Berlin, 19 November 1931

On the gold standard in the midst of the Great Depression – and a new paper on gravitation and electricity.

Einstein is about to leave for Pasadena, and will not have time to pass through Switzerland, ‘which is reassuring for my wallet, but disappointing for us’. He continues an exchange with Besso on macroeconomic questions, specifically on the utility of the gold standard. For internal purposes, Einstein considers the gold standard unnecessary, although in normal conditions he agrees on its usefulness in cross-currency exchange: nevertheless, he notes that even a rich country can suffer from an imbalance of exports against imports, leading to a shortage of gold, and that in the present circumstances the reparations payments for World War I have been an additional factor for debtor countries, whilst creditor countries have suffered from bank runs and the monopolisation of gold by private individuals. There is therefore an argument for basing international trade too on a unit of reference other than gold, given the considerable instability of the current system.

He concludes on scientific matters: 'My new paper on gravitation and electricity has not yet come out. You must however take time to study this interesting matter; it is too long for a letter. When the offprints arrive I will already be on board ship'.