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Published online by Cambridge University Press: 07 November 2014
The term “sterling area”, which came into existence immediately after Great Britain's departure from gold on September 21, 1931, has become increasingly current, so that at the present time it is generally accepted in the terminology of international economics. The term sterling area, or sterling bloc, is necessarily extremely loose. In no sense are the countries contained in this group bound together in a formal monetary union. Nor can the boundaries of the area be defined precisely. As generally understood, however, the sterling area includes those countries both within and outside the British Empire whose currencies are closely linked to the British pound and whose monetary policies are governed more or less directly by those which may be followed from time to time by the British Exchequer and the Bank of England. It includes, in addition to the Dominions and colonies, Argentina, the Scandinavian countries (whose currencies were more promptly and more closely linked to sterling in the 1931 crisis than even those of the Dominions), Finland, Portugal, Egypt, Palestine, and some smaller countries.
In contrast to the gold bloc, whose scope is limited strictly to currency problems, the sterling bloc is also to a certain degree an economic bloc. That is, trade within the sterling area represents a fairly large proportion of the total foreign trade of the countries included in that group. The attempt to forge closer links of currency and trade with the countries of this group has now become a well recognized principle of British foreign policy. The instruments which Great Britain has used in forging these closer links are represented by the Ottawa Agreements of 1932, by the reciprocal trade pacts with non-Empire countries, by the maintenance of stable exchange rates with these countries, by securing favourable treatment in exchange allotment, by the development of central banks in the Dominions, and by giving preferential treatment in the matter of international loans, which are, or at least may be, of vital importance in maintaining stability of exchanges in relation to sterling.
1 Economist, 11 24, 1934, p. 985.Google Scholar Some writers consider only the Scandinavian countries as making up the sterling area.
2 New York Times, Oct. 7, 1934.
3 League of Nations, Monthly Bulletin of Statistics, no. 4, 1935, p. 174.Google Scholar Ex-President Hoover has recently called the United States the “thirty-first member of the Sterling bloc … one of the thirty-one planets which revolve around the British sun” (New York Times, Nov. 16, 1935).
4 For the full text of these agreements see The Imperial Economic Conference, Ottawa, 1932, Report, Supplementary volume (Ottawa, 1933), annex V.Google Scholar
5 See New York Times, 04 13, 1933 Google Scholar; Feb. 5, 1933.
6 Ibid., May 3, 1933. The “Convention between the Government of the United Kingdom and the Government of the Argentine Republic” was signed on May 1, 1933 ( Great Britain, Treaty Series, no. 2 (1934), Cmd. 4492Google Scholar). A “Supplementary Agreement” and protocol were signed on September 26, and ratifications were exchanged for both agreements on November 7, 1933 ( Great Britain, Treaty Series, no. 3 (1934), Cmd. 4494Google Scholar). These agreements came into force on the date of exchange of ratifications. They are to remain in force three years from date of entry into force and are thereafter subject to termination by six months' notice of either party.
7 Par. 8 of the protocol to the convention.
8 Art. I of the convention.
9 Art. II of the convention.
10 See art. I, par. 4 for the basis of this arrangement; also, League of Nations, World Economic Survey, 1933–1934, pp. 204–5.Google Scholar
11 From 1899 to 1929 the Argentine peso was stabilized by operations of a “Conversion Office”, which, in effect, administered a gold exchange standard system on London. The exchange of gold for notes and the export of gold which were prohibited in 1914 were not resumed until August 27, 1927. See U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce, Handbook of Foreign Currency and Exchange (Washington, 1930), pp. 3–5.Google Scholar
12 Leguizamon, G. E., “An Argentine View of the Problem of Exchange Restriction” (International Affairs, 07, 1933, pp. 504–6).Google Scholar
13 The reasons which the provisional government gave as necessitating the system of exchange control were that: (1) England's abandonment of the gold standard had caused great uneasiness in the markets of the world; (2) Argentine sales, especially of cereal produce, had been paralysed, thereby bringing an unusual scarcity of drafts upon foreign countries; (3) the manoeuvres of speculators who had taken advantage of this temporary circumstance had to be suppressed; (4) it was, therefore, imperative to replace “the present state of ruinous anarchy” prevailing in the market by a centralized system of control. A further excuse was offered in the fact that many countries had in similar circumstances had recourse to measures controlling exchange (see ibid., p. 508).
14 Exporters were, of course, permitted to sell their produce freely but were required to hand over the resulting devisen to the government at the fixed rate (see Economist, 04 28, 1934, p. 933).Google Scholar
15 League of Nations, World Economic Survey, 1932–1933, p. 223 n.Google Scholar
16 Leguizamon, , “An Argentine View of the Problem of Exchange Restriction”, p. 511.Google Scholar
17 See art. II, par. 1 of the agreement.
18 Economist, 06 23, 1934, p. 1376.Google Scholar
19 Ibid., May 12, 1934, p. 1027; Oct. 20, 1934, p. 730.
20 Ibid., Dec. 9, 1933, p. 1120.
21 Ibid.
22 Ibid., Feb. 3, 1934, p. 242.
23 Ibid., Feb. 16, 1935, p. 367; Board of Trade Journal, 04 4, 1935, p. 570 Google Scholar; Oct. 3, 1935, p. 455.
24 Economist, 04 27, 1935, pp. 960, 961.Google Scholar
25 The tender rate has remained at 17.03 while the free rate appreciated to 18.07 in September, 1935 ( The Times, London, Trade and Engineering, 10, 1935, p. 23 Google Scholar).
26 Ibid.
27 Argentine imports from Japan January-August, 1934, amounted to only 12,785,000 paper pesos. During the corresponding period in 1935 this figure had increased to 31,008 paper pesos.
28 New York Times, Nov. 16, 1935; The Times, London, 11 16, 1935.Google Scholar
29 Economist, 08 11, 1934, p. 272.Google Scholar
30 The profits during the first full year of operation were $96,200,000 (see ibid., “Commercial History and Review of 1934”, Feb. 16, 1935, p. 24).
31 Economist, 12 15, 1934, p. 1149.Google Scholar
32 During the first year their losses were only $8,815,942.
33 Economist, Feb. 16, 1935.
34 Ibid., Feb. 2, 1935, pp. 248-9; Feb. 9, p. 316.
35 Ibid., Nov. 25, 1933, p. 1019.
36 Ibid., Oct. 14, 1933, p. 712.
37 Redemption will thus begin in 1939 and will be completed in 1953, giving the bonds an average life of approximately thirteen years.
38 The Times, London, 02 6, 1934 Google Scholar; Economist, 10 14, 1933, p. 712.Google Scholar
39 In October, 1933, other Argentine government 4 per cent, bonds, with a 1954 redemption date, stood around 70, as compared with 50 earlier in the year (see Economist, 10 28, 1933, p. 820).Google Scholar The Argentine 4 per cent. Sterling Bonds, in March, 1934, were selling for 68 to 70 (see ibid., March 24, 1934, p. 640).
40 For detailed operations of the trust see ibid., Oct. 28, 1933, pp. 819-20, 917; April 28, 1934, p. 933. An additional £6,370,000 of the Sterling Bonds were subsequently introduced separately and directly into the London market.
41 Ibid., Oct. 28, 1933, pp. 819-20. The “C” certificates were immediately quoted at 62 on the market.