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Chapter CLV: The St Leger's Day Massacre
Chapter CLV: The St Leger's Day Massacre.

The end of summer and the start of autumn often brings with it financial problems and crises, indeed there is a traditional City saying to that effect; "Sell in May and go away, come back after St Leger's Day". While the origins of the saying may well have been a recognition of the de facto long summer break that most financial markets enjoyed it had survived so long because there was more than a grain of truth in it, following this advice would have yielded an investor good returns for much of the 20th century. There are doubtless many reasons for the poor average returns over the summer, but a key one is surely the break itself and the subsequent return. If a problem remains unsolved at the start of summer it will generally get worse over the following weeks, thus when investors and bankers return from their summer break they will find the situation considerably worse than when they left it and be prompted to hasty action, this action rarely being good for the short term value of the asset in question. For the more serious events there has likely been a degree of 'frog boiling', that is to say a chronic problem getting constantly worse but so slowly that the true scale of the predicament is not apparent, for these cases the return from summer with fresh eyes can prompt a realisation of how bad things actually are and so initiate the crisis. Appropriately enough in the autumn of 1937 the focus of the returning financial world was on the Gold Bloc and in particular France. While Paris publicly declared the sacred and eternal nature of the link between the franc and gold, in private it was recognised the cost of supporting the franc at it's current value was increasingly untenable. The Bank of France had been very active in the foreign exchange markets in the previous months however the end of summer prompted an exponential increase in the scale of the required interventions. In the first week of September the Bank of France was spending £3 million in gold a day on defending the franc, in other terms this meant just over 13 tons of bullion leaving the vaults every day, most of which was making it's way to the London gold market. In theory France could keep up such spending for many months, there had been almost 2,500 tons of bullion in the Bank of France vaults in the spring, but in reality much of that gold was needed to back the Franc. The Gold Conference in Geneva only a few months earlier had declared that 40% currency backing was the absolute minimum required to be in the Gold Bloc, on that basis France needed at least 1,500 tons and realistically nearer 1,800 tons in reserve when all liabilities were considered just to meet the bare minimum. If this had been merely another short term speculative attack then the French would doubtless have gritted their teeth and continued the spending, to a certain extent that was the point of having reserves in excess of the bare minimum. However the devaluation fears were starting to infect the wider economy, bank deposits both at the Bank of France and at the commercial banks were declining rapidly as the public sought to exchange francs for gold, sterling, or any other hard asset they could. Given the chronic weaknesses of the post-Depression French banking sector this was not something that could endured for long before serious structural damage started being done. The traditional counter was raising interest rate and this had been done several times, while this had had precious little effect on the exchange markets it had been a further blow to the economy, to the point the finance ministry was warning about a serious risk of recession, or worse, unless the currency stabilised and interest rates lowered to more appropriate levels. Taking the wider view of the whole economy the answer was as obvious as it was unpalatable; France would have to devalue.

HkXiw02.jpg

Sir Sultan Mahomed Shah, Aga Khan III, on his way to Doncaster Racecourse for the last classic of the British flat racing season. The choice of St Leger's Day in the quoted saying was not an un-characteristic outbreak of piety from the City but a reference to this race, the St Leger's Stakes, which was named for it's military founder Major-General Anthony St Leger and not the medieval Burgundian martyr. The Aga Khan himself would end up peripherally involved in the devaluation crisis, while his experience with gold was limited to being gifted his weight in bullion for his golden jubilee the previous year, as President of the Assembly League of Nations for the 1937 session he would oversee the General Assembly that coincided with the international response to the affair.

While the Bank of France and the civil servants in the finance ministry began very quietly working on the mechanics of the devaluation, the new laws, emergency bank holiday regulations and so on, the politicians and diplomats turned to the wider implications. There were two pressing concerns about the devaluation and the first was France's continued membership of the Gold Bloc, the increasingly formal group of nations still on the gold standard. Technically France did not have to leave the gold standard in order to devalue the franc, it was theoretically possible to just revalue it in gold terms and carry on as before. In practice a devaluation would prove the speculators correct and there would be doubts that the new level of the franc was credible, consequently there would be a massive demand for gold as banks and the population scrabbled to avoid holding francs in case of a second devaluation. Of course the Bank of France could take the Italian or German route and notionally remain on the gold standard but end the right to exchange francs for gold. Unfortunately for this scheme the same Gold Bloc conference that had set the minimum backing ratio had also declared that being able to freely exchange currency for gold was a requirement for being on the gold standard, or at least a requirement for being a member of the Gold Bloc, as Italy had found out to it's disappointment. One obvious question is why Paris was so keen on remaining in the Gold Bloc and there were a range of reasons, none of which actually involved gold. As we have discussed the Gold Bloc members had lowered tariffs between themselves, not by a large amount and nothing on the scale of Empire Free Trade, but enough to be worth trying to keep and on a more practical level the clear support of the US government and Federal Reserve would make the new level of the franc easier to maintain. These were the official reasons and they were valid enough, but very unofficially Paris wanted to stay in the Bloc for strategic reasons. The Bloc was one of the few international forums that the US seriously engaged with and was the only one where Britain was not also present, it was therefore seen as a key route to engagement with the US and keeping them involved in world affairs. Given these world affairs, as defined by Paris at least, ranged from continued support for the Republican side in Spain through to security co-operation in the Pacific it is hardly surprising that this agenda could not be spoken of openly; the Landon administration was already burning political capital with it's support for Spain, so there was no appetite for another bruising fight with the isolationists over foreign affairs. The issue therefore was how to keep France de jure on the gold standard that they could stay in the Bloc, but de facto off it so they could reap the benefits of devaluation. The solution was typically French, use regulation and heavy taxes to encourage all gold holders to sell their gold to the Bank and then require all transaction in gold to be approved by the Bank of France. Paris could therefore state that the franc was still theoretically convertible with gold and thus conformed to the letter of the gold standard, if the Bank never actually gave permission for any gold transactions that was a mere irrelevant detail. Leaving aside any moral objection to this approach the challenge was to getting the rest of the Bloc to accept it. This ties in neatly with the other pressing concern, getting international agreement and support on defending the new value of the franc and not setting off a round of currency wars and competitive devaluations.

OgIyWSs.jpg

The central corbeille (basket) at the Paris Bourse with the official agents clustered around it, all trading on the exchange was via open outcry between this strictly limited group and those on the outer ring were there to support, instruct or just observe those traders. As part of the Monetary Law that changed the gold value of the franc the French government also imposed a retrospective 50% tax on any forward operations on the stock market and forced the declaration of all foreign currency operations even when not made at the exchange. Separately all gold holders in France had to either sell their gold to the Bank or pay a 'special levy' equal to the increase in the franc value of their gold after the devaluation. While such measures were doubtless satisfying to the government and parliament as a way to punish those seen to profit from France's misfortune, it also prompted another exodus of traders and business to New York, Amsterdam and above all London. As with the failure of Paris' previous attempts to be a financial centre the French were unwilling, or perhaps psychologically unable, to pay the price required to be a serious financial centre.

