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The term "sterling area", which came into existence immediately after Great Britain's departure from gold on September 21, 1931, has become increasingly current, so that at the present time it is generally accepted in the terminology of international economics. The term sterling area, or sterling bloc, is necessarily extremely loose. In no sense are the countries contained in this group bound together in a formal monetary union. Nor can the boundaries of the area be defined precisely. As generally understood, however, the sterling area includes those countries both within and outside the British Empire whose currencies are closely linked to the British pound and whose monetary policies are governed more or less directly by those which may be followed from time to time by the British Exchequer and the Bank of England. It includes, in addition to the Dominions and colonies, Argentina, the Scandinavian countries (whose currencies were more promptly and more closely linked to sterling in the 1931 crisis than even those of the Dominions), Finland, Portugal, Egypt, Palestine, and some smaller countries.In contrast to the gold bloc, whose scope is limited strictly to currency problems, the sterling bloc is also to a certain degree an economic bloc. That is, trade within the sterling area represents a fairly large proportion of the total foreign trade of the countries included in that group. The attempt to forge closer links of currency and trade with the countries of this group has now become a well recognized principle of British foreign policy. The instruments which Great Britain has used in forging these closer links are represented by the Ottawa Agreements of 1932, by the reciprocal trade pacts with non-Empire countries, by the maintenance of stable exchange rates with these countries, by securing favourable treatment in exchange allotment, by the development of central banks in the Dominions, and by giving preferential treatment in the matter of international loans, which are, or at least may be, of vital importance in maintaining stability of exchanges in relation to sterling.

American political theorists have long assumed that the various governmental units composing the United States act only in accordance with the powers bestowed upon them by constitutions and conforming laws of their respective jurisdictions. But in recent years they have received an electric shock through the development of "government by special consent." Basically, the new principle means that a supervisory authority can in reality exercise rights over persons and property not brought under its wing by the constitution under which it operates—provided certain public agencies or private parties agree to the extension. This practice, which has not yet received philosophical treatment, has enabled the several governments of the Union to conquer new worlds without resorting to the long, difficult, and unwieldy process of constitutional amendment. The novel method of transfer by agreement is both rapid and flexible. But why, one is led to inquire, do independent bodies surrender portions of their "sovereignty" to other groups? Certainly not through mere altruism. They do it "for value received," be it financial aid, convenience, advertising advantages, or other rewards. In all ages, from biblical days to the latest moment, birthrights have been sold for "pottage."Financial pottage needs no introduction to most American observers. They are well aware that various states in the Union, for example, have agreed to accept national control over their internal roads, educational affairs, forestry, agriculture, and other matters in exchange for monetary assistance from the federal government. Such transfers of authority for cash are of mutual benefit.

During 1934 three countries of the British Empire established Central Banks. The Reserve Bank of India was established by an Act which received the Governor-General's assent on March 6 of that year; on July 3 assent was given to the Act to incorporate the Bank of Canada which opened for business in March, 1935; and on August 1, 1934, the Reserve Bank of New Zealand opened its doors. The fortunes of these new Central Banks will be keenly watched by those interested in central banking and the influence of monetary policy on economic welfare.Only one British oversea Dominion has, as yet, any experience of the running of a newly-created Central Bank. In Australia, the Commonwealth Bank is a commercial bank which has acquired the functions of a Central Bank, but the Union of South Africa in 1920 established an entirely new bank, just as Canada has now done, and the fourteen years' experience of the Reserve Bank of South Africa may usefully be studied by those who are taking an interest in the future of the Bank of Canada. Indeed, in several respects there is similarity between Canada and South Africa; in neither country is there a developed money market for short loans, nor is there much scope for open market operations; both countries possess valuable gold fields; both are debtor countries; each is linked closely to a foreign financial centre, South Africa with London, and Canada with New York.