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After the Denarius. Throughout history, rulers unable to handle their monetary affairs have resorted to devaluation. The ancient Romans began to debase the denarius under Nero (A.D. 54-68) after they ran into—but failed to recognize—their balance of payments problems. Founded on plunder, Rome as an empire lacked the manufacturing, agriculture and commerce to pay for its costly imports. Trajan added copper to the once 99%-pure-silver denarius, and later the coin became wholly base metal. A century before Alaric sacked the Eternal City in A.D. 410, Rome had lost not only its purchasing power but also the wherewithal to resist barbarians at its borders.
As for recent times, only eight of the world's 120 currencies (those of the U.S., Cuba, Ethiopia, Haiti, Honduras, Liberia, Panama and El Salvador) have survived the 23 years since the end of World War II without a formal devaluation, according to Manhattan Currency Expert Franz Pick. Since Jan. 1, 1949, Chile has devalued 46 times, Brazil 32, Uruguay 18, South Korea 17. The U.S.S.R. has sliced the value of its ruble three times since World War II — not because of external pressures but to reduce domestic purchasing power.
In its 179-year history, the U.S. has formally devalued the dollar in terms of gold only once, in 1934. Franklin Roosevelt's aim in raising the price of gold from $20.67 to its present $35 per oz. was to mid-Depression.*Not increase only farm did he prices in fail in that objective, but dollar devaluation furthered a chain reaction of compet itive devaluations and trade restrictions aimed at preserving jobs. One effect was to devastate world trade, which fell 57% between 1929 and 1936.
Away from Orthodoxy. Those hard lessons weighed heavily on the dele gates from 45 nations who created day's monetary system during three summer weeks of 1944 in the forest-cupped resort town of Bretton Woods, N.H. Out of their deliberations came the Washington-based International Monetary Fund and its sister agency, the World Bank (now headed by Rob ert Strange McNamara), which makes loans to underdeveloped countries. Bretton Woods' key decision was to stick with gold as the primary international monetary asset. In vain, Britain's John Maynard Keynes argued for creation of a new international money to sup plant gold. He warned that reliance on "the barbarous metal" would ultimately lead to a drying up of reserves and re strictions on trade and capital flow. The U.S. (then holding some 57% of the world's monetary gold) prevailed with its view that creation of the IMF — a dar ing innovation for its day — would solve the problem.