This chapter explores the first fifteen months under the Tripartite Agreement, from September 1936 to the end of 1937. It focuses on two events that consumed the attention of authorities: the Gold Scare in the spring and the Dollar Scare that autumn. Both events involved questions about the price of gold and wreaked havoc on markets. But the club members--foremost Britain and America---worked together to calm markets and to reaffirm gold's centrality as the international reserve asset par excellence around which the system revolved. In so doing, they demonstrated the Tripartite Agreement's role as the cornerstone of their international monetary policies.

This chapter focuses on the reciprocal gold facilities created in the weeks after the Tripartite Agreement to enable exchange intervention, viewed as essential for the Agreement to have any chance of success. Each country agreed to convert its currency into gold for other members at a price set each day. The system squared the circle of how to enable countries to intervene in currencies that were not universally convertible into gold and played a crucial role in keeping members on the same page during a time of immense political and economic strain. It established a technical foundation for broader collaboration and was integral to the Tripartite Agreement's success in preventing policymakers from relapsing into the antagonisms of earlier years.

In February 1939, Chancellor of the Exchequer John Simon praised the Exchange Equalisation Account (EEA), telling the House of Commons that “the reputation” of the account “is one of our great sources of strength. We were the first country to show the world how to do it. It is being done with great skill, and we owe a great deal to the devoted men, whose work is never published, who watch this matter and serve the country so well in trying to maintain our currency value.” While the EEA’s reputation had not always been so high – foreign observers likened the account to a weapon of war in its early days – by the time of Simon’s address it was admired at home and abroad as a protector of monetary peace and the nation’s prestige. As for the men who managed it and indeed all those involved in sterling policy, they witnessed and contributed to immense changes in the monetary system, the consequences of which reverberate to this day. They were born under the gold standard, worked to reconstruct it after the First World War, started to dismantle it in 1931, and then created a new method of management that sought to balance exchange stability with internal prosperity.

This chapter draws out connections between the Tripartite Agreement and the Bretton Woods system, showing that the latter in many ways built on the former. Indeed, the principles articulated in the Agreement continue to motivate many of the goals for the international monetary system today. It concludes with lessons for improving international monetary cooperation based on the experience of the Tripartite years.

This chapter studies developments in Britain’s monetary system and relations during the harrowing run-up to war. The pound depreciated substantially beginning in the summer of 1938 as war scares caused capital to flee. While the depreciation could have led to the reemergence of a crippling animus among club members, a middle ground developed whereby Britain made good faith efforts to support the pound and other members acquiesced to its decline. The Tripartite Agreement continued to embody democratic solidarity and survived all the way up to the eruption of hostilities in fact and for some time thereafter in name, falling into abeyance due to the necessities of war finance rather than any disagreement between the parties. To defend the pound, Britain transferred the gold in the Bank of England to the Exchange Equalisation Account, thereby severing the remaining threads that had tied sterling to the metal and readying monetary policy for battle in what would become a total war.

This chapter examines the problems of the franc during the Tripartite years. The Big Three generally shared the following hierarchy of priorities (in decreasing order of importance): maintain solidarity, uphold the Tripartite Agreement, forestall exchange control, and prevent excessive depreciation. They succeeded in achieving their top three priorities, a signal accomplishment. Yet confidence in the franc plummeted at times, and with French requests for financial support refused and capital fleeing at an unsustainable rate, depreciation seemed the only way out. The ensuing falls in the franc were larger than Britain or America wished, but both agreed that it was much better to manage them within the club than to eject France. It was far more important for the general framework of the Agreement to survive than to risk all that had been gained over too strict an interpretation of its guidelines.

This chapter describes the monetary antagonism that pervaded the world from Roosevelt's inauguration in 1933 to the development of an uneasy ceasefire by the middle of 1935. Roosevelt's departure from the gold standard fundamentally changed the monetary system, and his chaotic method of doing so exacerbated the mutual suspicion already rife in the great capitals of the world. Once Roosevelt officially devalued the dollar in January 1934, Britain and France were clueless as to what, if anything America would do next; America and France were furious as Britain refused to stabilize the pound; and the world watched France flounder as its currency increasingly came under pressure. While Britain and America reached an uneasy suspension of monetary hostilities in 1935, the precariousness of the franc meant that this superficial stability was liable to crumble at any moment.