Floating against the Tide: Spanish Monetary Policy 1870–1931

The gold standard is not the monolithic metallic monetary system that it was once believed to be. Country cases and detailed studies of the actual workings of the system have shown that the gold standard was not a rigid mechanism for adjustment to external disequilibria, and that it enabled core and peripheral nations to tailor it to their needs. Exchange rate stability was achieved by various means. Some countries followed the so-called ‘rules of the game’, while others systematically evaded the rules and resorted to a variety of methods to keep the price of their currencies fixed against gold. Moreover, gold coins were a major part of the money in circulation in some countries, while gold did not circulate at all in others. Gold convertibility was usual in the core countries but, to a certain extent, specie convertibility was the exception in peripheral nations. As has recently been stressed, a re-conceptualization of the gold standard system has brought to the fore its reputational aspects and its status as a ‘contingent rule’, instead of the traditional approach, which focused on adherence to strict patterns of behaviour and well-defined rules. According to the new approach, the monetary policies that were followed in the short term mattered little, provided that in the long term a country was fully committed to the regime and that the financial community believed this to be true.1