This control mechanism was supported by substantial international capital movements that helped to ease the adjustment process. Countries in good credit standing could simply increase their short-term borrowing to weather a short-term outflow of gold and other countries relied on a continuing inflow or outflow of long-term capital to keep their accounts in balance. Thus the gold standard mechanism protected the value of these foreign loans because it kept exchange rates relatively constant among the principal countries, and it also effectively operated to discourage any inflationary policies that could undermine the value of a currency (Bloomfield, 1959).
Most authorities also agree that the gold standard worked so well during this historical time frame because of British dominance. (Triffin, 1968; Kindle
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