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The two sterling crises of 1964 and the decision not to devalue 1
Author(s) -
NEWTON SCOTT
Publication year - 2009
Publication title -
the economic history review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.014
H-Index - 49
eISSN - 1468-0289
pISSN - 0013-0117
DOI - 10.1111/j.1468-0289.2007.00431.x
Subject(s) - devaluation , speculation , deflation , position (finance) , economics , politics , government (linguistics) , keynesian economics , political economy , positive economics , monetary economics , political science , macroeconomics , currency , finance , law , monetary policy , philosophy , linguistics
Conventional wisdom is critical of the newly elected Labour government's reaction to external financial difficulties in the autumn of 1964. Anxious about its political position, it avoided the necessary measures, involving stringent deflation and possibly devaluation. This article seeks to revise the traditional view by re‐examining the response to what were actually two sterling crises. The first was handled efficiently. The second was provoked by speculation stemming from market expectations of devaluation. The decision not to devalue but seek external support was justifiable, given changes within the international economy which were to create problems for many postwar nation states.