Gold bloc, deflation and the devaluation of 1936

The last defenders of gold

While Britain left the gold standard in September 1931 and the United States devalued the dollar in 1933 and 1934, Switzerland held to its parity. In July 1933, after the failure of the London World Economic Conference, Switzerland joined France, the Netherlands, Belgium, Italy and Poland in the so-called gold bloc, a group of countries committed to maintaining the convertibility of their currencies at the existing parities.¹ Maintaining the parity while other currencies depreciated meant that Swiss prices and wages had to fall to keep Swiss exports competitive. The Federal Council, under the successive heads of the Federal Department of Finance, Jean-Marie Musy and Albert Meyer, and with the full support of the national bank, pursued exactly this deflation policy. Public salaries were cut, subsidies reduced and budgets balanced, while wages in the private sector were pushed down.

The social cost was high. The Historical Dictionary counts about 124,000 unemployed in January 1936. The history portal of Swiss social security records that in the winter of 1936 unemployment reached seven per cent of the working population and more in the industrial regions, and that the bourgeois parties held to the gold parity, pursued restrictive budget and tax policies and cut wages.² The labour movement answered with the Kriseninitiative, a popular initiative that would have obliged the Confederation for five years to combat the crisis through wage and price protection, job creation, debt relief for farmers, unemployment insurance, export promotion and the regulation of the capital market. It was put to the vote on 2 June 1935 with a record turnout of 84.4 per cent and rejected with 42.8 per cent of the votes. Federal Councillor Hermann Obrecht called it an experiment that would not survive sober reflection.³

The position of the gold bloc became untenable in 1935 and 1936. After Belgium left it in March 1935, speculation against the remaining gold currencies intensified.⁴ As the Swiss franc came under repeated attack, the national bank lost substantial gold reserves as foreign and domestic holders converted francs into gold or foreign currencies in anticipation of a devaluation. According to Cerutti, export industries, the tourism sector and the former Federal Councillor Edmund Schulthess called publicly for a devaluation, while the Social Democratic Party, suspicious of anything that would erode wages and savings, was largely opposed.

The weekend of 26 and 27 September 1936

The decision came from Paris. On 24 September 1936 the French minister Charles Spinasse informed the Swiss President of the Confederation, Albert Meyer, that France would devalue its franc by about 30 per cent. After three meetings on 25 and 26 September, the Federal Council decided to devalue the Swiss franc as well, against the opposition of Federal Councillors Johannes Baumann and Meyer himself. The gold parity of the franc, about 0.29 grams of fine gold since the days of the Latin Monetary Union, was replaced by a range of 0.190 to 0.215 grams, within which the national bank set the new parity. The effect was a devaluation of about 30 per cent. The stock exchanges were closed until 29 September to prevent speculation.⁵ The legal instrument was the Federal Council decree on monetary measures of 27 September 1936, by which the government changed the gold parity and suspended once again the obligation of the national bank to redeem its notes in gold.⁶

Meyer, who had defended the parity to the last, then addressed the population with the sentence that has become part of Swiss monetary folklore: “Ein Franken bleibt ein Franken”, a franc remains a franc.⁷ The sentence was meant to reassure savers that their deposits and banknotes had not lost their domestic purchasing power. Seventy years later, the chairman of the national bank, Jean-Pierre Roth, chose it as the title of his speech at the centenary celebration in Zurich, a sign of how deeply it had entered the institutional memory of the bank.⁸ The swissinfo account of the bank’s history notes that the Federal Council devalued against the wishes of the national bank, and that experts today regard the decision as belated.⁹ Harold James has cited model calculations suggesting that an earlier devaluation could have raised Swiss output in 1935 by 15 to 18 per cent.¹⁰

After the devaluation

The effects of the devaluation were positive and quick. The consumer price index rose only moderately, by eight points to 138, by the outbreak of the Second World War. Exports rose from 882 million francs in 1936 to 1,286 million in 1937, and unemployment fell from 93,009 in 1936 to 65,583 in 1938.¹¹ Switzerland subsequently associated itself with the international stabilisation agreement concluded between France, the United Kingdom and the United States, the Tripartite Agreement of September 1936.¹² Foreign capital returned. The Historical Dictionary records that after 1931 the authorities introduced clearing arrangements and licensing requirements for foreign issues on the Swiss market and that, particularly after the currency adjustment of 1936, foreign flight capital flowed into Switzerland in large amounts, strengthening the reserves and the deposits of the banks.¹³ With the growing threat of war, Zurich once more became the refuge of European wealth, a development whose moral and legal dimensions are the subject of chapter F.III.

