A World Without Gold: The Debate on the Clearing System in Italy (1907-1941)
In the last quarter of the 19th century, some solutions were adopted to solve or at least mitigate the problems associated with international gold (Haines, 1943, p. 123). A plan to establish a global clearing system was first proposed in explicit terms by the German economist Julius Wolf at the Brussels International Monetary Conference in November 1892 (Wolf 1892, 1908). The Wolf plan envisaged the adoption of an international compensation mechanism (on the model already implemented by the Universal Postal Union), based on central banks and on the use of a world currency as a unit of account for international payments, guaranteed from the gold riserve conferred by various member countries (Schumpeter 1954, 1076–1077; Haines 1943,123–124). In the wake of Wolf’s contribution, various international clearing projects were then developed in the following years, attracting increasing attention from public opinion. The severe crisis of 1907 stimulated further reflection on the unbalanced conditions of monetary systems. The fragile Italian economy had particularly suffered because the Bank of Italy did not have sufficient gold reserves to support the liquidity crisis in the Italian banking system. Luigi Luzzatti (1841-1927). blamed the crisis on poor coordination among the central banks of the major countries, which was expressed in the tendency to hoard gold, taking it away from the adjustment mechanism necessary for the proper functioning of the gold standard (practice was known as gold sterilization). In order to maintain the equilibrium of the international monetary system based on the gold standard, it was necessary for surplus countries to allow the flow of gold reserves to deficit countries, as established by the price-spice flow mechanism theory defined by David Hume. Luzzatti (Luzzatti 1907) proposed convening an International Conference for Monetary Peace. The International Conference should have periodically convened the heads of the central banks and treasury ministries in Paris to define forms of international monetary policy coordination by establishing a permanent Commission (Luzzatti, 1908 [1922], p. 19). The aim was to make coordination between central banks compulsory and permanent by establishing an international clearing house to settle mutual debt and credit positions, minimising gold flows and avoiding hoarding policies. Luzzatti proposed his project again at the International Trade Conference, which the countries of the Quadruple Entente held in Paris in April 1916 (Luzzatti, 1916 [1922]), but his proposal was rejected, above all for the British opposition, for a more generic commitment. After the Great Depression, the word ‘clearing
Area: History of Economic Thought - 20th century
Keywords: International monetary system; Gold, Clearing; Italian economic thought