Gold Standard

Gold standard - Wikipedia, the free encyclopedia http://en.wikipedia.org/w/index.php?
title=Gold_standard&printable=yes
From Wikipedia, the free encyclopedia
The gold standard is a monetary system in which the standard

economic unit of account is a fixed weight of gold. There are distinct
kinds of gold standard. First, the gold specie standard is a system in
which the monetary unit is associated with circulating gold coins, or
with the unit of value defined in terms of one particular circulating
gold coin in conjunction with subsidiary coinage made from a lesser
valuable metal.
Similarly, the gold exchange standard typically involves the

circulation of only coins made of silver or other metals, but where the Under a gold standard, paper notes
authorities guarantee a fixed exchange rate with another country that are convertible into pre-set, fixed
is on the gold standard. This creates a de facto gold standard, in that quantities of gold.
the value of the silver coins has a fixed external value in terms of
gold that is independent of the inherent silver value. Finally, the gold
bullion standard is a system in which gold coins do not circulate, but in which the authorities have agreed to
sell gold bullion on demand at a fixed price in exchange for the circulating currency.
1 History
1.1 Beginnings
1.2 The crisis of silver currency and bank notes Gold certificates were used as
(1750–1870) paper currency in the United States
1.3 The gold exchange standard (1870-1914) from 1882 to 1933. These
1.4 Impact of World War I (1914-25) certificates were freely convertible
1.5 The gold bullion standard and the decline of the into gold coins.
gold standard (1925–31)
1.6 Depression and World War II (1932–46)
1.6.1 Prolongation of the Great Depression
1.6.2 British hesitate to return to gold standard
1.7 Post-war international gold-dollar standard
(1946-1971)
2 Theory
2.1 Differing definitions
2.2 Advantages
2.3 Disadvantages
3 Advocates of a renewed gold standard
4 Gold as a reserve today
5 See also
6 References
7 Further reading
8 External links
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Gold standard - Wikipedia, the free encyclopedia http://en.wikipedia.org/w/index.php?title=Gold_standard&printable=yes
Beginnings
The gold specie standard was not designed, but rather arose out of a general acceptance that gold was useful
as a universal currency.[1] For these reasons, it existed not just in modern states, but in some of the great
empires of earlier times. One example is the Byzantine Empire, which used a gold coin known as the Byzant.
But with the ending of the Byzantine Empire, the European world tended to see silver, rather than gold, as
the currency of choice, and, in doing so, created the silver standard. An example is the silver pennies that
became the staple coin of Britain around the time of King Offa in the year 796 AD. The Spanish discovery of
the great silver deposits at Potosí and in Mexico in the 16th century led to an international silver standard in
conjunction with the famous pieces of eight, important until the nineteenth century.
In modern times the British West Indies was one of the first regions to adopt a gold specie standard.
Following Queen Anne's proclamation of 1704, the British West Indies gold standard was a de facto gold
standard based on the Spanish gold doubloon coin. In the year 1717, master of the Royal Mint Sir Isaac
Newton established a new mint ratio between silver and gold that had the effect of driving silver out of
circulation and putting Britain on a gold standard. However, only in 1821, following the introduction of the
gold sovereign coin by the new Royal Mint at Tower Hill in the year 1816, was the United Kingdom formally
put on a gold specie standard, the first of the great industrial powers. Soon to follow was Canada in 1853,
Newfoundland in 1865, and the USA and Germany de jure in 1873. The USA used the Eagle as their unit,
and Germany introduced the new gold mark, while Canada adopted a dual system based on both the
American Gold Eagle and the British Gold Sovereign.
Australia and New Zealand adopted the British gold standard, as did the British West Indies, while
Newfoundland was the only British Empire territory to introduce its own gold coin as a standard. Royal Mint
branches were established in Sydney, New South Wales, Melbourne, Victoria, and Perth, Western Australia
for the purpose of minting gold sovereigns from Australia's rich gold deposits.
The crisis of silver currency and bank notes (1750–1870)
In the late 18th century, wars and trade with China, which sold to Europe but had little use for European
goods, drained silver from the economies of Western Europe and the United States. Coins were struck in
smaller and smaller amounts, and there was a proliferation of bank and stock notes used as money.
In the 1790s, England, suffering a massive shortage of silver coinage, ceased to mint larger silver coins and
issued "token" silver coins and overstruck foreign coins. With the end of the Napoleonic Wars, England
began a massive recoinage program that created standard gold sovereigns and circulating crowns and
half-crowns, and eventually copper farthings in 1821. The recoinage of silver in England after a long drought
produced a burst of coins: England struck nearly 40 million shillings between 1816 and 1820, 17 million half
crowns and 1.3 million silver crowns. The 1819 Act for the Resumption of Cash Payments set 1823 as the
date for resumption of convertibility, reached instead by 1821. Throughout the 1820s, small notes were
issued by regional banks, which were finally restricted in 1826, while the Bank of England was allowed to
set up regional branches. In 1833, however, the Bank of England notes were made legal tender, and
redemption by other banks was discouraged. In 1844 the Bank Charter Act established that Bank of England
Notes, fully backed by gold, were the legal standard. According to the strict interpretation of the gold
standard, this 1844 act marks the establishment of a full gold standard for British money.
