The Decline of Sterling: Managing the Retreat of an International Currency, 1945–1992

by Catherine R. Schenk

• ISBN13: 9780521876971
• ISBN10: 0521876974
• Format: Hardcover
• Copyright: 2010-07-05
• Publisher: Cambridge University Press

Summary

The demise of sterling as an international currency was widely predicted after 1945, but the process took thirty years to complete. Why was this demise so prolonged? Traditional explanations emphasize British efforts to prolong sterling's role because it increased the capacity to borrow, enhanced prestige, or supported London as a centre for international finance. This book challenges this view by arguing that sterling's international role was prolonged by the weakness of the international monetary system and by collective global interest in its continuation. Using the archives of Britain's partners in Europe, the USA and the Commonwealth, Catherine Schenk shows how the UK was able to convince other governments that sterling's international role was critical for the stability of the international economy and thereby attract considerable support to manage its retreat. This revised view has important implications for current debates over the future of the U.S. dollar as an international currency.

Table of Contents

List of figures	p. x
List of tables	p. xiii
Acknowledgements	p. xv
Introduction	p. 1
Evolution of the international monetary system	p. 7
Britain in the world economy	p. 13
Measuring sterling's international role	p. 21
Summary and outline of the book	p. 27
Reconstructing the International Monetary System 1945-1959	p. 35
The Post-war international monetary system 1945-1950	p. 37
The post-war settlement	p. 37
The 1947 convertibility crisis	p. 60
Devaluation, 1949	p. 68
Conclusions	p. 80
The return to convertibility 1950-1959	p. 83
Sterling as a reserve currency	p. 83
Sterling as a trading currency	p. 95
The sterling exchange rate	p. 100
Convertibility on the current account	p. 102
Conclusions	p. 115
Accelerating the Retreat: Sterling in the 1960s	p. 117
Sterling and European integration	p. 119
Erosion of traditional relationships in the 1960s	p. 121
The first application, 1961-1963	p. 124
The second application, 1967	p. 131
The final battle for accession, 1970-1972	p. 138
Conclusions	p. 151
The 1967 sterling devaluation: relations with the United States and the IMF 1964-1969	p. 155
Devaluation and Anglo-American relations	p. 157
Devaluation and the IMF	p. 185
Conclusions	p. 204
Sterling and the City	p. 206
Measuring sterling as a commercial currency	p. 208
Sterling in banking and finance	p. 212
Capital controls on sterling	p. 215
The eclipse of sterling, 1958-1970	p. 224
Conclusions	p. 238
Multilateral negotiations: sterling and the reform of the international monetary system	p. 241
The G10 negotiations to reform the international monetary system	p. 245
Conclusions: the failure of multilateral negotiations in the 1960s	p. 271
The Sterling Agreements of 1968	p. 273
The origins of the Basle Agreement	p. 274
The second Group Arrangement, 1968	p. 285
Negotiating with the sterling area: July-September 1968	p. 293
Conclusions	p. 312
Sterling's Final Retreat 1970-1992	p. 315
Sterling and the end of Bretton Woods	p. 317
The Nixon shock and the Smithsonian Agreement, August-December 1971	p. 317
Floating the pound, June 1972	p. 329
The end of Bretton Woods, 1973-1974	p. 341
Renewing the Sterling Agreements	p. 347
Conclusions	p. 356
Years of crisis 1973-1979	p. 357
Sterling and the first oil crisis	p. 358
Sterling and the 1976 IMF crisis	p. 368
The third Group Arrangement, 1976/7	p. 378
Conclusions	p. 393
The aftermath 1980-1992	p. 396
Sterling and North Sea oil	p. 398
Attempts to stabilise core currencies: the Plaza and Louvre Agreements, 1985-7	p. 402
In and out of the Exchange Rate Mechanism: failing to turn sterling into a 'European' currency	p. 405
Conclusions	p. 413
Summary and overview	p. 414
Sterling in the international system	p. 417
Sterling and Britain's place in the world	p. 420
The development of British sterling policy	p. 422
Conclusions	p. 426
Index	p. 431
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