216 THE ECONOMIC EFFECTS OF THE 
same period, there was a corresponding fall in the United States 
from 247 to 138.1 As a result of this approximation in the pur- 
chasing power of the two currencies, sterling then stood at 
about 90 per cent. of parity in terms of the dollar.2 Despite 
femporary reactions from time to time, this movement towards 
parity between the British and American currencies was 
steadily maintained throughout the years 1923 and 1924. The 
two main dynamics to be detected in this movement towards 
the recovery of sterling were, first, the depreciation of gold 
itself, which, owing to the inflation in the United States, was 
worth only 60 per cent. of its pre-war value; and, secondly, the 
relatively greater degree of inflation that was forced on in 
Britain. } 
At this stage, prompted by the knowledge that the Gold and 
Silver Export Prohibition Act was about to lapse and that some 
statement of government policy was demanded, the British 
Government set up a committee, in June 1924, on the currency 
and exchange question. This body brought in a report of which 
the main findings were that the sovereign was only 1} per cent. 
away from parity with the dollar, and that the moment was 
favourable for clinching the return to parity by the restoration 
of the gold standard. The Baldwin Government thereupon 
adopted the recommendations of the committee, a decision to 
which it was urged by British financial opinion and by the 
banking authorities of the Dominions. The Chancellor of the 
Exchequer (Mr. Churchill) announced the decision in the House 
on 28 April 1925, a step which ‘represented the definitive 
shifting of the balance of power in the sphere of monetary policy *.4 
But the new situation differed in several important respects 
from that which pertained prior to 1914. Both the Home and 
the Dominion authorities took steps to discourage domestic 
circulation of gold, although free exports of gold were resumed 
from the United Kingdom after the beginning of 1926. The 
close co-operation of the monetary authorities of the English- 
' The position of Great Britain immediately before the decision to return to 
gold is reviewed at greater length in Gregory’s First Year of the Gold Standard, p. 39. 
? For international exchange purposes the value of the English and of the 
Australian pound may be regarded as identical; and what is postulated concerning 
the one may be assumed as approximately true of the other. 
* Committee on the Currency and Bank of England Note Issues. 
Gregory, The First Year of the Gold Standard, p. 1.