The United States may have been in a period of semi-isolation and disengaged from most international forums, but that did not mean they had lost all their diplomatic skills or their ability to spot a hustle. The French attempts at subtlety failed miserably, both the sleight of hand on the gold standard and the strategic reasoning for wanting to keep the Gold Bloc intact were soon spotted. Fortunately for Paris the US had it's own reasons for wanting to keep the Bloc intact, not least the lack of a plausible alternative. After the initial hurried and domestically focused reactions to the Depression US policy had been to try an rebuild international trade, as a considerable net exporter prior to the crash the collapse in trade had hit the US economy particularly hard. Unfortunately these efforts had failed and so in parallel a determined attempt had been made to build a Dollar Bloc, a economic area of preferential trade to rival the Sterling Area and the Exchange Control group forming around Germany. After many years of effort by the State Department and US Treasury the Dollar Bloc consisted of the US, the Philippines, and a smattering of smaller Central American states that had been on the receiving end of a US Marine intervention during the Banana Wars. Both policies had failed for the same reason, bipartisan political pressure that international trade be "fair" and not offer any competition to domestic industry. In practice this meant that while the US trade negotiators had no end of ideas about which tariffs and quotas other people should cut they had precious little to offer in terms of access to US markets to those negotiating a trade treaty or considering entry to the Dollar Bloc. As a result the Gold Bloc represented pretty much all of the progress the US had made towards trade liberalisation and tariff reduction, letting it fall apart risked undoing that progress and causing a further drop in trade, which would damage the still weak US domestic economy. In comparison to that possibility continuing to stay in an international talking shop seemed a small price to pay, particularly as the State Department was confident any French strategic overtures could easily be dismissed or at least politely watered down to nothing. It should also be noted there was another important reason the US response was far more enthusiastic than the French had dared hoped; the Federal Reserve was concerned that after the franc devalued it would be the dollar next to come under pressure. Devaluations must be relative to something and though both Paris and Washington were loath to admit it the reference currency of the time was, as it is today, sterling. Thus it had been the franc-sterling exchange rate that had been attacked by speculators and once the franc devalued it would be 'cable' (city slang for the dollar-sterling rate) that would be their next target. This would require the US to intervene to support the currency and as in France lead to increased public demand for 'safer' assets instead of an under-pressure dollar. In absolute terms the US Federal Reserve held far more gold bullion than the Bank of France, but as a proportion of the economy or the amount of currency in circulation, the psychologically important percentage backing of the currency, the figures were far lower. To be blunt the US would struggle to fend off gold flight of the scale France had faced for more than a couple of weeks and while the US domestic banking system was slightly stronger than in France that did not mean it could withstand extended capital flight. Recognising the inevitability of the situation the US government decided to minimise the economic costs and carry out a pre-emptive devaluation on their own terms; better to be seen as strong while making a controversial move than weak by being forced into it. To that end it was the US Treasury that came up with the final scheme adopted by the Gold Bloc, the plan should not be to devalue the franc or any other currency, instead the Bloc should say they were revaluing gold. If the entire Bloc all changed the exchange rate of their currencies to gold at the same time they could maintain it was the value of gold itself that had changed not their currencies. While this would be a devaluation relative to sterling and the rest of the world the rates between members would not change, hence the French decision to value the franc within a range not an absolute value, allowing them to conform to the letter of the devaluation while keeping flexibility to trade lower as required.

Uq0ZmNo.jpg

A Soviet gold mine in the mid 1930s, the crude approximations of a uniform and the pit pony indicate this is one of the more modern mines in the country at that time. The vast majority of Soviet gold production came from the mines around Kolyma in the Far East, these mines were operated by prison labour under the Gulag system and so lacked such luxuries. Global gold production increased almost 70% between 1929 and 1937 due to massive increases in US, Canadian, Australian but above all Soviet output. This should have led to a slump in the gold price as extra production flooded the market, yet the London gold fix had jumped from around £4/oz to over £7/oz in the same period. It was this disparity between the price of gold and both production and the size of the global economy that was the justification for the revaluation. Such talk was heresy to the high priests of the Gold Bloc, the League of Nation's Economic and Finance Organisation, who's economists and theorist were appalled at the very idea of devaluation and the cynical schemes being prposed to avoid keeping the 'golden promise'. However they were ultimately responsible to the League secretary-general, Joseph Avenol, a man who believed his highest concern was not the League's charter but French foreign policy. Consequently after a somewhat hustled vote of the General Assembly the plan received the League's seal of approval.

It must be noted at this point that these discussion and agreements were not taking place in a calm and considered atmosphere but in the midst of market turmoil. In financial circles it is still referred to as the Saint Leger's Day massacre, while no blood was spilled there were oceans of red ink across the stock, bond, exchange and even commodity markets on both sides of the Atlantic. As is often the case the rumours circulating were worse than the secret discussions and the speculation fuelled the volatility in the markets, particularly when it became clear the central banks were reluctant to intervene to defend rates that would soon change. It is in this context that the British cabinet and the Bank of England were presented with a tough choice around how, if at all, to react to the overtures from the Gold Bloc on co-operation around exchange rates, gold and related issues. Unusually it was genuinely a difficult decision and not the more common political version where 'tough choice' was code for 'There is an obviously correct solution to this, but it is electorally unfavourable'. There already was a degree of communication between the Bank of France and the Bank of England, as both were regularly intervening in the exchange and gold markets some unofficial co-ordination prevented their agents ending up on opposite sides of the same trade and helped solve the logistical challenges of regularly moving large quantities of bullion from Paris to London. What the French proposed was an extension of the existing Gold Bloc agreement on maintaining stability between currencies to include sterling and the Bank of England. The Bank was modestly in favour of the proposal as was the Treasury in the form of Frederick Leith-Ross, the chief economic advisor recently returned from his triumphant mission to China, who was a strong advocate for it. While far from enthused about the gold standard itself, he had after all just overseen China abandoning the silver standard and reaping the rewards, he was attracted by the stability offered and the promise to prevent another round of currency wars. To this formidable grouping could be added the Foreign Office who could still be relied upon to look favourably on almost any international agreement, particularly if it involved the prospect of improved relationships with France; one consequence of Eden selecting a passive Foreign Secretary was the lack of effort being applied to remove the lingering Francophilia in the department. In opposition the arguments were mainly revenge based, not just because of France's inaction during the Abyssinian War or it's self serving deal making at the Amsterdam Conference, but something older and more relevant. In early 1931 the UK had been struggling with a currency crisis that eventually ended in devaluation and French support had been minimal and grudging, worse that little help had been more than offset by the Bank of France systematically dumping it's own sterling reserves and hurriedly purchasing gold, a very clear sign to all involved that Paris had zero faith in sterling and a move which rapidly became a self fulfilling prophecy. In fairness while those opposed may have been in part motivated by thoughts of retribution there were other more cool headed reasons to reject the offer. Top of the list was the Gold Bloc itself, should France fail to stabilise the franc then the Bloc could well collapse and there was a strong argument this could be good for the UK. While it was very unlikely France or the US would join the Sterling Area the other Bloc countries may well do so and as we have seen this was of benefit not just to the new members but all the existing ones as well. In particular the prospect of tempting the Netherlands across and into the Sterling Area was seen as having a strategic value in addition to any economic advantages that would accrue. There was also the question of credibility, under the proposal the Bank of England and Treasury would to an extent be standing behind the new devalued level of the franc, so should the Bank of Franc fail to stabilise the franc then in part the Bank of England would also have failed. While the Bank had plenty of reserves in the Exchange Fund, and at the time was mostly fighting to restrain the pound from rising too far, the French experience was proof that if the people lost confidence in a currency then all the reserves did was delay the inevitable.

