This chapter narrates the twists and turns in monetary relations that culminated in the Tripartite Agreement. After discussing the franc's deteriorating position from the spring of 1935 and the implications for Britain's management of the pound, it turns to the pivotal Anglo-American relationship. Distrust was pervasive, but the two sides eventually came to an understanding, assuring each other that they would not further depreciate their currencies in response to a fall in the franc. With London and Washington talking again, there was now space for an agreement to facilitate French devaluation. The resulting Tripartite Agreement, announced on September 26, 1936, set forth revolutionary principles for monetary cooperation, including the rejection of competitive depreciation and exchange controls. With time, the Agreement--informal and vague, unconventional and pathbreaking--would turn the page on the chaos of earlier years and redefine the international monetary landscape.

This chapter explores the first fifteen months under the Tripartite Agreement, from September 1936 to the end of 1937. It focuses on two events that consumed the attention of authorities: the Gold Scare in the spring and the Dollar Scare that autumn. Both events involved questions about the price of gold and wreaked havoc on markets. But the club members--foremost Britain and America---worked together to calm markets and to reaffirm gold's centrality as the international reserve asset par excellence around which the system revolved. In so doing, they demonstrated the Tripartite Agreement's role as the cornerstone of their international monetary policies.

This chapter draws out connections between the Tripartite Agreement and the Bretton Woods system, showing that the latter in many ways built on the former. Indeed, the principles articulated in the Agreement continue to motivate many of the goals for the international monetary system today. It concludes with lessons for improving international monetary cooperation based on the experience of the Tripartite years.

This chapter studies developments in Britain’s monetary system and relations during the harrowing run-up to war. The pound depreciated substantially beginning in the summer of 1938 as war scares caused capital to flee. While the depreciation could have led to the reemergence of a crippling animus among club members, a middle ground developed whereby Britain made good faith efforts to support the pound and other members acquiesced to its decline. The Tripartite Agreement continued to embody democratic solidarity and survived all the way up to the eruption of hostilities in fact and for some time thereafter in name, falling into abeyance due to the necessities of war finance rather than any disagreement between the parties. To defend the pound, Britain transferred the gold in the Bank of England to the Exchange Equalisation Account, thereby severing the remaining threads that had tied sterling to the metal and readying monetary policy for battle in what would become a total war.

This chapter examines the problems of the franc during the Tripartite years. The Big Three generally shared the following hierarchy of priorities (in decreasing order of importance): maintain solidarity, uphold the Tripartite Agreement, forestall exchange control, and prevent excessive depreciation. They succeeded in achieving their top three priorities, a signal accomplishment. Yet confidence in the franc plummeted at times, and with French requests for financial support refused and capital fleeing at an unsustainable rate, depreciation seemed the only way out. The ensuing falls in the franc were larger than Britain or America wished, but both agreed that it was much better to manage them within the club than to eject France. It was far more important for the general framework of the Agreement to survive than to risk all that had been gained over too strict an interpretation of its guidelines.