The origins of this competitive struggle for gold are popularly attributed to the
absence of a hegemon. The competing financial centers—London, Paris, and New
York—worked at cross-purposes because, in contrast to the preceding period, no
one central bank was sufficiently powerful to call the tune. Before the war, the
Bank of England had been sufficiently dominant to act as a leader, setting its
discount rate with the reaction of other central banks in mind, while other central
banks responded in the manner of a competitive fringe. By using this power to
defend the gold parity of sterling despite the maintenance of slender reserves, the
bank prevented the development of a competitive scramble for gold. But after
World War I, with the United States unwilling to accept responsibility for leadership,
no one central bank formulated its monetary policy with foreign reactions and
global conditions in mind, and the noncooperative struggle for gold was the result.
In this interpretation of the interwar liquidity problem, hegemony—or, more
precisely, its absence—plays a critical role.