Did Impending War in Europe Help Destroy the Gold Bloc in 1936? An Internal Inconsistency Hypothesis

This paper investigates the gold bloc operated between France, the Netherlands, Switzerland and Belgium, especially over the period after the USA left the gold standard in March 1933 to its end in September 1936. It enquires into the effect of military-political developments in Germany and Italy on the sustainability of the gold bloc between its members. Juxtaposed is the view of leading political scientists, such as Henry Kissinger, who see impending war in Europe as deeply and adversely affecting psychology in Europe, and what may be called the standard "economists' view" that sees the demise of the gold bloc as being caused almost exclusively by economic factors. Developing concepts of external and internal inconsistency of the gold bloc, this investigation concludes that both economic and military-political developments played important roles in destroying the last vestiges of the gold standard.

Exchange Market Pressure on the Pound-Dollar Exchange Rate: 1925-1931

An investigation of exchange market pressure against the pound sterling during the inter-war period. The main findings are that a) the behavior of UK fundamentals relative to those of the USA help to explain exchange market pressure against the pound; b) during the run up to devaluation in September 1931 the monetary authorities in the UK were acting to reduce domestic credit; but that c) additional pressure was brought against the pound from speculative sources. These findings relate to current thinking on the choice of exchange rate regime as even well behaved fundamentals may not be sufficient to sustain a currency on its peg.

The Discontinuous Nature of Kriging Interpolation for Digital Terrain Modeling

Kriging is a widely employed method for interpolating and estimating elevations from digital elevation data. Its place of prominence is due to its elegant theoretical foundation and its convenient practical implementation. From an interpolation point of view, kriging is equivalent to a thin-plate spline and is one species among the many in the genus of weighted inverse distance methods, albeit with attractive properties. However, from a statistical point of view, kriging is a best linear unbiased estimator and, consequently, has a place of distinction among all spatial estimators because any other linear estimator that performs as well as kriging (in the least squares sense) must be equivalent to kriging, assuming that the parameters of the semivariogram are known. Therefore, kriging is often held to be the gold standard of digital terrain model elevation estimation. However, I prove that, when used with local support, kriging creates discontinuous digital terrain models, which is to say, surfaces with “rips” and “tears” throughout them. This result is general; it is true for ordinary kriging, kriging with a trend, and other forms. A U.S. Geological Survey (USGS) digital elevation model was analyzed to characterize the distribution of the discontinuities. I show that the magnitude of the discontinuity does not depend on surface gradient but is strongly dependent on the size of the kriging neighborhood.

International Money and Finance

We discuss the effectiveness of pegged exchange rate regimes from an historical perspective, drawing conclusions for their effectiveness today. Starting with the classical gold standard period, we point out that a succession of pegged regimes have ended in failure; except for the first, which was ended by the outbreak of World War I, all of the others we discuss have been ended by adverse economic developments for which the regimes themselves were partly responsible. Prior to World War II the main problem was a shortage of monetary gold that we argue is implicated as a cause of the Great Depression. After World War II, more particularly from the late-1960s, the main problem has been a surfeit of the main international reserve asset, the US dollar. This has led to generalized inflation in the 1970s and into the 1980s. Today, excessive dollar international base money creation is again a problem that could have serious consequences for world economic stability.