431A8OC.jpg

The imposing Palazzo Mezzanotte, home of the Borsa Italiana (Italian Exchange) in Milan. While Rome remained the administrative and political capital, Milan was the financial hub of Italy and so her exchange was the most prestigious and her traders the best connected, thus when rumours of the devaluation spread it was attentive ears in Milan and not Rome that heard them first. The resulting stock and currency crash was stopped before it became a widespread panic as the government agents shut the exchange, but the end result would be the same; Mussolini had lost 'The Battle of the Lira' and Italy would devalue mere hours after the official Gold Bloc announcement. Il Duce and his propagandists blamed the French and US decisions for forcing his hand, which was in part true, but there were plenty of Italian economists relieved that a long overdue devaluation of the lira was finally happening, whatever the cause.

In the end the cabinet came to a mature and considered compromise, mostly by convincing the more retribution minded members not to cut off their nose to spite their face. That said the final deal was not the 'deep co-operation' that Paris had originally proposed, in the grandest French tradition the first draft had a system whereby the Bank of France decided what interventions should be carried out to support the franc and the Bank of England would then unquestioningly implement their part. The cabinet also demurred at the proposed 'currency swaps', exactly as suggested this would involve an exchange of currencies between the two central banks, a boon to the Bank of France which would have a large amount of Sterling to spend on interventions but just a liability for the Bank of England which would receive a matching pile of francs that it didn't want and couldn't do anything with. Instead the existing unofficial co-operation between the central banks was put on a firmer footing and the three main players agreed what currency rates would be defended by the various exchange intervention and stabilisation funds. In addition the Bank of England agreed to have the necessary chats with the main British commercial banks to ensure the large sterling loan being floated in London by the Bank of France would be strongly supported and get away at an 'appropriate rate' for a government security. Said chats mostly consisted of reassurance that while the Bank of France was technically a private company, the British government considered that the French state was backing it and so would treat a failure to repay in full as a major diplomatic incident with all that entailed. To provide cover for these moves there was also a very grand sounding announcement of an international currency control agreement between London, Washington and Paris to maintain the post-devaluation currency levels and to forswear any competitive depreciations or devaluations. Grand sounding because the actual text of the agreement mostly consisted of loopholes and exceptions, nobody involved wanting to actually commit to anything beyond the very short term measures previously discussed. That said with the support of London secured Paris and Washington could finally explain the plan to the rest of the Gold Bloc and then make the announcement and devalue at the end of September. The market turmoil extended on well into October, though at a markedly lower level and well within the capacity of the intervention funds to control, making the transition a success for a suitably relaxed and expansive value of success.

The Treasury and Bank of England kept a careful eye on things and checked for domestic or Imperial consequences, but these mostly failed to emerge. There were a number of excitable stories about firms or individuals who had made fortunes by speculating on the crisis or lost them by believing French government statements, but nothing significant or out of the ordinary. The rest of the government were relieved to consider the matter closed and moved onto the other challenges facing the country. Indeed the Foreign Office and those of a Francophile disposition were optimistic that Anglo-French relations had finally hit rock bottom and this economic co-operation would lead to a warming of relations as Paris became more appreciative of the value of strong links with London. As their more realistic colleagues tried to warn them such a rose tinted view would only lead to disappointment, as it duly did later in the autumn during the Straits Crisis. There are however a number of other events that occurred that autumn that we need to consider first.

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Notes:
Look, plot! That's a good thing I'm told.

This is the much delayed US and France falling off gold update, which has been causing them a degree of problems. But it is important not to over-state that, France also had a number of domestic... challenges shall we say while the US problem was more the collapse in global trade and their idiosyncratic approach to trying to re-start it and that hasn't changed. If anything the US has been chucked a bone here and there is no gold confiscation, an OTL FDR measure which yielded very little actual bullion but did a great deal to undermine confidence and the economy (after the silver confiscation and the gold confiscation it was not unreasonable to ask what would be seized next). France has avoided the disasters of the Popular Front, but not addressed the problems the Popular Front were trying to solve so things remain troubled, but that is for later.

The Aga Khan is an interesting figure who we may yet see again in a future sub-continent related update, certainly he was a unique figure who was indeed president of the League General Assembly at this point. And in his religious leader role did indeed get gifted his weight in precious materials at the relevant jubilee, alas the available photos are not the highest quality or I would have gone with the one of him being weighed against gold. While he did love horse racing, Rolls Royces and the finer things in life all the money from the jubilee was apparently spent on various charitable endeavours to benefit the community and outside of that he was a renowned philanthropist.

Gold output did jump massively and by the mid-1930s most of it ended up in London or New York, the exact flows depending on how badly the US economy was doing vs how likely war in Europe looked at that moment. In Butterfly that means its all flowing to London to the extent the Bank of England is starting to get concerned about the stability of the wider global financial system and so are keen to get things stabilised, unlike Paris they are aware that after a certain point vast gold reserves become a problem and not a sign of strength. I think the rest is fairly self explanatory, a factor no doubt of it's length, so I will curtail the excessive notes. I feel confident if I am not correct on that then someone will soon say, hopefully sparking some lively debate.
 
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The St Leger's Day Massacre

Presumably not a zombie apocalypse breaking out in the City...?

In the first week of September the Bank of France was spending £3 million in gold a day on defending the franc, in other terms this meant just over 13 tons of bullion leaving the vaults every day, most of which was making it's way to the London gold market.

This obsession with gold...when will it be enough, Pip? When?

Sir Sultan Mahomed Shah, Aga Khan III

Ah...him.

One obvious question is why Paris was so keen on remaining in the Gold Bloc and there were a range of reasons, none of which actually involved gold.

Blasphemy!

The solution was typically French, use regulation and heavy taxes to encourage all gold holders to sell their gold to the Bank and then require all transaction in gold to be approved by the Bank of France. Paris could therefore state that the franc was still theoretically convertible with gold and thus conformed to the letter of the gold standard, if the Bank never actually gave permission for any gold transactions that was a mere irrelevant detail.

A proper L'or l'or episode plot!

, it also prompted another exodus of traders and business to New York, Amsterdam and above all London. As with the failure of Paris' previous attempts to be a financial centre the French were unwilling, or perhaps psychologically unable, to pay the price required to be a serious financial centre.

Not all its cracked up to be, but presumably something that will benefit England in the short and long term...and may also be an increasingly heavy albatross round its neck.

not mean they had lost all their diplomatic skills or their ability to spot a hustle.

I should hope they'd learnt their lesson by now, having been hustled by the british in Central amercia. And by the britsh in South amercia. And by the british in the Pacific. And by the british in New York. And by the british in the middle easy. And by the british in Asia. And by the british, no doubt, in suez at some point...

Devaluations must be relative to something and though both Paris and Washington were loath to admit it the reference currency of the time was, as it is today, sterling.

Ooooooo...foreshadowing!!!

In absolute terms the US Federal Reserve held far more gold bullion than the Bank of France

When did that happen (otl and ttl)? Too early for Fort Knox just yet, I think?

instead the Bloc should say they were revaluing gold.

Cunning weasels. Unfortunately, a lot of gold is owned, stored and produced...er...in the British Empire and Soviet Union.

I'm sure they'll play ball though.

In particular the prospect of tempting the Netherlands across and into the Sterling Area was seen as having a strategic value in addition to any economic advantages that would accrue.

True. Esepcially in Indonesia. Lots of infrastructure investment going on there atm.

mostly consisted of reassurance that while the Bank of France was technically a private company, the British government considered that the French state was backing it and so would treat a failure to repay in full as a major diplomatic incident with all that entailed.

Naughty but nice.

as it duly did later in the autumn during the Straits Crisis.