The US adopted a silver standard based on the Spanish milled dollar in 1785. This was codified in the 1792
Mint and Coinage Act, and by the Federal Government's use of the "Bank of the United States" to hold its
reserves, as well as establishing a fixed ratio of gold to the US dollar. This was, in effect, a derivative silver
standard, since the bank was not required to keep silver to back all of its currency. This began a long series
of attempts for America to create a bimetallic standard for the US Dollar, which would continue until the
1920s. Gold and silver coins were legal tender, including the Spanish real, a silver coin struck in the Western
Hemisphere. Because of the huge debt taken on by the US Federal Government to finance the Revolutionary
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War, silver coins struck by the government left circulation, and in 1806 President Jefferson suspended the
minting of silver coins.
The US Treasury was put on a strict hard-money standard, doing business only in gold or silver coin as part
of the Independent Treasury Act of 1848, which legally separated the accounts of the Federal Government
from the banking system. However the fixed rate of gold to silver overvalued silver in relation to the demand
for gold to trade or borrow from England. The drain of gold in favor of silver led to the search for gold,
including the California Gold Rush of 1849. Following Gresham's law, silver poured into the US, which
traded with other silver nations, and gold moved out. In 1853, the US reduced the silver weight of coins, to
keep them in circulation, and in 1857 removed legal tender status from foreign coinage.
In 1857 the final crisis of the free banking era of international finance began, as American banks suspended
payment in silver, rippling through the very young international financial system of central banks. In the
United States this collapse was a contributory factor in the American Civil War, and in 1861 the US
government suspended payment in gold and silver, effectively ending the attempts to form a silver standard
basis for the dollar. Through the 1860–1871 period, various attempts to resurrect bi-metallic standards were
made, including one based on the gold and silver franc; however, with the rapid influx of silver from new
deposits, the expectation of scarcity of silver ended.
The interaction between central banking and currency basis formed the primary source of monetary
instability during this period. The combination that produced economic stability was a restriction of supply of
new notes, a government monopoly on the issuance of notes directly and, indirectly, a central bank and a
single unit of value. Attempts to avoid these conditions produced periodic monetary crises: as notes
devalued; or silver ceased to circulate as a store of value; or there was a depression as governments,
demanding specie as payment, drained the circulating medium out of the economy. At the same time, there
was a dramatically expanded need for credit, and large banks were being chartered in various states,
including, by 1872, Japan. The need for a solid basis in monetary affairs would produce a rapid acceptance
of the gold standard in the period that followed.
By way of example, and following Germany's decision after the Franco-Prussian War to extract reparations
to facilitate a move to the gold standard, Japan gained the needed reserves after the Sino-Japanese War of
1894-1895. Whether the gold standard provided a government sufficient bona fides when it sought to borrow
abroad is debated. For Japan, moving to gold was considered vital to gain access to Western capital
markets.[2]
The gold exchange standard (1870-1914)
Towards the end of the 19th century, some of the remaining silver standard countries began to peg their
silver coin units to the gold standards of the United Kingdom or the USA. In 1898, British India pegged the
silver rupee to the pound sterling at a fixed rate of 1s 4d, while in 1906, the Straits Settlements adopted a
gold exchange standard against the pound sterling with the silver Straits dollar being fixed at 2s 4d.
At the turn of the century, the Philippines pegged the silver Peso/dollar to the US dollar at 50 cents. A
similar pegging at 50 cents occurred at around the same time with the silver Peso of Mexico and the silver
Yen of Japan. When Siam adopted a gold exchange standard in 1908, this left only China and Hong Kong on
the silver standard.
Impact of World War I (1914-25)
Governments faced with the need to fund high levels of expenditure, but with limited sources of tax revenue,
suspended convertibility of currency into gold on a number of occasions in the 19th century. The British
government suspended convertibility (that is to say, it went off the gold standard) during the Napoleonic
wars and the US government during the US Civil War. In both cases, convertibility was resumed after the
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war.[citation needed] The real test, however, came in the form of World War I, a test "it failed utterly"
according to economist Richard Lipsey.[1]
In order to finance the costs of war, most belligerent countries went off the gold standard during the war, and
suffered significant inflation. Because inflation levels varied between states, when they returned to the
standard after the war at price determined by themselves (some, for example, chose to enter at pre-war
prices), some countries' goods were undervalued and some overvalued.[1] Ultimately, the system as it stood
could not deal quickly enough with the large deficits and surpluses created in the balance of payments; this
has previously been attributed to increasing rigidity of wages (particularly in terms of wage cuts) brought
about by the advent of unionized labor, but is now more likely to be thought of as an inherent fault with the
system which came to light under the pressures of war and rapid technological change. In any case, prices
had not reached equilibrium by the time of the Great Depression, which served only to kill it off
completely.[1] In related circumstances, Germany, having lost much of its gold in reparations, could no
longer produce gold Reichsmarks, and was forced to issue unbacked paper money, leading to hyperinflation
in the 1920s.
The gold bullion standard and the decline of the gold standard (1925–31)
The gold specie standard ended in the United Kingdom and the rest of the British Empire at the outbreak of
World War I. Treasury notes replaced the circulation of the gold sovereigns and gold half sovereigns.
