The Rise Of Australasia

Chapter 910: Chapter 678: Currency War

Arthur had not been reveling in the progress made with transport planes for long before a major news burst out of Europe.

In fact, this news was somewhat expected. Since the onset of the economic crisis, many countries, including the UK, US, Germany, Italy, Australia, Island Nation, and France had suffered considerable financial losses. Apart from the special case of Australasia, France was the country least affected by the economic crisis.

This seemed rather peculiar. After all, in terms of population and economic scale, France could only be considered middle to upper tier among the Powers. Why then was it less impacted by the economic crisis?

Mostly, this was the result of France implementing a strategy of substantial currency devaluation.

Firstly, currency devaluation would wildly stimulate exports, continuously generating more jobs, pulling up people’s consumption level, thereby stimulating the growth of internal demand.

Secondly, the constant depreciation of the currency would also lead to an incessant rise in commodity prices, which in turn would cause the stock market to continually drop.

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This meant that, even before the outbreak of the economic crisis, the Paris Stock Market had already fallen into a slump, which was the real reason why the Frenchmen were not greatly affected.

After all, if the stock market had already dropped to a lower level, how much lower could it go?

Due to the currency depreciation, the internal demand in France was continuously increasing. This also led to a situation where France’s production surplus was not so severe, which was an important factor in avoiding the economic crisis.

Even more enviable to other countries was the fact that the number of unemployed in France was constantly decreasing, stabilizing at the lowest tier among the unemployed populations of the Powers, second only to Australasia. @@novelbin@@

This was the most attractive point to other countries, as currently, the sizable unemployed populations were what caused the chaos in many nations.

If the US did not have those millions of unemployed, American People would not be so angry with President Coolidge, nor would it directly lead to the Opposition party’s impeachment of him.

It was also because of the benefits brought by currency depreciation that the British had become somewhat restless. The British Government had started to propose a plan regarding the devaluation of the Pound, seeking approval from King George V of Britain and the British Parliament.

News about the British taking actions on currency naturally reached Australasia. To be honest, as the Australian Dollar was highly tied to the Pound, it would inevitably be affected if the Pound depreciated.

This was like cause and effect; the Australian Dollar enjoyed the benefits brought by its peg to the Pound, and naturally, it had to bear the adverse effects of the Pound’s depreciation.

However, the devaluation of the Australian Dollar was also within Arthur’s plans, as the current volume of the Australian Dollar was not enough to support it as a world currency, and following the lead of the Pound was the best outcome.

Currently, it’s best to leave the world currency struggle between the Pound and US dollars, which could deepen the rift between Britain and the United States, the two superpowers.

The time when the British decide to take action against the United States may well be when the next war breaks out.

Before that happens, it would be better for Australasia not to have any ambitions. Even against the United States alone, Australasia would not have the capability to defeat it.

If the United States and the Island Nation were to join forces, with the double pressure from the army and navy, even Australasia might not be able to withstand it.

This is where having support from behind is beneficial, with the British going first in any conflict. After all, with the extensive resources and business of the British, they wouldn’t care about such minor losses.

When it comes time to divide the benefits in the future, Australasia won’t be left out, as a single Britain could not possibly divide up the world situation completely, and it will need allies like Australasia to stabilize the order.

It was not only France’s current situation that made the British decide to abandon the gold standard, but also the significant impact of the economic crisis on the British.

As the strongest country in the world, the British Empire’s export-import balance was usually positive, generating profits enough to tempt all nations.

But since the start of the economic crisis, the British Empire’s export volume plummeted, and the export-import trade balance turned upside down instantly.

Even with the great business and wealth of the British, they could still not bear a loss in foreign trade balance amounting to over £100 million.

The original exchange rate from 1 pound to 4.95 US dollars had already risen to 1 pound to 3.85 US dollars, making it hard to maintain the gold standard for the Pound.

The gold standard was initiated by Britain, and coupled with the strength of the British Empire over the past hundred years, it resulted in the currencies of many countries being more or less linked to the Pound.

When the Pound faced issues, the currencies of other nations encountered problems as well. The British gold standard being difficult to maintain meant that other countries’ gold standards were, likewise, difficult to sustain.

The good news was that the British plan to abandon the gold standard was not hastily decided, but rather after careful thought and long-term consideration.

Not long after the British Government proposed the bill, Prime Minister Baldwin contacted Australasia and stated that after abandoning the gold standard, a pound-based currency group centered around the Pound would be established. He also indicated that the new Pound would still be linked to the Australian Dollar, which would become a major currency within the Pound group.