Foreshadowing! Dardanelles, Gibraltar, suez or baltic? Presumably Gibraltar but who knows?

Look, plot!

I know! Amazing isn't it?

That's a good thing I'm told.

It's more of a bonus for this AAR.

Gold output did jump massively and by the mid-1930s most of it ended up in London or New York, the exact flows depending on how badly the US economy was doing vs how likely war in Europe looked at that moment. In Butterfly that means its all flowing to London to the extent the Bank of England is starting to get concerned about the stability of the wider global financial system and so are keen to get things stabilised, unlike Paris they are aware that after a certain point vast gold reserves become a problem and not a sign of strength. I

Hmm...London needs to buy another aircraft carrier or...idk...Greenland or something.
 
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Presumably not a zombie apocalypse breaking out in the City...?
That would probably be one of the few stories one could tell about the City that DB might approve of, but it is sadly not this story.
This obsession with gold...when will it be enough, Pip? When?
It is an incredibly resilient obsession, almost as untarnishable as the metal itself.
Ah...him.
Indeed.
A proper L'or l'or episode plot!
There is so much potential in that AAR concept. Yet so little available time
Not all its cracked up to be, but presumably something that will benefit England in the short and long term...and may also be an increasingly heavy albatross round its neck.
It absolutely is a choice that comes with pros and cons, but then no-one has ever claimed being a hegemon (even a financial one) was an easy endeavour or one that came without cost.
I should hope they'd learnt their lesson by now, having been hustled by the british in Central amercia. And by the britsh in South amercia. And by the british in the Pacific. And by the british in New York. And by the british in the middle easy. And by the british in Asia. And by the british, no doubt, in suez at some point...
I'm sure the US has had many successes, they just happen off-screen in a different US AAR.
Ooooooo...foreshadowing!!!
That and plot, all in the same update. I'm surprised the readership survived, though maybe many didn't. It would explain why only commented.
When did that happen (otl and ttl)? Too early for Fort Knox just yet, I think?
OTL surprisingly early, by 1890 the US had the biggest gold reserves of anyone. But in a bit of a parallel proceeds to lose 3/4s of them in the Panic of 1893. But post-WW1 the US benefited from all the gold sales and transfers and took the lead again. The Bank of England was never really fussed by the entire concept, sure you needed some reserves but they were never interested in piling up gold.

The bulllion dump at Fort Knox was built 1936/37 and has not happened in Butterfly, there has been no massive inflow of gold into the country to justify it. If anything the gold has been flowing the other way.
Cunning weasels. Unfortunately, a lot of gold is owned, stored and produced...er...in the British Empire and Soviet Union.

I'm sure they'll play ball though.
Everyone, even the Soviets, were trading on the London Gold Fix price anyway, so to a certain extent the Gold Bloc can declare what they want as it won't change the 'real' price of gold.
True. Esepcially in Indonesia. Lots of infrastructure investment going on there atm.
One of the big draws on the Sterling Area proper was free capital movement, so absolutely this.
Foreshadowing! Dardanelles, Gibraltar, suez or baltic? Presumably Gibraltar but who knows?
Me, I know. But beyond that, I hope no-one.
It's more of a bonus for this AAR.
"Do not, my friends, become addicted to plot. It will take hold of you, and you will resent its absence!"
Hmm...London needs to buy another aircraft carrier or...idk...Greenland or something.
Buying Greenland probably works quite well, it removes the excess funds from the economy and doesn't add anything productive so it won't make the inflation problem worse. However I think making a purchase explicitly because it is economically useless is perhaps a step too far for the government of the time.
 
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That would probably be one of the few stories one could tell about the City that DB might approve of, but it is sadly not this story.

Unlikely. The high octane ending of Imperial Cheese actually involves COMMUNIST zombies invading the City and eating much of the secret world order types, and DB still hasn't bleeding commented!

It is an incredibly resilient obsession, almost as untarnishable as the metal itself.

How many nations have sold their entire gold reserves to London now? I think its at least two, which is a lot. Three, now, I guess?

There is so much potential in that AAR concept. Yet so little available time

The episode summaries exist and are good. I just never got round to coming up with any characters aside from Majorie. And it would need a pretty solid cast to make it all work.

I'm sure the US has had many successes, they just happen off-screen in a different US AAR.

Actually, my AARs aren't much better. They either involve the Irish taking over everything and thus the US doesn't exist, or the US existing but being crushed by the British at every term...

Eh. Maybe the germans will save them?

OTL surprisingly early, by 1890 the US had the biggest gold reserves of anyone.

An actual gilded age, then?

But in a bit of a parallel proceeds to lose 3/4s of them in the Panic of 1893.

And ended at about the same time too! Wonderful.

The Bank of England was never really fussed by the entire concept, sure you needed some reserves but they were never interested in piling up gold.

It might have developed an unsuspecting addiction given that it keeps acquiring tons and tons of gold. It's why the government needs to get rid of it as soon as they get it.

One of the big draws on the Sterling Area proper was free capital movement, so absolutely this.

Mind you that does mean the british have something to lose when the Japanese inevitably steamroller the Dutch and therefore have to try and defend not just the Pacific ocean and some strategic ports they own, but also an entire continent sized series of islands too.

Buying Greenland probably works quite well, it removes the excess funds from the economy and doesn't add anything productive so it won't make the inflation problem worse. However I think making a purchase explicitly because it is economically useless is perhaps a step too far for the government of the time.

Makes the empire bigger, helps Canada (somehow), a friend for Newfoundland, fishing and shipping ports...that's pretty much it. But maybe there's some far seeing aviation or climate expert sending furious memos saying this will all pay off in two centuries!

Or they could spend the money on some more things the british government could have invested in inventing/got into on the ground level but didn't. Maddening how many of those examples around. Even moreso the times when they got very close to doing or, or actually did try to support something, and then something else buggered it up. And for some reason, it's always computer related...
 
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Unlikely. The high octane ending of Imperial Cheese actually involves COMMUNIST zombies invading the City and eating much of the secret world order types, and DB still hasn't bleeding commented!
That is quite ungrateful given the circumstances.
How many nations have sold their entire gold reserves to London now? I think its at least two, which is a lot. Three, now, I guess?
I count one (Spain). France has lost a lot of gold it is true, but they had a truly massive amount to begin with.
Actually, my AARs aren't much better. They either involve the Irish taking over everything and thus the US doesn't exist, or the US existing but being crushed by the British at every term...

Eh. Maybe the germans will save them?
That's not a plan that has much historical backing for it, but would probably work out well in most versions of HOI.
An actual gilded age, then?

And ended at about the same time too! Wonderful.
The 1890s in the US appear to be a wonderful example of why the gold standard is a terrible idea.
It might have developed an unsuspecting addiction given that it keeps acquiring tons and tons of gold. It's why the government needs to get rid of it as soon as they get it.
As long as it's just a side effect and not the main object of the exercise then it is fine, they can keep saying they aren't actually addicted.
Mind you that does mean the british have something to lose when the Japanese inevitably steamroller the Dutch and therefore have to try and defend not just the Pacific ocean and some strategic ports they own, but also an entire continent sized series of islands too.
Hence the reason the Dutch are engaging with the conversation, their entire war plan in the Far East already relies on at least the UK and ideally the US being involved as well. Anything to snare the UK in, without increasing the risk of the Dutch being dragged into any European conflict, seems a good idea.
a friend for Newfoundland,
Newfoundland could do with a friend, particularly if it wants anything other than just being absorbed by Canada.
Or they could spend the money on some more things the british government could have invested in inventing/got into on the ground level but didn't. Maddening how many of those examples around. Even moreso the times when they got very close to doing or, or actually did try to support something, and then something else buggered it up. And for some reason, it's always computer related...
This is indeed deeply frustrating.



