Even at its apex, the LMU was unable to move the world prices of these
metals. When silver became overvalued, it was exported (at times
smuggled) within the Union, in violation of its rules. The Union had to
suspend silver convertibility and thus accept a humiliating de facto
gold standard. Silver coins and tokens remained legal tender, though.
The unprecedented financing needs of the Union members - a result of
the First World War - delivered the coup de grace. The LMU was
officially dismantled in 1926 - but expired long before that.
The LMU had a common currency but this did not guarantee its survival.
It lacked a common monetary policy monitored and enforced by a common
Central Bank - and these deficiencies proved fatal.
In 1867, twenty countries debated the introduction of a global currency
in the International Monetary Conference. They decided to adopt the
gold standard (already used by Britain and the USA) following a period
of transition. They came up with an ingenious scheme. They selected
three "hard" currencies, with equal gold content so as to render them
interchangeable, as their legal tender. Regrettably for students of the
dismal science, the plan came to naught.
Another failed experiment was the Scandinavian Monetary Union (SMU),
formed by Sweden (1873), Denmark (1873) and Norway (1875).
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