Prime Minister Baldwin’s overtures toward Australasia were clearly visible. In fact, that was indeed the case.

Because, after leaving the gold standard, the currency exchange ratios between countries no longer had fixed values.

The stability of a currency’s value and the trust people place in new paper money depend not only on the number of nations recognizing the currency but also on the gold reserves and strength of the country.

Clearly, to maintain the Pound as the world currency, the might of the British Empire alone is insufficient.

Considering the Americans also have the support of island nations, and with their considerable wealth, it’s not certain that the British can outlast them in a war of attrition.

It’s also to blame that Britain has significant enemies in various regions.

In Europe, the enemy is France; in Asia, it is Russia Nation; in the Pacific Ocean, it is the Island Nation and the United States.

In such circumstances, if Britain does not ally with a reliable partner to maintain the Pound’s stability, its value is bound to be hit.

The British courting did not come as a surprise to Arthur and also aligned with his interests.

After all, with the Australian Dollar deeply linked to the Pound, separating the two under current circumstances is virtually impossible.

With Arthur’s nod of approval, the Australasian Government agreed to abandon the gold standard following the United Kingdom’s lead and to join the Pound group established by Britain.

Securing Australasia’s promise, the British Government evidently gained confidence, and the motion to abandon the gold standard passed swiftly through Parliament.

On May 25th, 1927, the British Government officially announced its decision to give up the gold standard due to irreparable errors and, after careful consideration, to establish a government-managed Monetary System, freeing the new Pound from its gold link.

Such news created a significant stir in both the United Kingdom and the rest of Europe since Britain was the first country to declare the abandonment of the gold standard.

The involvement of many countries tied to the Pound, including global colonies, was a heavy blow to the world’s gold standard system.

This also meant that after Britain, other nations’ gold standards could no longer be maintained. With the leading proponent of the gold standard, Britain, giving it up, the only option left for them was to follow suit.

Australasia kept its word, and after some preparation, on June 2nd, 1927, the royal family and the government jointly declared the immediate abandonment of the gold standard and decoupled the Australian Dollar from gold.

Before the world’s population could even start actively discussing these two pieces of news, the governments of the United Kingdom and Australasia issued a joint statement to form the Pound-Australian Dollar group, with the Pound and Australian Dollar serving as the official currencies of the group, set to a fixed exchange rate.

The new currency exchange rate established was as follows:

1 pound = 20 Shillings = 240 Pennies = 2 Australian Dollars = 20 Australian Shillings = 200 Australian Pennies.

Additionally, the currency group issued demands to other nations. The two governments jointly stated that for countries joining the currency group, their currencies would maintain a fixed exchange rate with the Pound and Australian Dollar to ensure the relative balance of each country’s currency.

Furthermore, intra-group trade between member countries would be conducted in Pounds or Australian Dollars to prevent losses due to currency value fluctuations in import and export trade.

Such news naturally attracted the attention of the entire world, and the Pound-Australian Dollar group became a hot topic among all nations.

The decision to join this new currency group and whether to give up the gold standard immediately became the most difficult choices for countries around the world in 1927.

Abandoning the gold standard also meant leaving behind a monetary system that nations had adhered to for decades or even centuries.

For a country’s currency, this is a huge shock and even a slight misstep could cause the nation’s monetary credit to instantly collapse.

After all, compared to gold which has stable and increasing value, paper money reliant on official government credit is far more unpredictable.

The Pound, despite its previous shortcomings, was still convertible to gold, and there were no fears of significant devaluation.

But now, if the British and Australasian governments have related schemes, they could easily cause the Pound and Australian Dollar to fluctuate wildly in value, which is not so favorable for those countries joining the currency group.

After all, their currencies are pegged to the Australian Dollar and the Pound, which means they could very well be affected by actions in Britain and Australasia.

This way of entrusting the credit of one’s national currency to other countries undoubtedly reveals one’s vulnerabilities to them.

While some countries would hesitate, others would naturally be tempted and take action.

Britain has many allies, and a significant portion of them have shown interest, which is already a push towards abandoning the gold standard.

What Arthur did not expect was that the Grand Duchy of Finland, controlled by Dmitry, would be the quickest to act.

Soon after, on June 14th, the Grand Duchy of Finland’s government made an announcement that Finland would abandon the gold standard with immediate effect and join the Pound-Australian Dollar currency group.