It does appear though that actual plot has not proven popular with the commentariat. I did fear this would be the case, it seemed unlikely that readers who actually liked plot would have persisted this long with this work. Lessons have been learnt.
 
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That is quite ungrateful given the circumstances.

I just hope they're alright. We've had 3 Prime Ministers since the last Echoes update.

I count one (Spain). France has lost a lot of gold it is true, but they had a truly massive amount to begin with.

Ah, that's right. Italy didn't pay their war reps in gold, but in their remaining capital ships.

That's not a plan that has much historical backing for it, but would probably work out well in most versions of HOI.

I think we've learnt over the years that if you aren't England or Germany, you have to pray Paradox added a meme option for your country. Otherwise, you're going nowhere or at best just staying where you are.

Hence the reason the Dutch are engaging with the conversation, their entire war plan in the Far East already relies on at least the UK and ideally the US being involved as well. Anything to snare the UK in, without increasing the risk of the Dutch being dragged into any European conflict, seems a good idea.

Seems like a win win for the Dutch and British there then.

Newfoundland could do with a friend, particularly if it wants anything other than just being absorbed by Canada.

My thinking exactly. And maybe a trifecta of semi autonomous nations when Iceland goes independant?

This is indeed deeply frustrating.

Something I didn't realise was that Babbage actually GOT the governments money, and then passed off the man who made his engine and scrapped the plans anyway to make a new one.

17 thousand pounds and such promise wasted.

And the less said about Tommy flowers and his fellow computer engineers the better...poor sods.

It does appear though that actual plot has not proven popular with the commentariat. I did fear this would be the case, it seemed unlikely that readers who actually liked plot would have persisted this long with this work. Lessons have been learnt.

Oh no...
 
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I would love to comment properly but I've not been around my desktop to have a proper go at it. Be assured that the fact that plot has occurred has not gone unremarked.
 
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I only just got to reading it, I prefer reading it in one go at weekend rather than in small chunks during week.

Other than that, I can say I enjoyed it and I think I understood it, but I can't say that my knowledge is sufficient to probe the matter with good questions.

Who are other members of Gold Bloc, any major ones besides French, US and Dutch? I think Swiss?

Straits crisis in autumn seems very interesting, but I fear my yet unconceived child will be preparing for school when we get to read about it :p On the other hand, updates lately do seem to come quite often.
 
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Who are other members of Gold Bloc, any major ones besides French, US and Dutch? I think Swiss?

Italy. Less major than they were but still a sizeable economy. Germany isn't on the gold standard but nazis do be loving their gold so I'm sure they're paying attention.

Can't remember whether Luxembourg and Belgium are still on. Think Belgium at least is about to be dragged into the sterling area if Netherlands go too.
 
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Hmmmm . . . interesting. The US and the French cosying up, thats never a good thing.

You know, when i was reading this an insane thought popped in my head about where this AAR is actually going. France is getting more and more desperate, Germany are looking weaker and weaker . . .

Pip, you're not actually going to have France declare war and invade Germany are you??

No, no. the extra shot of Glenfiddich was not a good idea.

Well, it was, but not for critical thinking.


TheButterflyComposer said:
Foreshadowing! Dardanelles, Gibraltar, suez or baltic? Presumably Gibraltar but who knows?

Me, I know. But beyond that, I hope no-one.


My Money is on the Malacca Strait. Japan have been awfully quiet of late. Methinks a little foray around Singapore into the Indian ocean is on the cards. just to get a good look at all the new toys Britain has stationed there and judge their reaction.

Good stiff as usual pippy. The last three updates have been great, just haven't had the time to be able to comment. Looking forward to the next one, a present for the holidays perhaps?
 
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Ah, that's right. Italy didn't pay their war reps in gold, but in their remaining capital ships.
Indeed. One of the lesser lessons of Versailles was that a long dragged out treaty requires a long dragged out commitment to enforcing it. As Britain didn't need the money (the war wasn't that expensive in the scheme of things) and wasn't actually in a position to dictate any terms they wanted (Italy proper was never really touched) they skipped that part.
I think we've learnt over the years that if you aren't England or Germany, you have to pray Paradox added a meme option for your country. Otherwise, you're going nowhere or at best just staying where you are.
I think they represent the two extremes in HOI. They obviously have to get Germany right as that's a huge chunk of the player base and it dominates the land side of things, while the UK is the inconvenient "Has a navy" and "Involves the sea" nation so has to be looked about because of those bits.
Seems like a win win for the Dutch and British there then.
Potentially, though of course Dutch neutrality worked out fairly well in WW1 so there are arguments that why change a successful plan? Without hindsight it's not an unreasonable argument and indeed the "the Japanese will have to go to war with the UK and UK anyway, so we don't need a defensive alliance" thinking was correct. It just didn't work out as the Dutch had hoped.
My thinking exactly. And maybe a trifecta of semi autonomous nations when Iceland goes independant?
Iceland was apparently fully sovereign in 1918, just in a personal union with Denmark under the King, something which really seems like it belongs in an EU IV game.

Given Paradox can't even begin to get the British Empire and Dominions right it's not surprising they skimmed over that detail. Though given they included Iceland as a releasable nation they had done most of the work required.
And the less said about Tommy flowers and his fellow computer engineers the better...poor sods.
It is some tragic short term thinking. Keeping it a secret did mean all the people who were using the Enigma machines post-war could be easily hacked, and that was a surprisingly large number of people including everyone from East Germany to Israel. But it was taken to an unnecessary extreme, the work could have carried on and been shared in a non-code breaking context.
I'm afraid the readership have spoken. Well failed to speak, but the message is clear regardless.
I would love to comment properly but I've not been around my desktop to have a proper go at it. Be assured that the fact that plot has occurred has not gone unremarked.
But in a positive or negative way?
I only just got to reading it, I prefer reading it in one go at weekend rather than in small chunks during week.
This is the way.
Other than that, I can say I enjoyed it and I think I understood it, but I can't say that my knowledge is sufficient to probe the matter with good questions.
All questions are always welcome. Not literally all, for instance questions about the correct Latin translation of My Little Pony are best addressed elsewhere or perhaps not asked at all, but all questions on relevant and even tangentially related topics should be raised at your earliest convenience.
Who are other members of Gold Bloc, any major ones besides French, US and Dutch? I think Swiss?
Italy. Less major than they were but still a sizeable economy. Germany isn't on the gold standard but nazis do be loving their gold so I'm sure they're paying attention.
The relationships between these two and gold will be featuring in a future update. Though I note that Germany was and is technically on the gold standard and officially never devalued, the reality of course being very different.
Can't remember whether Luxembourg and Belgium are still on. Think Belgium at least is about to be dragged into the sterling area if Netherlands go too.
All three still in the Gold Bloc for now, will probably drift along as moving is a big foreign policy decision as well as an economic one.

Straits crisis in autumn seems very interesting, but I fear my yet unconceived child will be preparing for school when we get to read about it :p On the other hand, updates lately do seem to come quite often.
The current estimate is August 2024 (+/- quite a lot), so unless your child starts school spectacularly early I hope to beat that milestone. ;)


Hmmmm . . . interesting. The US and the French cosying up, thats never a good thing.
Indeed, always a troubling sign.
DYAEiOu.gif

You know, when i was reading this an insane thought popped in my head about where this AAR is actually going. France is getting more and more desperate, Germany are looking weaker and weaker . . .

