So it was that, once the problems posed by the establishment of a banknote monopoly had been solved, the youthful SNB was quickly confronted, in 1914, with the problem of financing the military expenditure caused by the First World War and, after the end of hostilities, the difficulties related to normalisation. The social disruption of 1918 and the high level of inflation at the end of the war were bitterly felt and attributed to a failure of monetary management. This setback had a lasting effect on morale at the SNB and accounts to a considerable extent for the orthodoxy of the policies adopted in the decades that followed. This accounts for the determination with which the SNB worked to restore the rules of the gold standard once peace had returned. The pre-war gold parity was re-established in 1924. However, after a few good years, the economic situation again deteriorated, culminating eventually in the crisis of the 1930s. The devaluation of sterling in 1931, followed by that of the dollar in 1933, were the first episodes in the eventual collapse of the gold standard. In 1936, following the devaluation of the French franc, the Swiss federal authorities were forced, in their turn, to reduce the parity of the Swiss franc. A few years later, the challenge of administering a war economy again arose. The story of the Second World War, with its doubts, agonies and errors of judgement has been extensively analysed by historians over the past few years.
Much reflection has also been carried out on the matter within the Swiss National Bank in order to better understand this difficult period in our own history. The postwar period was characterised by a fierce determination to start afresh, to avoid the reappearance of the misleading thinking that had led to pre-war protectionism, and to reconstruct the economies that lay in ruins. A phase of intensive work began, with the aim of reorganising the international monetary order. Still isolated, both economically and politically, Switzerland participated in the efforts without becoming a member of the Bretton Woods Institutions. The gradual liberalisation  BIS Review 40/2007  3  of payments and trade rapidly led to a period of prosperity but also to a situation of disequilibrium in the operation of the international monetary system. Inflation and speculative movements of funds became common features during the 1960s and the monetary arena was disturbed by multiple devaluations, particularly in Europe. Suspension of gold convertibility for the dollar, in 1971, hailed the collapse of the system of fixed exchange rates that had been put into place after the war. Faced with a massive flow of speculative funds, the SNB was forced to abandon stabilisation of the Swiss franc in 1973. The transition to sustained floating for the Swiss franc was definitely the most important change of direction in the monetary policy strategy pursued by our bank in its hundred years of existence.