Forgotten Ottoman Empire


Second, by fixing the exchange rate regulated price relationship between the mother country and the colonies. In the absence of direct transport links between the UK and the Middle East grade commodities trading was not possible, and the purchasing power parity condition is not satisfied. Choosing the level of exchange-rate metropolis determine the price of colonial raw materials.

Third, currency board has no function of lender of last resort. In contrast to developed countries, where the role of lender of last resort served the central bank or the coalition, support local colonial banks have been none. As a result, foreign banks have received a significant advantage in the financial market in the Middle East. In most of the eastern colonies in the domestic market was dominated by subsidiaries of European banks.

Part 3.

Currency decolonization

With the end of World War I, the sterling currency area got straight contours. Participants of the sterling area were unified currency controls in relation to other countries, but within the zone itself no currency restrictions, and the inside of the zone is the free market. Zone members have full access to the British capital market and the monetary market in London.

Colonial crisis and currency collapse

The collapse of the British colonial system in Africa, Asia and the Middle East has become one of the key events of the second half of the twentieth century. The collapse of the empire, which peaked in 1945-1965 gg., Had a big impact. He led not only to re-giving of the sovereign rights of the mother country to the former colonies, but also to change the economic picture of the world. In the new post-colonial world that Britain has never had such an influence, as in the era of the empire.

Among specialists in economic history no consensus on the causes of the collapse. In our opinion, the disintegration of the sterling area contributed to several macroeconomic factors. First among them to put the currency volatility of the metropolis. Sterling area in the Middle East began to crumble after the September 1931 pound was devalued by 20%.

Secondly, the empire has accumulated huge debts, payments are creating pressure on the pound sterling. If at the beginning of World War I, Britain was the strongest power in economic terms, accounting for 40% of global foreign investment by the end of the war, her position was undermined. The country was in debt - debt to the United States amounted to about 850 million pounds in interest payments for which went 40% of budget expenditures.

Third, the Bank of England did not have enough gold reserves to cover the monetary issue, some of which settled in the East. Colonies accumulated balances in pounds seven times covered the reserves of the Bank of England. The largest holders of sterling balances were Egypt and India. Repeated attempts by the authorities of the former colonies to discuss the issue with representatives of the metropolis unsecured balances were unsuccessful.