Pip, you're not actually going to have France declare war and invade Germany are you??
A war will definitely happen. Beyond that I refuse to be drawn, but this sort of speculation is always welcome.
No, no. the extra shot of Glenfiddich was not a good idea.

Well, it was, but not for critical thinking.
I think it was an excellent idea all round. :D
My Money is on the Malacca Strait. Japan have been awfully quiet of late. Methinks a little foray around Singapore into the Indian ocean is on the cards. just to get a good look at all the new toys Britain has stationed there and judge their reaction.
An excellent guess. Obviously I will not be confirming or denying but that is definitely a possibility for the reasons you say.
Good stiff as usual pippy. The last three updates have been great, just haven't had the time to be able to comment. Looking forward to the next one, a present for the holidays perhaps?
That is insanely ambitious, though if you stretch 'holidays' to include up to New Years Eve then... maybe?

...OK, so maybe he doesn't know?
Guaranteed.
That is quite harsh, there absolutely is a plan. There was a period about a decade ago when things were a lot more fluid, but there's a skeleton outline of future updates and everything now.
 
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Potentially, though of course Dutch neutrality worked out fairly well in WW1 so there are arguments that why change a successful plan? Without hindsight it's not an unreasonable argument and indeed the "the Japanese will have to go to war with the UK and UK anyway, so we don't need a defensive alliance" thinking was correct. It just didn't work out as the Dutch had hoped.

The UK always gets counted twice in Pip AARs.

Could always make it super specific about it being about Japan, not Germany. Though that might insult both axis nations. And the nazis also 'learnt lessons' about the mistake of keeping a 'neutral' western European nation on its doorstep. Especially one that couldn't really defend itself.

Iceland was apparently fully sovereign in 1918, just in a personal union with Denmark under the King, something which really seems like it belongs in an EU IV game.

Given Paradox can't even begin to get the British Empire and Dominions right it's not surprising they skimmed over that detail. Though given they included Iceland as a releasable nation they had done most of the work required.

Hmm. Did not know that. Will change the Tomorrow map accordingly. Although Denmark is quite a bit stronger there, so maybe they still dominate the island? Hmm...

Though I note that Germany was and is technically on the gold standard and officially never devalued, the reality of course being very different.
All three still in the Gold Bloc for now, will probably drift along as moving is a big foreign policy decision as well as an economic one.

A full list might be helpful, of those officially on the bloc, those on the gold standard, those officially on the gold standard but not really, and those officially not on the gold standard but still bascially are.
 
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The UK always gets counted twice in Pip AARs.
As is right and proper.
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Could always make it super specific about it being about Japan, not Germany. Though that might insult both axis nations.
That is a concern, as is the self fulfilling prophecy possibility. If you make Japan feel surrounded and you might provoke the kind of attack you are trying to deter. I'm not sure I really believe that, but without hindsight it's something people could be concerned about.
And the nazis also 'learnt lessons' about the mistake of keeping a 'neutral' western European nation on its doorstep. Especially one that couldn't really defend itself.
I had seen it more that the invasion of the Netherlands was a consequence of planning decisions elsewhere and indeed the Maginot Line. The German Army thought they needed a wider front than the WW1 Schlieffen Plan, not least because the 'distraction' invasion into north Belgium had to be a decent distance from the drive into the Ardennes or it wouldn't be a useful diversion. But because Holland extends all the way down to Maastricht they had to violate Dutch territory to get into North Belgium in a reasonable timeframe. And then once they had done that they kind of rolled into taking the whole country as Goering wanted it for air bases and also to deny the British said bases.

Hmm. Did not know that. Will change the Tomorrow map accordingly. Although Denmark is quite a bit stronger there, so maybe they still dominate the island? Hmm...
They absolutely could have if they had been bothered. However Denmark mostly rolled over to every Icelandic request as they just didn't care, there were no resources and Denmark lacked the strength or inclination to take advantage of it's strategic location.

A Denmark with dreams of controlling the North Sea and the route to the Atlantic would be a sight to behold, though I fear they would once again end up being Copenhagened by the Royal Navy who are unlikely to tolerate such schemes.
A full list might be helpful, of those officially on the bloc, those on the gold standard, those officially on the gold standard but not really, and those officially not on the gold standard but still bascially are.
To start with the easy one, nobody is on the 'proper' gold standard. The proper standard being that is at least 40% of your currency is backed by physical gold (i.e. if you have £10 billion in currency circulating you have at least £4 billion in bullion. The gold valued at whatever you say the official price of gold is) and your central bank will buy/sell unlimited amounts of gold at that price.

The Gold Bloc
Who have enough reserves but put limits on the exchange of gold. Like to pretend they are on the Gold Standard.
France, the US, Swiss, Netherlands, Belgium, Switzerland

Lurking around the Bloc
Former members or never-members that would like to be in the Bloc but don't allow exchange
Poland (dropped out in '33), Italy (probably meets the new Gold Bloc standards, but politics),

Sterling Area
Generally have plenty of gold reserves but are pegged to sterling not a price of gold. The UK/Bank of England has an official gold price, but it's way lower than market rates and there is no convertibility. All readily admit that they are not on Gold Standard.
UK, Dominions, Empire (India, Hong Kong, Malaya, Africa, etc), Informal Empire (Libya, Abyssinia, Iraq, Egypt, etc), all four Scandies, all the Baltics, Portugal, Siam, Iran, China,

Sterling Area Lurkers
Still pegged to Sterling, but had exchange controls and generally (but not always) worse deals on Empire Free Trade and investment than core, but still better than rest of the world. Also admit not on Gold.
Argentina, Brazil, Bolivia, Greece, Yugoslavia.
Japan and the Yen Bloc (which was their puppet states basically) also pegged to Sterling but got no trade or investment benefits.

Exchange Rate Control Bloc
Germany would dearly love this to be the Mark Bloc. But it really isn't. It is instead the countries that have heavy exchange controls and do lots of barter/govt to govt deals as no-one wants/trusts their currency or their official exchange rates. None are on the gold standard though all like to pretend they haven't devalued, hence the exchange controls as the 'official' currency rates are utter fiction.
Germany, Austria, Bulgaria, Czechoslovakia,Greece, Hungary, Romania, Turkey, and Yugoslavia - There's a bit of overlap with the Sterling lurkers as the two were not completely exclusive. You could officially peg your currency to Sterling and then have exchange controls to defend that official price, while doing barter deals with Germany or whoever.

Dollar Bloc
Technically sort of near the gold bloc. After all if you are pegged to the dollar then indirectly you are pegged to the rest of the Gold Bloc. But it's so small a group no-one cares.
The US, Philippines, tiny Central American and Caribbean states. Liberia (possibly, I'll admit I've not put any thought into it)

Mexico and the South American minors flit around between Exchange Control and the Sterling Area. Many would have liked to have still been in the Silver Bloc, but that got destroyed by the US Silver Purchase Act.

Spain was not on Gold inter-war but was trying to get there, however they never quite managed it for a range of complex reasons. Right now it's all barter and promises as all the hard currency and gold is long gone and committed to arms purchases.

I think that's everyone, though I'm sure to have missed someone out.
 
