Depression

The period of boom and monetary stability did not last long. The world economic crisis from 1929 to 1934 also affected Czechoslovakia. During this crisis, the price of gold on world markets rose. The consequence of this development was strong deflationary pressure on all currencies that were tied to gold. The Czechoslovak koruna was also pulled into this current. Opinions on the effective action of the National Bank in resolving this deflationary situation differed and then escalated in two directions: either to keep the gold content of the koruna and gradually adjust to its devaluation by interest rate, wage, budget, foreign exchange and price policies, or to initiate such devaluation of the koruna by reducing the gold content, which would restore the consistency of its purchasing power with the purchasing power of gold, and thus avoid the long-term process of adapting all economic numbers. The government has opted for a devaluation solution. In February 1934, the Governor of the National Bank, Vilém Pospíšil, and the entire Bank Board resigned. On February 23, 1934, Karel Engliš was appointed the new governor. In February 1934, the gold content of the koruna was reduced by one-sixth - to 37.15 mg. However, some states - the countries of the golden bloc - maintained the current monetary policy and proceeded to a devaluation solution later. The procedure of the National Bank also adapted to this, so the golden content of the koruna was later reduced again by the second devaluation in October 1936, again by one-sixth - to 31.21 mg. After these devaluations, price and monetary developments stabilized.