The closing of the stock market

The closing of the stock market

The closing of the stock market and government intervention prevented catastrophic fire sale of assets. But it proved impossible to restore free mobility of capital. Currency crises, defaults, arguments for reparations, war debts and the beginning of the Great Depression led many countries to impose capital and exchange controls and trade restrictions. Thus, the first era of financial globalization took at least a generation to develop. But it broke down in a matter of days.

Under the Bretton Woods agreement that was hammered in 1944, the exchange rate remains fixed, but the dollar became the international reserve currency in place of gold. The dollar remained notionally converted into gold. Control of capital movements has become a key issue for many governments. Even tourists found it difficult to get foreign currency. Cross-border capital flows were mainly between governments.