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But because Holland extends all the way down to Maastricht they had to violate Dutch territory to get into North Belgium in a reasonable timeframe. And then once they had done that they kind of rolled into taking the whole country as Goering wanted it for air bases and also to deny the British said bases.

WW1:

Germany main aim is to take down Russia hard, which requires a limited war with France because they will open a second front otherwise. Makes sense therefore to try and keep the western European front as limited as possible. So yes, surprise attack through Belgium and hope they beat France before the british show up (it sort of nearly worked for the first few weeks) but avoid declaring on Netherlands etc.

WW2:

The main enemies are the UK and France from the off. Therefore, Makes perfect sense to crush France ASAP through all means necessary in preparation for making British landings impossible and grabbing as many channel ports and airbase as possible vital. And when it turned out pretty much perfectly, taking out every other possible friendly country to the UK Makes sense too, and all their ports and airstrips.

And in particular to the Netherlands, with Japan as a sort of ally and knowing they are going to attack the Netherlands eventually, a surprise attack to make the Pacific war even easier against britian Makes a lot of sense.

They absolutely could have if they had been bothered. However Denmark mostly rolled over to every Icelandic request as they just didn't care, there were no resources and Denmark lacked the strength or inclination to take advantage of it's strategic location.

A Denmark with dreams of controlling the North Sea and the route to the Atlantic would be a sight to behold, though I fear they would once again end up being Copenhagened by the Royal Navy who are unlikely to tolerate such schemes.

Well, it's not quite come up yet except for a mild allusion with Russia being stymied in Scandinavia, but the peninsula is a bigger deal than OTL. Denmark therefore ended up ironically being the balance that prevents someone far worse controlling the baltic straits and half the north sea...

France, the US, Swiss, Netherlands, Belgium, Switzerland

The Swiss count twice for tax reasons.

Poland (dropped out in '33), Italy (probably meets the new Gold Bloc standards, but politics),

Poland has bigger problems but Italy is presumably going to get back in if only because the other countries need their support.

Informal Empire (Libya, Abyssinia, Iraq, Egypt, etc),

Including all of South amercia?

all four Scandies, all the Baltics, Portugal, Siam, Iran, China,

A huge area then.

Argentina, Brazil, Bolivia, Greece, Yugoslavia.

Ah, not quite then.

Japan and the Yen Bloc (which was their puppet states basically) also pegged to Sterling but got no trade or investment benefits.

That's quite funny.

Technically sort of near the gold bloc. After all if you are pegged to the dollar then indirectly you are pegged to the rest of the Gold Bloc. But it's so small a group no-one cares.
The US, Philippines, tiny Central American and Caribbean states.

Bet the british are pleased with that...

Spain was not on Gold inter-war but was trying to get there, however they never quite managed it for a range of complex reasons. Right now it's all barter and promises as all the hard currency and gold is long gone and committed to arms purchases.

Probably sterling area when war ends. Unless the communists get in and cancel all debts.

I think that's everyone, though I'm sure to have missed someone out.

The Soviet comintern bloc, although they're probably quite different to everyone else.
 
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Oh golly! Not one but two updates in my time away...

I for one must clearly and unambiguously state that the presence of plot has been noted in the most positive of lights. Of course, the amount of plot that happens should probably continue to be rationed lest we become addicted, or worse, come to actually expect it. Plot being a special event maintains the overall character of the work. Even if that means it will take several generations to complete, if there is even exists such a thing as completion for TBE...

On the past two updates a lot has already been said by others. I found the comparison of Fordism with 'Flow production' quite interesting. In a rapidly evolving landscape it does make more sense to be able to rapidly and relatively cheaply make changes to the product rather than rigidly producing massive quantities of the same thing. It's really the eternal resilience vs. efficiency tension raising it's head again. Peak efficiency and peak resilience rarely go hand in hand, as the massive disruptions to global supply chains during the pandemic have shown.

It's of course funny that despite espousing the Fordist model, the Germans couldn't stop fiddling with their designs before and during ww2, resulting in a system that was, in a way, neither resilient nor efficient. Be it their tanks, aeroplanes, or even submarines, there was a massive amount of different variants, sometimes with single digit production runs before some little thing was modified for the next sub-variant. This is a massive oversimplification, but as I understand it, you had factories gearing up again and again to build hundreds if not thousands of (near-)identical tanks per year, designers constantly pushing out incremental improvements to their designs in their quest to get the perfect panzer, and a nazi leadership that kept insisting the factories build the latest and greatest version of the latest and greatest tanks.

The gold standard is a weird one for me. On the one hand there is something nice in the simplicity of having your money backed by a fixed amount of gold. Of course, when you remember that economies are not simple nor very stable, it is clearly both difficult and often economically counterproductive to maintain such a rigid standard. Then again, when you have a free floating currency it becomes much easier for money printing to get out of hand, be it to dampen government debt, or to 'stimulate' the economy. I, for one find it hard to believe Modern Monetary Theory and it's precept that central banks can just infinitely print money, and governments can infinitely borrow to fund their programmes (even those that are a net drain on the economy), with no serious consequences to the economy at large.
I guess, somewhere in there, there has to be a 'happy middle ground' of keeping the money supply relatively stable and dampening shocks on the exchange markets without committing to the rigidity of the gold standard. What is your position El Pip? Clearly you like a free-floating currency. What are your thoughts on so-called 'Quantitative easing'?

Thanks for the updates, I have to start checking this thread more frequently...
 
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Personally I can't wait for the Chinese warlord state economic update, or one each maybe?
I shall add that to the list of things for El Pip VI to work on in the future Butterfly background apocrypha.
And in particular to the Netherlands, with Japan as a sort of ally and knowing they are going to attack the Netherlands eventually, a surprise attack to make the Pacific war even easier against britian Makes a lot of sense.
While true I think that spectacularly over-estimates how much the Germans cared about Japan. Any help was always entirely accidental or a side effect, even if it was sometimes incredibly helpful; I'm reminded of the claim that the single most effective ship for the Japanese side in WW2 was probably the Tirpitz.
Well, it's not quite come up yet except for a mild allusion with Russia being stymied in Scandinavia, but the peninsula is a bigger deal than OTL. Denmark therefore ended up ironically being the balance that prevents someone far worse controlling the baltic straits and half the north sea...
Lithuania! Such producers of inferior plywood can never be trusted. */spits in King Haakon VII/*.
Poland has bigger problems but Italy is presumably going to get back in if only because the other countries need their support.
An argument that also applies to Poland, France in particular is taking the whole area a bit more seriously now the Entente is dead.
Probably sterling area when war ends. Unless the communists get in and cancel all debts.
All of the factions doubtless want Spain to join their group after the war (France would happily further fudge the rules to sneak Spain into the Gold Bloc). As it happens right now both sides are probably closest to the German Exchange Control Group ideal, it's mostly govt-to-govt deals with as little hard currency involved as possible as neither side has any.
The Soviet comintern bloc, although they're probably quite different to everyone else.
Something like the German system as it happens. There was an official exchange rate but that was mostly fiction. It did occasionally get adjusted so wasn't quite as detached from reality as the Nazi "no devaluations ever" claim but it wasn't accurate. However as the state controlled all trade the actual deals were done at realistic rates in gold, hard currency or barter. As a large gold miner the Soviets did quite a lot of trade in gold, hence their interest in the London Gold Fix as that set the price those trades were done in.