However, legally, the gold specie standard was not repealed. The end of the gold standard was successfully
effected by appeals to patriotism when somebody would request the Bank of England to redeem their paper
money for gold specie. It was only in the year 1925 when Britain returned to the gold standard in
conjunction with Australia and South Africa that the gold specie standard was officially ended.
The British Gold Standard Act 1925 both introduced the gold bullion standard and simultaneously repealed
the gold specie standard. The new gold bullion standard did not envisage any return to the circulation of gold
specie coins. Instead, the law compelled the authorities to sell gold bullion on demand at a fixed price. This
gold bullion standard lasted until 1931.[citation needed] On September 19, 1931, the United Kingdom left the
revised gold standard,[3] forced to suspend the gold bullion standard due to large outflows of gold across the
Atlantic Ocean. Australia and New Zealand had already been forced off the gold standard by the same
pressures connected with the Great Depression, and Canada quickly followed suit with the United Kingdom.
Depression and World War II (1932–46)
Prolongation of the Great Depression
Some economic historians, such as American professor Barry Eichengreen, blame the gold standard of the
1920s for prolonging the Great Depression.[4] Others including Federal Reserve Chairman Ben Bernanke
and Nobel Prize winning economist Milton Friedman lay the blame at the feet of the Federal Reserve.[5][6]
The gold standard limited the flexibility of central banks monetary policy by limiting their ability to expand
the money supply, and thus their ability to lower interest rates. In the US, the Federal Reserve was required
by law to have 40% gold backing of its Federal Reserve demand notes, and thus, could not expand the
money supply beyond what was allowed by the gold reserves held in their vaults.[7]
In the early 1930s, the Federal Reserve defended the fixed price of dollars in respect to the gold standard by
raising interest rates, trying to increase the demand for dollars. Higher interest rates intensified the
deflationary pressure on the dollar and reduced investment in U.S. banks. Commercial banks also converted
Federal Reserve Notes to gold in 1931, reducing the Federal Reserve's gold reserves, and forcing a
corresponding reduction in the amount of Federal Reserve Notes in circulation.[8] This speculative attack on
the dollar created a panic in the U.S. banking system. Fearing imminent devaluation of the dollar, many
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foreign and domestic depositors withdrew funds from U.S. banks to convert them into gold or other assets.[8]
The forced contraction of the money supply caused by people removing funds from the banking system
during the bank panics resulted in deflation; and even as nominal interest rates dropped, inflation-adjusted
real interest rates remained high, rewarding those that held onto money instead of spending it, causing a
further slowdown in the economy.[9] Recovery in the United States was slower than in Britain, in part due to
Congressional reluctance to abandon the gold standard and float the U.S. currency as Britain had done. It
was not until 1933 when the United States finally decided to abandon the gold standard that the economy
began to improve.[10]
British hesitate to return to gold standard
During the 1939-1942 period, the UK depleted much of its gold stock in purchases of munitions and
weaponry on a "cash-and-carry" basis from the U.S. and other nations.[citation needed] This depletion of the
UK's reserve convinced Winston Churchill of the impracticality of returning to a pre-war style gold standard.
To put it simply, the war had bankrupted Britain.
John Maynard Keynes, who had argued against such a gold standard, proposed to put the power to print
money in the hands of the privately owned Bank of England. Keynes, in warning about the menaces of
inflation, said "By a continuous process of inflation, governments can confiscate, secretly and unobserved,
an important part of the wealth of their citizens. By this method, they not only confiscate, but they
confiscate arbitrarily; and while the process impoverishes many, it actually enriches some".[11]
Quite possibly because of this, the 1944 Bretton Woods Agreement established the International Monetary
Fund and an international monetary system based on convertibility of the various national currencies into a
U.S. dollar that was in turn convertible into gold. It also prevented countries from manipulating their
currency's value to gain an edge in international trade.[citation needed]
Post-war international gold-dollar standard (1946-1971)
Main article: Bretton Woods system
After the Second World War, a system similar to a Gold Standard and sometimes described as a "gold
exchange standard" was established by the Bretton Woods Agreements. Under this system, many countries
fixed their exchange rates relative to the U.S. dollar. The U.S. promised to fix the price of gold at
approximately $35 per ounce. Implicitly, then, all currencies pegged to the dollar also had a fixed value in
terms of gold.[1] Under the administration of the French President Charles de Gaulle up to 1970, France
reduced its dollar reserves, trading them for gold from the U.S. government, thereby reducing U.S. economic
influence abroad. This, along with the fiscal strain of federal expenditures for the Vietnam War and a
persistent balance of payments deficits, led President Richard Nixon to end the direct convertibility of the
dollar to gold in 1971, resulting in the system's breakdown (the "Nixon Shock").
Commodity money is inconvenient to store and transport. It also does not allow the government to control or
regulate the flow of commerce within their dominion with the same ease that a standardized currency does.
As such, commodity money gave way to representative money, and gold and other specie were retained as
its backing.
Gold was a common form of money due to its rarity, durability, divisibility, fungibility, and ease of
identification,[2] often in conjunction with silver. Silver was typically the main circulating medium, with gold
as the metal of monetary reserve.
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It is difficult to manipulate a gold standard to tailor to an economy’s demand for money, providing practical
constraints against the measures that central banks might otherwise use to respond to economic crises.[12]
The gold standard variously specified how the gold backing would be implemented, including the amount of
specie per currency unit. The currency itself is just paper and so has no intrinsic value, but is accepted by
traders because it can be redeemed any time for the equivalent specie. A U.S. silver certificate, for example,
could be redeemed for an actual piece of silver.
