The gold standard was with great cacophony in August 1914, when the first world war broke out. Great Britain, France, Germany and Russia suspended the redemption of banknotes into gold and embargoes on the export of gold. Countries froze its currency’s value through the fixation (or parity), which I will explain later. Hyperinflation was rampant after the war, especially in Germany, Austria, Hungary, Poland and Russia. At the end of 1923, the index of prices to the producer in Germany was more than 1 trillion times greater than before the first world war. Exchange rates fluctuated greatly in the 1920s, when parity with fixed exchange rates ended with the war.

A serious problem arose. Central banks realized that only could boost exports arbitrarily through the devaluation of its currency to trade their cheaper products. No matter them the damage they did to the well-being of the middle class or to trade long term with other countries. The global political economies tried to bring back the pattern gold as a solution to these depreciations predators. It was then when the United States replaced Britain as the dominant power in the financial world. And our Government gave him the impetus to restore the gold standard. The military-industrial complex of the United States was not played in the first World War (and the second).

This meant that its economy was more stable and had less inflation. The United States returned to the pattern gold in 1919. The young Winston Churchill became Chancellor of the Exchequer the title held by the Minister of the British Cabinet which is responsible for all economic and financial affairs. This became the most famous head of Parliament. In that role, Churchill played a key role in the restoration of the gold standard in 1925.