The gold-exchange standard of the 1920s, at least among economists, has suffered an infamous posterity. “There are few Englishmen who do not rejoice at the breaking of our gold fetters,” Keynes declared when Britain elected to abandon the system in 1931. In the current era, when monetary authorities have institutionalized flexible exchange rates with a modicum of success, most analysts looking backward tend to agree. The attempt to reconstitute the status quo ante by reestablishing the gold standard after World War I proved “a dreadful mistake,” opines Peter Temin. Barry Eichengreen insists that only when the monetary authorities repudiated the principles of “orthodox finance” could recovery from the Great Depression begin. Allan Meltzer sees no compelling evidence that a gold-standard regime offers superior price stability to compensate for the easier transmission of shocks or the potential variability in output and employment.

The classic older treatment by Charles Kindleberger does not fully echo those criticisms. Kindleberger concedes that monetary adjustment mechanisms did not work properly in the Depression, but he faults a cumulation of policy failures as much as insurmountable structural problems. Still, Kindleberger views the monetary regime of the 1920s as fatally impaired by the absence of a hegemon. Great Britain no longer possessed the financial clout to clear the market of distress goods, lend counter-cyclically, or discount in a crisis. The United States did not yet acknowledge a responsibility proportionate to its economic means to serve as the global stabilizer. Although Kindleberger differs in emphasis from his Keynesian successors, he, too, regards the gold-exchange standard regime as inadequate in practice to the challenges of post–World War I reconstruction.

The solution of the Rhineland question at the Paris Peace Conference of 1919 left no one happy. Here, in practical terms, lay the cornerstone of the whole diplomatic edifice. Could a peace fashioned through the compromise of fundamentally opposing views prevent Germany from breaking out on the world again or developing the ambition to do so?

Jacques Bainville touched on the nub of the difficulty in his disabused apothegm: the treaty appeared “too gentle for all that is in it which is harsh.” Notwithstanding the outcome on the battlefield, the disproportion between French and German power loomed almost as large as ever. France had suffered a demographic holocaust. Ten northeastern departments of the country lay devastated. By contrast, Germany retained the most technologically skilled population in Europe. Its formidable industrial resources remained intact. Could military dispositions provide satisfactory containment?

The French obtained a three-stage, fifteen-year occupation of the Rhineland. But that occupation would lose much of its value as a security guarantee when the Allies evacuated the Cologne zone five years after the treaty took effect. It would end at the latest in 1935, when the French faced their greatest manpower deficit and with the planned reparations schedule still only half fulfilled. The United States and Britain undertook in principle to come to France's aid in the event of a new attack.

The U.S. government considered the Genoa Conference a sideshow - a misconceived British conjuring trick to deal with the superficial features of trade depression on the Continent before agreement was reached on the political prerequisites for European economic reconstruction along sound lines. American policymakers perceived three such political prerequisites. The West European countries had to agree to write-down reparations to a figure that Germany could manage financially and accept without endangering political stability. The former Allies, chief among them Great Britain, had to fund their war debts to the United States on reasonable terms. Last, but not least, all European countries had to drastically reduce expenditures on land armaments along lines comparable to what the main sea powers had agreed to at the Washington Naval Conference. A realistic approach to international indebtedness and the transfer of military resources to civilian needs, so went the line in Washington, would promote balanced budgets, end inflationary excess, and foster respect for obligations at home and abroad. With comity among nations restored, trade would revive naturally, without hothouse schemes. The United States would provide adequate credit at market rates. Revived markets would create their own inducements.