Notes

1. Cerutti, “Abwertung 1936” (HLS), https://hls-dhs-dss.ch/de/articles/045078/, on the gold bloc of July 1933, the deflation policy of the finance ministers Jean-Marie Musy and Albert Meyer, the unemployment of January 1936 and the decision of September 1936. ↩
2. Geschichte der Sozialen Sicherheit in der Schweiz, “1932–1937”, https://www.geschichtedersozialensicherheit.ch/synthese/1932-1937. ↩
3. Christian Bolliger, “Die Kriseninitiative wird bei rekordhoher Beteiligung abgelehnt”, in: Handbuch der eidgenössischen Volksabstimmungen 1848–2007, analysis of the vote of 2 June 1935, https://swissvotes.ch/attachments/361edd2ede73ff6bc214e5678494c501118ad02e3a8f37aed8d9fab458a1039b. ↩
4. Wikipedia, “Gold bloc”, https://en.wikipedia.org/wiki/Gold_bloc: “Belgium and Luxembourg gave up the gold standard in March 1935 and devalued their currencies.” Mauro Cerutti, “Abwertung 1936”, in HLS, version of 7 May 2012, https://hls-dhs-dss.ch/de/articles/045078/2012-05-07/, on the repeated speculative attacks against the franc that the SNB had to repel. ↩
5. Cerutti, “Abwertung 1936” (HLS), https://hls-dhs-dss.ch/de/articles/045078/, on Spinasse’s message of 24 September, the Federal Council meetings of 25 and 26 September, the new gold range and the closure of the stock exchanges. ↩
6. Richli, “Der Schweizer Franken und sein Wert”, p. 12, https://www.unilu.ch/fileadmin/universitaet/unileitung/dokumente/universitaetsreden/Unireden_26.pdf; Tanner, “Schweizerische Nationalbank (SNB)” (HLS), https://hls-dhs-dss.ch/de/articles/013747/2015-06-29/, on the suspension of the redemption obligation in 1936 and its formal abolition by legislation of 1953. ↩
7. Richli, “Der Schweizer Franken und sein Wert”, p. 12, https://www.unilu.ch/fileadmin/universitaet/unileitung/dokumente/universitaetsreden/Unireden_26.pdf. ↩
8. Jean-Pierre Roth, “‘A franc remains a franc’ – 100 years of National Bank policy in support of monetary stability”, speech at the official ceremony for the 100th anniversary of the SNB, Zurich, 22 June 2007, BIS Review, https://www.bis.org/review/r070626a.pdf. ↩
9. swissinfo.ch, “Erst die Nationalbank hat den Franken ‘nationalisiert’”, https://swissinfo.ch/ger/erst-die-nationalbank-hat-den-franken--nationalisiert-/5939048. ↩
10. James, speech of 21 June 2007, https://www.snb.ch/public/publication/en/www-snb-ch/publications/communication/speeches/2007/ref_20070621_hja/publications0_en/ref_20070621_hja.en.pdf. ↩
11. Cerutti, “Abwertung 1936” (HLS), https://hls-dhs-dss.ch/de/articles/045078/, section on the results of the devaluation. ↩
12. Kloter, “Goldwährung” (HLS), https://hls-dhs-dss.ch/de/articles/013742/2007-01-04/, on Switzerland’s adherence to an international stabilisation agreement after the devaluation. ↩
13. HLS, “Kapitalverkehr”, https://hls-dhs-dss.ch/textes/d/D13839.php. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.