Monetary War and Peace: Sterling, the Exchange Equalisation Account, and the Tripartite Agreement, 1931-1939

Abstract

This dissertation examines Britain's international monetary policy during the 1930s, with a focus on the operations of the Exchange Equalisation Account (EEA) and the decisive move toward cooperation brought about by the Tripartite Agreement of 1936. The EEA and the Tripartite Agreement were products of a decade of monetary innovation initiated by the suspension of gold convertibility in 1931, and they would become intimately connected. Established in 1932, the EEA was a fund administered in secrecy by the Bank of England and the Treasury with the aim of managing the value of sterling through intervention. This experiment in exchange management engendered suspicion around the world, with countries seeing a lower pound as the underlying goal. Monetary relations deteriorated as the Great Depression progressed—particularly after the United States embarked on its gold experiment in 1933 and created its own exchange fund—until Britain, France, and the United States attempted to turn the page with the Tripartite Agreement. Using archival sources and previously unexplored data, I argue that the Tripartite Agreement brought forth a new era of monetary cooperation. The countries agreed to work toward exchange stability and set up new gold facilities to enable stabilizing intervention, employing the previously suspect exchange funds for this purpose. The EEA was no longer seen as an instrument of monetary war but as a tool of collaboration. Moreover, the technical mechanisms not only helped the members combat financial crises but also encouraged the development of further ties. All the while, the role of gold evolved, losing its position as the fundamental determinant of monetary policy but gaining luster as the linchpin of exchange management.