6 ideas
The pre-1914 gold standard did not balance itself through gold flows and price adjustments as textbook models describe. It worked because Britain could use its empire, especially India, to absorb shocks and settle imbalances, so the system's stability was a political and colonial arrangement dressed up as a market mechanism.
India ran large export surpluses with continental Europe, the US and others, and ran a deficit with Britain through Home Charges, interest and services. Those multilateral surpluses let Britain cover its own deficits with rising industrial rivals. London also held India's reserves and could deploy them to support sterling in a crisis.
The Bank of England ran the world's key currency on a remarkably small gold stock. It relied on changes in Bank Rate to pull short-term funds into London instead of holding large reserves.
Look at who actually adjusted when the system was under strain, not at what the rules said. When London tightened, the costs of adjustment fell on primary-producing and peripheral economies through credit contraction and falling commodity prices.
British authorities moved India from silver onto a gold-exchange standard and did not give it a gold currency. Its gold and sterling reserves were held in London instead of in India. The India Office and the Council Bills mechanism managed these funds in ways that supported the London money market and sterling, often against Indian interests in local liquidity and development.
The system was already fragile before the war. Germany and the United States were building their own financial centers and gold reserves, and France was using its gold holdings for diplomatic leverage. This weakened London's ability to manage the system on a small reserve, so its later collapse reflected a structural decline of British monetary dominance, not only a wartime shock.