In the years following the Great War, the consensus among economists and bankers in the Anglo-American world

was that the key to restoring the pre-war prosperity was to return to the gold standard.

Against this traditional view came a new, more modern perspective that questioned the value of the gold standard.

John Maynard Keynes articulated this viewpoint best when he dismissed it as a barbarous relic of a less

advanced age.

Welcome to the history of the 20th century.

Music Welcome to the history of Allied war debt to the United States.

The heavy debts of the Allies, particularly Britain, were impairing the ability of those

countries to return to peacetime prosperity. The refusal of the U.S. government to give the

UK more than 20% in debt forgiveness

had knock-on effects as the U.K. was forced in turn to collect on debt owed to it by France and

Italy and smaller allied nations, which in turn gave the French an even stronger incentive

toward ruthlessness in dealing with German reparations payments.

The German reparations obligation and the Allied war debt were two pieces of the problem,

but they weren't the whole problem. They were the elephant's trunk and the elephant's tail,

but they weren't the elephant. The elephant is the

international system of finance and trade, and among its parts we haven't talked about yet, is the

gold standard. I last mentioned the gold standard in episode 214. Before the war, all the major

Western economies were on the gold standard. In the early

20th century, it was accepted as a fact of financial life that the gold standard was the, well,

the gold standard of international finance. In the Bella Poc, an era which saw unprecedented

levels of international trade and freedom of movement between nations, every Western economy pegged the value of its currency to gold.

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