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John Kenneth Galbraith

Print publication date: 2017

Print ISBN-13: 9780691171661

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691171661.001.0001

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The Self-Inflicted Wounds

The Self-Inflicted Wounds

(p.190) Chapter 13 The Self-Inflicted Wounds

John Kenneth Galbraith

James K. Galbraith

Princeton University Press

This chapter examines the negative consequences of Britain's return to the gold standard in 1925 and the stock market speculation in the United States in the late 1920s. In Britain, as elsewhere, prices fell in 1920 and 1921 as the wartime shortages were overcome, the budget was brought back under control, and the boom came to an end. Unemployment, which had been negligible in the preceding years, rose to 12.6 percent of the labor force in 1921. The chapter considers Winston Churchill's justification of Britain's decision to restore the pound to its prewar gold content of 123.27 grains of fine gold, its old exchange rate of $4.87, John Maynard Keynes's case against Churchill, and the stock market crash of October 1929 in the United States after the Federal Reserve Board had issued a warning against banks's use of Federal Reserve funds to finance speculation.

Keywords:   gold standard, stock market, speculation, United States, Britain, prices, Winston Churchill, John Maynard Keynes, stock market crash, banks

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