Representative money and the gold standard protect citizens from hyperinflation and other abuses of
monetary policy, as were seen in some countries during the Great Depression. However, they were not
without their problems and critics, and so were partially abandoned via the international adoption of the
Bretton Woods System. That system eventually collapsed in 1971, at which time nearly all nations had
switched to full fiat money.
According to later analysis, the earliness with which a country left the gold standard reliably predicted its
economic recovery from the great depression. For example, Great Britain and Scandinavia, which left the
gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much
longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The
connection between leaving the gold standard as a strong predictor of that country's severity of its depression
and the length of time of its recovery has been shown to be consistent for dozens of countries, including
developing countries. This partly explains why the experience and length of the depression differed between
national economies.[13]
Differing definitions
A 100%-reserve gold standard, or a full gold standard, exists when a monetary authority holds sufficient gold
to convert all of the representative money it has issued into gold at the promised exchange rate. It is
sometimes referred to as the gold specie standard to more easily identify it from other forms of the gold
standard that have existed at various times. Opponents of a 100%-reserve standard, such as Byron Dale
(http://www.wealthmoney.org) , generally consider a 100%-reserve standard difficult to implement as the
quantity of gold in the world is too small to sustain current worldwide economic activity at current gold
prices. Its implementation would entail a many-fold increase in the price of gold.[citation needed]
This is due to the fractional-reserve banking system. As money is created by the central bank and spent into
circulation, the money expands via the money multiplier. Each subsequent loan and redeposit results in an
expansion of the monetary base. Therefore, the promised exchange rate would have to be constantly
adjusted.
In an international gold-standard system (which is necessarily based on an internal gold standard in the
countries concerned)[14], gold or a currency that is convertible into gold at a fixed price is used as a means
of making international payments. Under such a system, when exchange rates rise above or fall below the
fixed mint rate by more than the cost of shipping gold from one country to another, large inflows or outflows
occur until the rates return to the official level. International gold standards often limit which entities have
the right to redeem currency for gold. Under the Bretton Woods system, these were called "SDRs" for
Special Drawing Rights.[citation needed]
Advantages
Long-term price stability has been described as the great virtue of the gold standard.[15] Under the
gold standard, high levels of inflation are rare, and hyperinflation is impossible as the money supply
can only grow at the rate that the gold supply increases.[16] Economy-wide price increases caused by
ever-increasing amounts of currency chasing a constant supply of goods are rare,[16] as gold supply for
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monetary use is limited by the available gold that can be minted into coin.[16] High levels of inflation
under a gold standard are usually seen only when warfare destroys a large part of the economy,
reducing the production of goods, or when a major new source of gold becomes available.[16] In the
U.S. one of those periods of warfare was the Civil War, which destroyed the economy of the
South,[17] while the California Gold Rush made large amounts of gold available for minting.[18]
The gold standard limits the power of governments to inflate prices through excessive issuance of
paper currency.[16] It provides fixed international exchange rates between those countries that have
adopted it, and thus reduces uncertainty in international trade.[16] Historically, imbalances between
price levels in different countries would be partly or wholly offset by an automatic balance-
of-payment adjustment mechanism called the "price specie flow mechanism."[16]
The gold standard makes chronic deficit spending by governments more difficult, as it prevents
governments from inflating away the real value of their debts.[19] A central bank cannot be an
unlimited buyer of last resort of government debt. A central bank could not create unlimited quantities
of money at will, as there is a limited supply of gold.[16]
Disadvantages
The total amount of gold that has ever been mined has
been estimated at around 142,000 metric tons.[20] This is
less than the value of circulating money in the U.S. alone,
where more than $8.3 trillion is in circulation or in deposit
(M2).[21] Therefore, a return to the gold standard, if also
combined with a mandated end to fractional reserve
banking, would result in a significant increase in the
current value of gold, which may limit its use in current
applications.[22] However, this is specifically a
disadvantage of return to the gold standard and not the Gold prices (US$ per ounce) from 1968
efficacy of the gold standard itself. Some gold standard to 2006, in nominal US$ and inflation
advocates consider this to be both acceptable and adjusted US$.
