Monetary Blocs

Monetary Blocs

 

groupings of capitalist states created in order to ensure the monetary and economic hegemony of the country heading a given bloc by means of tying the valuta of the participant countries to its currency. Monetary blocs arose in the course of the world economic crisis of 1929-33 as a result of the intensification of the monetary war among imperialist countries. The basic monetary blocs were the sterling, the dollar, and the gold blocs.

The sterling bloc arose after the abolition of the gold standard in Great Britain (1931). It included the countries of the British Empire (except the dominions of Canada and Newfoundland and also the territory of Hong Kong) and many states whose economies were closely associated with Great Britain (Egypt, Iraq and Portugal). Later the bloc was joined by Sweden, Norway, Denmark, Finland, Japan (de facto), and later by Germany and Iran (in all the bloc included 21 countries, not counting Japan). The currencies of those countries that belonged to the bloc had exchange rates dependent on the pound sterling, and their relationship to the dollar and to other currencies was determined in accordance with the exchange rate between pounds and dollars. Accounts between participants in the sterling bloc were kept mainly in pounds sterling; their currency reserves were kept in the Bank of England and were used both for mutual accounts and for accounts with countries that were not members of the bloc.

The dollar bloc was created in 1933 after the abolition of the gold standard in the USA. It included Canada and Latin American countries. The members of the dollar bloc maintained a defined relationship between their currencies and the USA; currency control in international accounts with foreign states was not practiced. The greater part of the currency reserves of the member countries was kept in the form of dollar accounts in the American banks through which international settlements were made.

In June 1933 a group of countries that still adhered to the gold standard (France, Belgium, the Netherlands, Switzerland, and later Italy and Poland) formed the gold bloc. This bloc did not last long. During the depression following the crisis of 1929-33, the member countries abolished the gold standard and introduced currency restrictions. In 1936, the bloc collapsed once and for all.

Before and during World War II, Germany and Japan attempted to create their own monetary blocs, which included countries occupied by them. During and after World War II, currency zones were formed on the basis of the prewar monetary blocs.

V. M.

References in periodicals archive ?
Moreover, unified monetary blocs will necessarily involve greater integration and co-ordination between individual countries' fiscal policies and impinge directly on matters of political sovereignty and control over taxation and public spending.