In the nineteenth century, gold standard, deflationary policy constituted the basic instrument for restoring an economy’s competitiveness. However, in the interwar period deflation ceased to be an effective adjustment mechanism. This was spectacularly illustrated by the unsuccessful defence of the pound’s overvalued gold parity in 1925–1931. Ultimately the UK left the gold standard and allowed depreciation of its currency. Almost everywhere it was tried, depreciation stimulated economic recovery. On the other hand, in Germany, continuation of the deflationary policy laid the groundwork for Hitler to come to power. The frightening analogy between the deflationary policy applied to defend the gold standard and “internal devaluation” should provide food for thought for European leaders.