| 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 |
|
