On 23 August 1931, the second Labour government split over the decision to cut unemployment benefits. The next day, a National Government, led by Labour leader Ramsay MacDonald, but largely supported by Conservative and Liberal MPs, was appointed to ‘save sterling’ – only to decide to leave the gold standard on 21 September 1931. These events generated two narratives within and outside the Labour Party, the first highlighting Labour’s betrayal of the working class, the second underlining Labour’s incompetence on economic matters. The two narratives crystalized into ‘myths’ in the following decades, a process linked to the fact that sterling turbulences occurred while other Labour governments were in office. This work links the betrayal myth to the incompetence myth and shows how the former developed, to some extent, in relation to the latter. By adopting a long-term perspective, it demonstrates that political myths go through ebbs and flows and are compounded and/or eclipsed by other myths. Building upon published literature, memoirs and press accounts, this work explains how the myth of betrayal, which after 1931 allowed a party demoralized and divided to coalesce around a common enemy, came to be perceived from the 1960s onwards as dysfunctional within a growing section of the Labour Party. The betrayal myth was eventually exorcized in the 1990s, through a process which also encompassed the renegotiation of the economic-incompetence myth.