necessary[23] The amount of such base currency (M0) is
only about one tenth as much as the figure (M2) listed
above.[24]
Deflation rewards savers[25][26] and punishes debtors.[27][28] Real debt burdens therefore rise, causing
borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may
choose to save some of their additional wealth rather than spending it all.[29] The overall amount of
expenditure is therefore likely to fall.[29] Deflation also prevents a central bank of its ability to
stimulate spending.[29] However in practice it has always been possible for governments to control
deflation by leaving the gold standard or by artificial expenditure.[29][30][31]
Mainstream economists believe that economic recessions can be largely mitigated by increasing
money supply during economic downturns.[32] Following a gold standard would mean that the amount
of money would be determined by the supply of gold, and hence monetary policy could no longer be
used to stabilize the economy in times of economic recession.[33] Such reason is often employed to
partially blame the gold standard for the Great Depression, citing that the Federal Reserve couldn't
expand credit enough to offset the deflationary forces at work in the market.[34] Opponents of this
viewpoint have argued that gold stocks were available to the Federal Reserve for credit expansion in
the early 1930s, but Fed operatives failed to utilize them.[35]
Monetary policy would essentially be determined by the rate of gold production.[36] Fluctuations in
the amount of gold that is mined could cause inflation if there is an increase, or deflation if there is a
decrease.[36][37] Some hold the view that this contributed to the severity and length of the Great
Depression as the gold standard forced the central banks to keep monetary policy too tight, creating
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deflation.[22][38] Milton Friedman however argued that the main cause of the severity of the Great
Depression in the United States was the Federal Reserve, and not the gold standard, as they willfully
kept monetary policy tighter than was required by the gold standard.[39] Additionally, three increases
by the Federal Reserve in bank reserve requirements occurred in 1936 and 1937, which doubled bank
reserve requirements[40]
Although the gold standard gives long-term price stability, it does in the short term bring high price
volatility.[37] In the United States from 1879 to 1913, the coefficient of variation of the annual change
in price levels was 17.0, whereas from 1943 to 1990 it was only 0.88.[37] It has been argued by among
others Anna Schwartz that this kind of instability in short-term price levels can lead to financial
instability as lenders and borrowers become uncertain about the value of debt.[41]
James Hamilton contended that the gold standard may be susceptible to speculative attacks when a
government's financial position appears weak, although others contend that this very threat
discourages governments' engaging in risky policy (see Moral Hazard). For example, some believe that
the United States was forced to raise its interest rates in the middle of the Great Depression to defend
the credibility of its currency after unusually easy credit policies in the 1920s.[38] This disadvantage
however is shared by all fixed exchange rate regimes and not just limited to gold money. All fixed
currencies that appear weak are subject to speculative attack.[42]
If a country wanted to devalue its currency, it would generally produce sharper changes than the
smooth declines seen in fiat currencies, depending on the method of devaluation.[43]
The return to the gold standard is supported by many followers of the Austrian School of Economics and, in
the United States, by strict constitutionalists, Objectivists, and free-market libertarians[44] largely because
they object to the role of the government in issuing fiat currency through central banks. A significant number
of gold-standard advocates also call for a mandated end to fractional-reserve banking.[citation needed]
Few politicians[23] today advocate a return to the gold standard, other than adherents of the Austrian school
and some supply-siders. However, some prominent economists have expressed sympathy with a
hard-currency basis, and have argued against fiat money, including former U.S. Federal Reserve Chairman
Alan Greenspan (himself a former Objectivist), and macro-economist Robert Barro.[45] Greenspan famously
argued the case for returning to a gold standard in his 1966 paper "Gold and Economic Freedom", in which
he described supporters of fiat currencies as "welfare statists" intent on using monetary policies to finance
deficit spending. He has argued that the fiat money system of his day (pre-Nixon Shock) had retained the
favorable properties of the gold standard because central bankers had pursued monetary policy as if a gold
standard were still in place.[46] U.S. Congressman Ron Paul has continually argued for the reinstatement of
the gold standard, but is no longer a strict advocate, instead supporting a basket of commodities that emerges
on the free markets.[47]
The current global monetary system relies on the U.S. dollar as a reserve currency by which major
transactions, such as the price of gold itself, are measured.[citation needed] A host of alternatives has been
suggested, including energy-based currencies, and market baskets of currencies or commodities, gold being
one of the alternatives.
In 2001, Malaysian Prime Minister Mahathir bin Mohamad proposed a new currency that would be used
initially for international trade among Muslim nations. The currency he proposed was called the Islamic gold
dinar and it was defined as 4.25 grams of pure (24-carat) gold. Mahathir Mohamad promoted the concept on
the basis of its economic merits as a stable unit of account and also as a political symbol to create greater
unity between Islamic nations. The purported purpose of this move would be to reduce dependence on the
United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with
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Islamic law against the charging of interest.[48] However, to date, Mahathir's proposed gold-dinar currency
has failed to take hold.[citation needed]
Main article: Gold reserves
The Swiss Franc was based on a 40% legal gold-reserve requirement from 1936, when it ended gold
convertibility,[49] until 2000. However, gold reserves are held in significant quantity by many nations as a
means of defending their currency, and hedging against the U.S. Dollar, which forms the bulk of liquid
currency reserves.
Both gold coins and gold bars are widely traded in liquid markets, and therefore still serve as a private store
of wealth. Some privately issued currencies, such as digital gold currency, are backed by gold reserves.
In 1999, to protect the value of gold as a reserve, European Central Bankers signed the Washington
Agreement on Gold, which stated that they would not allow gold leasing for speculative purposes, nor would
they enter the market as sellers except for sales that had already been agreed upon.
A Program for Monetary Reform (1939) - The Gold Standard

Bimetallism
Coinage Act of 1792
Coinage Act of 1873
Federal Reserve System
Full-reserve banking
Gold as an investment
Gold bug
Gold Points
Gold Reserve Act
Representative money
Silver standard
Store of value
The Great Deflation
International institutions:
Bank for International Settlements

International Monetary Fund
United Nations Monetary and Financial Conference
World Bank
1. ^ a b c d e Lipsey, Richard G. (1975). An introduction to positive economics (fourth ed.). Weidenfeld &
Nicolson. pp. 683–702. ISBN 0297768999.
