculture.

p 511-515

1933 US Home Owners Loan Corporation created
Like the Federal Home Loans Banks created the previous year this institution is intended to combat the depression by stimulating the building industry.

p 511

1933 US Agricultural Adjustment Act
Existing financial institutions are given greater resources and their efforts coordinated through the Farm Credit Association. The Thomas Amendment to the Act authorizes an increase in note circulation, a reduction in the dollar's gold value, and promotes and subsidizes official purchases of silver.

p 511-512

1933 US Federal Deposit Insurance Corporation created
Through payments of a small premium by practically all banks a fund is set up to guarantee repayment of customers' deposits.

p 513

1933 National Bank of Nigeria founded
This is one of only 3 indigenous banks to be founded in Nigeria before 1945. The other two fail after only a short period.

p 611

1934 US Gold Reserve Act
The official price of gold is raised from $20.67 to $35 per ounce, a substantial devaluation of the dollar, and the internal circulation of gold is ended.

p 514-515

1934 US Silver Purchase Act
The Act obliges the government to buy large quantities of silver. This raises its price in world markets to such an extent that China is forced off its silver standard and many other countries demonetize their silver currencies. Thus in the long run the Act reduces the demand for silver, contrary to the intention of its supporters.

p 515

1934 German Banking Act
This establishes a national Banking Supervisory Board authorized to license every bank.

p 575

1935 - c.1970 Continuous moderate inflation in Britain
The general level of prices rises every year but at a moderate rate.

p 395-396

1935 US Banking Act
The changes this makes in the Federal Reserve System have the effect of shifting power away from New York and the Federal Reserve Districts towards Washington.

p 513-514

1935 Reserve Bank of India begins operations
India's central bank is modelled on the Bank of England.

p 624

c. 1935 Cowries still used as money in Nigeria
Their use in fairs in rural areas is not uncommon before the Second World War but declines rapidly afterwards.

p 35,608

1936 France abandons the gold standard
The French government's policy of a strong franc is undermined by competitive devaluation. After abandoning the gold standard France continues to be the centre of a Franc bloc including most of the non-German European countries south of Scandinavia until the Second World War.

p 443,562-563

1936 Tripartite Agreement between Britain, France and the US on exchange rates
The aim of the agreement is to stabilize exchange rates. It falls apart with the advent of the Second World War.

p 563

1938 US Federal National Mortgage Association created
The Association, known as Fanny Mae, increases the availability of finance for housing.

p 511

c. 1938 Cattle still used as money in parts of Africa
Even scrawny cattle are highly valued because of their monetary functions. Overgrazing resulting from attachment to cattle as a store of value continues to cause environmental problems as late as the 1980s.

p 43

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Roy Davies - Last updated 25 May 2005.