I for one must clearly and unambiguously state that the presence of plot has been noted in the most positive of lights. Of course, the amount of plot that happens should probably continue to be rationed lest we become addicted, or worse, come to actually expect it. Plot being a special event maintains the overall character of the work.
This is entirely the correct attitude and I am pleased that at least part of the readership understands this vital point.
Z3wSg01.gif

Even if that means it will take several generations to complete, if there is even exists such a thing as completion for TBE...
I struggle to imagine such a thing, but as you say it is a challenge for future generations to grapple with.
On the past two updates a lot has already been said by others. I found the comparison of Fordism with 'Flow production' quite interesting. In a rapidly evolving landscape it does make more sense to be able to rapidly and relatively cheaply make changes to the product rather than rigidly producing massive quantities of the same thing. It's really the eternal resilience vs. efficiency tension raising it's head again. Peak efficiency and peak resilience rarely go hand in hand, as the massive disruptions to global supply chains during the pandemic have shown.

It's of course funny that despite espousing the Fordist model, the Germans couldn't stop fiddling with their designs before and during ww2, resulting in a system that was, in a way, neither resilient nor efficient. Be it their tanks, aeroplanes, or even submarines, there was a massive amount of different variants, sometimes with single digit production runs before some little thing was modified for the next sub-variant. This is a massive oversimplification, but as I understand it, you had factories gearing up again and again to build hundreds if not thousands of (near-)identical tanks per year, designers constantly pushing out incremental improvements to their designs in their quest to get the perfect panzer, and a nazi leadership that kept insisting the factories build the latest and greatest version of the latest and greatest tanks.
It was never quite that bad, but certainly there was an attempt to both get the benefits of mass production and keep producing new variants. The Bf-109 is probably the best example, kept in production for far too long it was horribly outclassed by the end and with a bewildering variety of variants and subtly different models. But it was cheap, because the airframe hadn't really changed and the engine was basically the same they had got the benefits of mass production. Finger in the air the hours required to build one dropped from 10,000 odd pre-war to barely 2,000 hours by early 1945.

The Spitfire was in production just as long to similar numbers but never saw such a huge drop because the changes there were far more dramatic. The engine changes were substantial (A Griffon is nothing like a Merlin), the wings changed, new canopy and so on. So an early 1945 Spitfire took far longer to build than a 109, but it was a far better aircraft.

On the tank side you get the split, as you say the prestige tanks were constantly being modified and tweaked and those were rushed to the factory which hurt production, though as the original design had been rushed in the first place those tweaks were despatately needed. Then you have all the things done with the Czech factories, the LT38/Pz38 chassis was kept in production for the whole war , first as as a tank and then as a range of tank destroyers. So they all became very cheap and reliable, but because the gun kept getting larger they remained useful. I have a feeling it was the lack of prestige that allowed this to work, Hitler only cared about the new big things so a less interesting workhorse design could sneak through.
The gold standard is a weird one for me. On the one hand there is something nice in the simplicity of having your money backed by a fixed amount of gold. Of course, when you remember that economies are not simple nor very stable, it is clearly both difficult and often economically counterproductive to maintain such a rigid standard. Then again, when you have a free floating currency it becomes much easier for money printing to get out of hand, be it to dampen government debt, or to 'stimulate' the economy.
To an extent you can argue the Eurozone is just the gold standard without the gold. It's not quite that neat, but from an individual nation perspective you are making the same trade offs in the Trilema (fixed exchange rates, free flow of capital, no/limited control of fiscal policy). Of course in theory the individual nations have a say in ECB policy so they have some say in fiscal policy, though of course that doesn't help much when the needs of various nations are contradictory. As on the gold standard when there is an imbalance it shows up in the capital account (the TARGET2 balances in Eurozone speak) and in lots of unemployment and deficit in the nations that have to adjust and can't let the currency take the strain.

I, for one find it hard to believe Modern Monetary Theory and it's precept that central banks can just infinitely print money, and governments can infinitely borrow to fund their programmes (even those that are a net drain on the economy), with no serious consequences to the economy at large.
Japan has shown you can print titanic amounts of money and still not have a problem with inflation, though admittedly apart from a long of questionably useful infrastructure they have little to show for it and are arguably a special case. The main problem I see with MMT is that it's proponents don't even really believe in it. Right now with high inflation MMT says raise taxes, cut spending and generally pull money from the private sector to reduce demand, because that is their entire thing. As none of the advocates are currently arguing for that policy, not least because it looks horribly counter-productive, they clearly aren't that convinced by it either.

I guess, somewhere in there, there has to be a 'happy middle ground' of keeping the money supply relatively stable and dampening shocks on the exchange markets without committing to the rigidity of the gold standard. What is your position El Pip? Clearly you like a free-floating currency. What are your thoughts on so-called 'Quantitative easing'?
If I knew the answer to that I would be rich beyond my wildest dreams and have the time and money to write Butterfly full time. ;) I start from believing the impossible trilema is true and that having control of fiscal policy is important, it may not always be used wisely but it at least allows the possibility of governments to react to crises and not be trapped in by external rules. Out of the remaining two letting the currency take the strain seems preferable to making sacrifices to maintain an arbitrary fixed rate, economically the costs may be similar but how they are felt is very different - better everyone feels a bit poorer due to a weaker currency than a smaller section of society sees their jobs destroyed to keep things convenient for importers/exporters. With those two chosen I've ruled out the gold standard and I can allow free capital movement, which is good as it plays to the strengths of the City of London. If you have other priorities you may end up with different decisions.

I'm not convinced QE did a great deal of harm, but then neither do I think it helped massively. The evidence shows it kept stock prices high, which was good for anyone with a non-public sector pension but of limited connection to the wider economy, and may have leaked out elsewhere. But certainly in the UK it's hard to tell as the housing market is so utterly ruined due to existing factors so was going to race up anyway (there are many crimes of Atlee's government, but in hindsight the Town & Country Planning Act has to be right up there). Maybe if the QE had been literal helicopter money, direct transfers to bank accounts or whatever, then it would have had more of an impact. But the chosen methods had a very weak transmission mechanism and by the end it was pushing on string, lots of effort for minimal change.

Conversely the EU PEPP programme probably did make a big difference, though whether it was a good idea is a different question. Explicitly throwing money at keeping southern European bond rate low has worked, but it has done nothing to solve the underlying problems. It's probably all the ECB can do, but it doesn't feel sustainable. Though of course if Italy is heading down the Japan route then maybe it is.
Thanks for the updates, I have to start checking this thread more frequently...
This is a wise move. Your erudite and sophisticated commmentary is always welcome.
 
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'm reminded of the claim that the single most effective ship for the Japanese side in WW2 was probably the Tirpitz

I'd say it was probably the most effective ship for the axis overall. An obscene amount of attention, resources and time was spent nobbling the capacity for it to stop, hide, rest, repair etx, let alone sinking it. Impressive feats, of course, but for one ship, I don't think it can be matched. Not even Bismark.

Lithuania! Such producers of inferior plywood can never be trusted. */spits in King Haakon VII/*.

A much, much bigger threat than them.

Lithuania is safely contained by being eyed greedily by both Poland and Germany. It will almost certainly get eaten piece by piece by someone. Esepcially with how HOI4 loves...Well...relaunching revanched monarchies.

Depending on how Ouster (and his masters) leave things in Free Poland, relations between the two are going to be...alright compared to OTL, or even slightly worse.

All of the factions doubtless want Spain to join their group after the war (France would happily further fudge the rules to sneak Spain into the Gold Bloc).

Allow a member with no gold into the gold bloc? Well...you never know. It might work.
 
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