2. ^ a b Metzler, Mark (2006). Lever of Empire: The International Gold Standard and the Crisis of Liberalism in
Prewar Japan.. Berkeley: University of California Press. p. [1] (http://eh.net/bookreviews/library/1166) .
ISBN 0-520-24420-6.
3. ^ Barry J. Eichengreen (15 September 2008). Globalizing capital: a history of the international monetary
system (http://books.google.com/books?id=_iNqESd-9R0C&pg=PA61) . Princeton University Press. pp. 61–.
ISBN 9780691139371. http://books.google.com/books?id=_iNqESd-9R0C&pg=PA61. Retrieved 23 November
9 de 14 17/01/2011 17:43
2010.
4. ^ Eichengreen, Barry (1992) Golden Fetters: The Gold Standard and the Great Depression, 1919-1939. Preface.
5. ^ Speech by Ben Bernanke to the Conference to Honor Milton Friedman at University of Chicago, November 8
2002. (http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm)
6. ^ WorldNetDaily, March 19 2008. (http://www.wnd.com/?pageId=59405)
7. ^ The original Federal Reserve Act provided for a note issue which was to be secured ... by a 40% reserve in
gold (http://www.jstor.org/pss/1807996)
8. ^ a b "FRB: Speech, Bernanke-Money, Gold, and the Great Depression -March 2, 2004"
(http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm) . Federalreserve.gov.
2004-03-02. http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm. Retrieved
2010-07-24.
9. ^ "In the 1930s, the United States was in a situation that satisfied the conditions for a liquidity trap. Over
1929-1933 overnight rates fell to zero, and they remained on the floor through the 1930's." (http://eh.net
/Clio/ASSAPapers/Hanes.pdf)
10. ^ The European Economy between Wars; Feinstein, Temin, and Toniolo
11. ^ John Maynard Keynes Economic Consequences of the Peace, 1920.
12. ^ Demirgüç-Kunt, Asli; Enrica Detragiache (April 2005). "Cross-Country Empirical Studies of Systemic Bank
Distress: A Survey" (http://ner.sagepub.com/cgi/reprint/192/1/68) . National Institute Economic Review 192 (1):
68–83. doi:10.1177/002795010519200108 (http://dx.doi.org/10.1177%2F002795010519200108) .
ISSN 0027-9501 (http://www.worldcat.org/issn/0027-9501) . OCLC 90233776 (http://www.worldcat.org
/oclc/90233776) . http://ner.sagepub.com/cgi/reprint/192/1/68. Retrieved 2008-11-12.
13. ^ Bernanke, Ben (March 2, 2004), "Remarks by Governor Ben S. Bernanke: Money, Gold and the Great
Depression", At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington,
Virginia.
14. ^ The New Palgrave Dictionary of Economics, 2nd edition (2008), Vol.3, S.695
15. ^ Bordo, Michael D. (2008). "Gold Standard". http://www.econlib.org/library/Enc/GoldStandard.html. The great
virtue of the gold standard was that it assured long-term price stability.
16. ^ a b c d e f g h "Advantages of the Gold Standard" (http://mises.org/books/goldstandard.pdf) . The Gold
Standard: Perspectives in the Austrian School. The Ludwig von Mises Institute. http://mises.org/books
/goldstandard.pdf. Retrieved 9 January 2011.
17. ^ http://eh.net/encyclopedia/article/ransom.civil.war.us The Economics of the Civil War the Union also
experienced inflation as a result of deficit finance during the war; the consumer price index rose from 100 at the
outset of the war to 175 by the end of 1865.
18. ^ http://eh.net/encyclopedia/article/whaples.goldrush California Gold Rush from 1792 until 1847 cumulative
U.S. production of gold was only about 37 tons. California’s production in 1849 alone exceeded this figure, and
annual production from 1848 to 1857 averaged 76 tons. ... Soaring gold output from the California and
Australia gold rushes is linked with a 30 percent increase in wholesale prices from 1850 through 1855.
19. ^ Gold and Economic Freedom by Alan Greenspan http://www.constitution.org/mon/greenspan_gold.htm
20. ^ Butterman, W.C.; Earle B. Amey III (2005) (PDF). Mineral Commodity Profiles—Gold (http://pubs.usgs.gov
/of/2002/of02-303/OFR_02-303.pdf) . Reston, Virginia: United States Geological Survey. OCLC 62034878
(http://www.worldcat.org/oclc/62034878) . http://pubs.usgs.gov/of/2002/of02-303/OFR_02-303.pdf. Retrieved
2008-11-12.
21. ^ "Money Stock and Debt Measures" (http://www.federalreserve.gov/releases/h6/current/default.htm) . Federal
Reserve Board. 2008-03-13. http://www.federalreserve.gov/releases/h6/current/default.htm. Retrieved
2008-03-16.
22. ^ a b Warburton, Clark (1966). "The Monetary Disequilibrium Hypothesis". Depression, Inflation, and
Monetary Policy: Selected Papers, 1945-1953. Baltimore: Johns Hopkins University Press. pp. 25–35.
OCLC 736401 (http://www.worldcat.org/oclc/736401) .
23. ^ a b Paul, Ron; Lewis Lehrman (1982) (PDF). The case for gold: a minority report of the U.S. Gold
Commission (http://www.mises.org/books/caseforgold.pdf) . Washington, D.C.: Cato Institute. p. 160.
