Samenvatting

The Bank of England depleted its open market portfolio by secretly sterilising large gold inflows. Thereafter interest rates were influenced by falsifying reported gold flows. The false reporting was a tightly kept secret, hidden from members of the Bank of England's highest governing bodies. The false reporting obscured the instability of the gold standard and supported monetary policies that degraded British economic performance and increased world financial fragility in the critical early years of the Great Depression. The episode supports the view that the interwar gold standard was not a system guiding policy, but was manipulated to enforce a dysfunctional classical orthodoxy.