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The two sterling crises of 1964 and the decision not to devalue1

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  • SCOTT NEWTON

Abstract

Conventional wisdom is critical of the newly elected Labour government's reaction to external financial difficulties in the autumn of 1964. Anxious about its political position, it avoided the necessary measures, involving stringent deflation and possibly devaluation. This article seeks to revise the traditional view by re‐examining the response to what were actually two sterling crises. The first was handled efficiently. The second was provoked by speculation stemming from market expectations of devaluation. The decision not to devalue but seek external support was justifiable, given changes within the international economy which were to create problems for many postwar nation states.

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  • Scott Newton, 2009. "The two sterling crises of 1964 and the decision not to devalue1," Economic History Review, Economic History Society, vol. 62(1), pages 73-98, February.
    • Handle: RePEc:bla:ehsrev:v:62:y:2009:i:1:p:73-98
    DOI: 10.1111/j.1468-0289.2007.00431.x
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    1. A. P. Thirlwall & Heather D. Gibson, 1992. "Balance-of-Payments Theory and the United Kingdom Experience," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21806-6, November.
    2. Roger Middleton, 1998. "Charlatans or Saviours?," Books, Edward Elgar Publishing, number 1556.
    3. Catherine R. Schenk, 2004. "The empire strikes back: Hong Kong and the decline of sterling in the 1960s," Economic History Review, Economic History Society, vol. 57(3), pages 551-580, August.
    4. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    5. Jim Tomlinson, 2005. "Managing the economy, managing the people: Britain c.1931–70," Economic History Review, Economic History Society, vol. 58(3), pages 555-585, August.
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    Cited by:

    1. Scott Newton, 2013. "The two sterling crises of 1964: a reply to Oliver," Economic History Review, Economic History Society, vol. 66(4), pages 1127-1133, November.
    2. Bordo, Michael D. & Macdonald, Ronald & Oliver, Michael J., 2009. "Sterling in crisis, 1964–1967," European Review of Economic History, Cambridge University Press, vol. 13(3), pages 437-459, December.
    3. Obstfeld, Maurice, 2020. "Harry Johnson’s “Case for Flexible Exchange Rates†– 50 Years Later," CEPR Discussion Papers 14488, C.E.P.R. Discussion Papers.
    4. Maurice Obstfeld, 2020. "Harry Johnson's “Case for flexible exchange rates”—50 years later," Manchester School, University of Manchester, vol. 88(S1), pages 86-113, September.

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