ISBN 0-932790-31-3. OCLC 8763972 (http://www.worldcat.org/oclc/8763972) . http://www.mises.org/books
/caseforgold.pdf. Retrieved 2008-11-12.
24. ^ Data from http://www.federalreserve.gov/releases/h6/hist/ as interpreted in File:Components of the United
States money supply2.svg
25. ^ http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748704779704574554830014559864.html
deflation rewards savers who hoard cash
26. ^ http://208.106.154.79/story.aspx?82504cb2-de36-4934-bd4f-6912fbca58cc Deflation rewarded those who
saved
10 de 14 17/01/2011 17:43
27. ^ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am.gkYZFlB0A “Deflation hurts borrowers and

rewards savers,” said Drew Matus, senior economist at Banc of America Securities-Merrill Lynch in New York,
in a telephone interview. “If you do borrow right now, and we go through a period of deflation, your cost of
borrowing just went through the roof.”
28. ^ http://www.dailypaul.com/node/120184 which in contrast rewards savers and penalizes debtors, and
governments most of all, they being the largest debtors in the modern era.
29. ^ a b c d http://www.economist.com/node/13610845 Inflation is bad, but deflation is worse
30. ^ "The central bankers' burden" (http://www.economist.com/node/16590992?story_id=16590992&
CFID=136849207&CFTOKEN=92989586) . The Economist. 2010-07-15. http://www.economist.com
/node/16590992?story_id=16590992&CFID=136849207&CFTOKEN=92989586.
31. ^ http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf. Irving Fisher The Debt Deflation Theory of Great
Depressions "the above named factors have played a subordinate role as compared with two dominant factors,
namely over-indebtness to start with and deflation following soon after" and "I have, at present, a strong
conviction that these two economic maladies, the debt disease and the price-level disease, are...more important
causes then all others put together"
32. ^ Mankiw, N. Gregory (2002). Macroeconomics (5th ed.). Worth. pp. 238–255. ISBN 0324171900.
33. ^ Krugman, Paul. "The Gold Bug Variations" (http://www.slate.com/id/1912/) . Slate.com.
http://www.slate.com/id/1912/. Retrieved 2009-02-13.
34. ^ Timberlake, Richard H. 2005. "Gold Standards and the Real Bills Doctrine in US Monetary Policy". Econ
Journal Watch 2(2): 196-233. [2] (http://econjwatch.org/issues/volume-2-issue-2-august-2005)
35. ^ Timberlake, Richard H. 2005. "Gold Standards and the Real Bills Doctrine in US Monetary Policy". Econ
Journal Watch 2(2): 196-233. [3] (http://econjwatch.org/issues/volume-2-issue-2-august-2005)
36. ^ a b DeLong, Brad (1996-08-10). "Why Not the Gold Standard?" (http://www.j-bradford-delong.net/Politics
/whynotthegoldstandard.html) . Berkeley, California: University of California, Berkeley. http://www.j-bradford-
delong.net/Politics/whynotthegoldstandard.html. Retrieved 2008-09-25.
37. ^ a b c Bordo, Michael D. (2008). "Gold Standard" (http://www.econlib.org/library/Enc/GoldStandard.html) . In
David R. Henderson. Concise Encyclopedia of Economics. Indianapolis: Liberty Fund. ISBN 0-86597-666-X.
OCLC 123350134 (http://www.worldcat.org/oclc/123350134) . http://www.econlib.org/library
/Enc/GoldStandard.html. Retrieved 2010-08-28.
38. ^ a b Hamilton, James D. (2005-12-12). "The gold standard and the Great Depression"
(http://www.econbrowser.com/archives/2005/12/the_gold_standa.html) . Econbrowser.
http://www.econbrowser.com/archives/2005/12/the_gold_standa.html. Retrieved 2008-11-12. See also
Hamilton, James D. (April 1988). "Role of the International Gold Standard in Propagating the Great Depression"
(http://www3.interscience.wiley.com/journal/120017201/abstract) . Contemporary Economic Policy 6 (2):
67–89. doi:10.1111/j.1465-7287.1988.tb00286.x (http://dx.doi.org/10.1111%2Fj.1465-7287.1988.tb00286.x) .
http://www3.interscience.wiley.com/journal/120017201/abstract. Retrieved 2008-11-12.
39. ^ http://www.pbs.org/fmc/interviews/friedman.htm "One of the explanations given for the Federal Reserve
action was that they were tied to the ideology of the gold standard. The gold standard is not a limiting factor,
and the Federal Reserve at all times had enough gold so they could have maintained the requirements of the
gold standard at the same time that they expanded the quantity of money.
40. ^ http://www.jstor.org/pss/4538817 The Federal Reserve doubled reserve requirements between August 1936
and May 1937
41. ^ Michael D. Bordo and David C. Wheelock in The Federal Reserve Bank of St. Louis Review
(http://research.stlouisfed.org/publications/review/98/09/9809dw.pdf) September/October 1998.
42. ^ http://web.mit.edu/krugman/www/crises.html The classic example of this strategy is, of course, George Soros'
attack on the British pound in 1992. As argued in the case study below, it is likely that the pound would have
dropped out of the exchange rate mechanism in any case; but Soros's actions may have triggered an earlier exit
than would have happened otherwise.
