The Rise Of Australasia

Chapter 911 - 679: Tariffs Confrontation and Covert Strategy

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The Grand Duchy of Finland’s early adoption wasn’t just the death knell for the gold standard; it also made the British lose face somewhat.

The very British who had been the first to propose the currency group were now seeing a small nation from Australasia as the first among the smaller countries to join.

This represented not only a special relationship between the Grand Duchy of Finland and Australasia, but also suggested that the British subordinate relationships were not that great.

How could the British allow such a loss of face? Almost simultaneously, the British Government began contacting these subordinates, applying significant pressure.

With the pressure from the British, those countries that had been slow in abandoning the gold standard suddenly accelerated the process.

In the second half of June 1927, Sweden, Norway, Denmark, Finland, Portugal, Greece, Argentina, Brazil, Colombia, Paraguay, Bolivia, Thailand, Iran, Egypt, and Greece chose to join the Pound-Australian Dollar currency group, triggering a global shift away from the gold standard.

The joining of so many countries to the new currency system naturally helped the Pound and the Australian Dollar remain relatively stable.

Of course, this stability was only relative. Compared to the robustness of the gold standard era, the Pound and Australian Dollar had already begun to devalue significantly.

Based on actual buying power, one pound used to be worth about 7.3 grams of gold, whereas now its value has dropped to 5.7 grams of gold and is continuing to devalue.

If nothing unexpected happens, the Pound’s actual buying power should devalue by at least half compared to before the abandonment of the gold standard.

After all, compared to reliable gold, the value of paper money that cannot be exchanged for gold and only relies on government credit was greatly diminished.

However, compared to the gold standard currency system, this managed paper currency system was clearly more suitable for national development.

After all, it’s easier for a country to control the issuance of paper money and to manipulate currency devaluation and appreciation to achieve its goals and purposes.

The currency previously tied closely to gold found it difficult to devalue or appreciate substantially.

But now, the devaluation and appreciation of currency could basically be decided by the amount of money printed, plus the interest rates set by various banks, etc.

Simplistically, if more money circulates in society, the currency tends to devalue.

If less money circulates, then the currency tends to appreciate.

At present, to comfortably handle this economic crisis, the Pound group definitely needed to devalue their currency.

After all, the Pound-Australian Dollar group comprised about ten countries and united, their economic power was not insignificant. They could control an orderly devaluation of the currency, which at least wouldn’t be as chaotic and uncontrollable as what was happening with the Franc.

With the gradual devaluation of the Pound and Australian Dollar, the benefits of currency devaluation became clearly visible.

First was the gradual increase in exports because now, the rest of the world could import materials from Pound system countries at a lower cost than before, which was naturally profitable for non-Pound system countries.

Frankly, some industrial products can be temporarily done without, but important raw materials and mining supplies cannot be left unconsumed.

There’s also grain and meat; as long as there are people, there will be consumption of these, a fact that technological advancement can never change.

With the dividends from currency devaluation, Australasia saw a rapid increase in grain and meat exports in a short period of time, which slowly led to economic prosperity.

From a historical perspective, the significance of the Hoover Dam for the United States is fairly evident.

In later generations, the electricity generated by the Hoover Dam not only completely paid off the costs and interest of its construction but also irrigated over 1.5 million acres of land by controlling the floods of the Colorado River, providing water for 16 million Americans.

However, whether this dam, which wouldn’t begin construction for another six months, could bring improvement to the United States, currently plagued by an economic crisis, is a question worth pondering.

Arthur naturally learned of the continuous actions taken by the American government and paid close attention to them.

Not to mention, the Hoover Dam did indeed have a positive impact on the United States, and it could very likely alleviate the current economic crisis.

After some thought, Arthur still decided to add to the chaos in America, lest President Hoover do something historically unprecedented.

It must be noted that although President Hoover endures significant vilification in American history, the assessments of his presidency are almost polar opposite.

While ranked as one of the worst Presidents in America, some of Hoover’s policies were still quite effective.

If developments diverge from history, and Hoover ends up doing something only a capable president could achieve, like maintaining the unity and stability of the nation, then all the preparations Arthur had made for a potential war with the United States would be in vain.

However, as opposed to the Hoover Dam project, which wouldn’t begin until the following year, the American government’s actions on the monetary front deserve closer attention at this moment.

What exactly does the Smoot-Hawley Tariff Act signed by President Hoover mean?

The simplest explanation is that it increased import tariffs on agricultural products to help American farmers increase their income.

But it wasn’t just the import tariffs on agricultural products; it included over 2000 kinds of imported goods, with tariffs raised to the highest levels in history.

This angered the countries that had not joined in raising tariffs against the United States. After all, it was the European Nations led by Britain that had initially raised tariffs against the United States, and many other countries had not participated.

The Americans went as far as to raise tariffs on their ally, the Island Nation, also increasing tariffs on agricultural products from there.

This caused the already low-income farmers of the Island Nation to lose a portion of their income, prompting the Island Nation to begin protesting against the United States.

More seriously, compared to the impact of raising tariffs on imports and exports, it was the attitude of beggaring thy neighbor, as demonstrated by the American government through this act, that upset those previously neutral countries.

After all, everyone’s original stance was one of neutrality; was this not slyly pushing all countries towards Britain?

Britain certainly did not miss this opportunity and immediately began courting these neutral countries.

Maybe truly disliking the attitude of the Americans, countries began retaliating against the United States individually, raising tariffs on all US imports and exports, and even joined the tariff alliance against the United States formed by the British.

This outcome was something neither the American government nor President Hoover had anticipated, but it was clearly too late to reverse now.

If the American government wanted to sacrifice the interests of other countries to save its domestic situation, then obviously the other countries would not agree to it.

Australasia was certainly pleased to see this as the United States had included Australasia in the list of countries subject to increased tariffs; after all, grain and meat from Australasia had always been key exports.

However, Arthur’s focus was not on raising tariffs against the United States, given that they had already been increased to a quite high level.

Rather than engaging with Americans on tariffs, Arthur acted more decisively, utilizing some companies in the United States to lure the unemployed, offering conditions such as jobs and housing to attract a large number of unemployed Americans in a short period.