43. ^ McArdle, Megan (2007-09-04). "There's gold in them thar standards!" (http://meganmcardle.theatlantic.com
/archives/2007/09/theres_gold_in_them_thar_stand.php) . The Atlantic Monthly.
http://meganmcardle.theatlantic.com/archives/2007/09/theres_gold_in_them_thar_stand.php. Retrieved
2008-11-12.
44. ^ "Time to Think about the Gold Standard? | Cato @ Liberty" (http://www.cato-at-liberty.org/2009/03/12/time-
to-think-about-the-gold-standard/) . Cato-at-liberty.org. 2009-03-12. http://www.cato-at-liberty.org/2009/03
/12/time-to-think-about-the-gold-standard/. Retrieved 2010-07-24.
45. ^ Salerno, Joseph T. (1982-09-09). "The Gold Standard: An Analysis of Some Recent Proposals"
(http://www.cato.org/pubs/pas/pa016.html) . Cato Policy Analysis. Cato Institute. http://www.cato.org/pubs/pas
/pa016.html. Retrieved 2009-03-23.
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46. ^ Greenspan, Alan (July 1966). "Gold and Economic Freedom" (http://www.constitution.org
/mon/greenspan_gold.htm) . The Objectivist 5 (7). http://www.constitution.org/mon/greenspan_gold.htm.
Retrieved 2008-10-16.
47. ^ "End The Fed & Consider Outlawing Fractional Reserve Banking" (http://www.ronpaul.com/2009-11-14
/end-the-fed-consider-outlawing-fractional-reserve-banking/) . 2009-11-14. http://www.ronpaul.com/2009-11-14
/end-the-fed-consider-outlawing-fractional-reserve-banking/.
48. ^ al-'Amraawi, Muhammad; Al-Khammar al-Baqqaali, Ahmad Saabir, Al-Hussayn ibn Haashim, Abu Sayf
Kharkhaash, Mubarak Sa'doun al-Mutawwa', Malik Abu Hamza Sezgin, Abdassamad Clarke and Asadullah
Yate (2001-07-01). "Declaration of 'Ulama on the Gold Dinar" (http://www.islamidag.dk/ulamaongold.html) .
Islam i Dag. http://www.islamidag.dk/ulamaongold.html. Retrieved 2008-11-14.
49. ^ http://books.google.com/books?id=IqPMKv1h4uEC&pg=PA33&lpg=PA33&
dq=switzerland+gold+convertibility+1926&source=bl&ots=Av1X48sG_i&sig=4ZtA5UfQ2JDb-
2bidicu7KFJ4lk&hl=en&ei=BTHgTM7DBYS8lQeqr8T7Aw&sa=X&oi=book_result&ct=result&resnum=1&
ved=0CBYQ6AEwAA#v=onepage&q=switzerland%20gold%20convertibility%201926&f=false
Bensel, Richard Franklin (2000). The political economy of American industrialization, 1877-1900.
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Eichengreen, Barry J.; Marc Flandreau (1997). The gold standard in theory and history. New York
City: Routledge. ISBN 0-415-15061-2. OCLC 37743323 (http://www.worldcat.org/oclc/37743323) .
Bordo, Michael D. (1999). Gold standard and related regimes: collected essays. Cambridge:
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/oclc/59422152) .
Bordo, Michael D; Anna Jacobson Schwartz and National Bureau of Economic Research (1984). A
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Depression. Annandale-on-Hudson, New York: Jerome Levy Economics Institute. OCLC 31141890
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Adjustment Under Fixed Exchange Rates, 1871-1913. Cambridge: Cambridge University Press.
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/bookreviews/library/1166) . ISBN 0-520-24420-6.</ref>
What is The Gold Standard? (http://www.uiowa.edu/ifdebook/faq/faq_docs/gold_standard.shtml)

University of Iowa Center for International Finance and Development
History of the Bank of England (http://www.bankofengland.co.uk/about/history/) Bank of England
1933 Audio of FDR's Explanation of the Banking Crisis & Gold Confiscation (http://www.knology.net
/~bilrum/fdrgoldaudio.htm)
Is the Gold Standard Still the Gold Standard among Monetary Systems? (http://www.cato.org/pubs/bp
/bp100.pdf) by Lawrence H. White Ph.D. Professor of Economic History
The Case for a 100 Percent Gold Dollar (http://mises.org/story/1829) by Murray N. Rothbard Ph.D.
Professor Emeritus of Economics
The Gold Bug Variations (http://www.pkarchive.org/cranks/goldbug.html) by Paul Krugman Ph.D.
Professor of Economics
Timeline: Gold's history as a currency standard (http://uk.reuters.com/article
/idUKTRE6A71J120101108)
Retrieved from "http://en.wikipedia.org/wiki/Gold_standard"
Categories: Gold standard | Gold | International trade | Monetary policy | Monetary economics | History of
banking | Economic history | Economic history of the United States | Economic history of Japan | Empire of
Japan
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Gold standard - Wikipedia, the free encyclopedia http://en.wikipedia.org/w/index.php?

From Wikipedia, the free encyclopedia

The gold standard is a monetary system in which the standard

Similarly, the gold exchange standard typically involves the

The crisis of silver currency and bank notes (1750–1870)

The gold exchange standard (1870-1914)

Impact of World War I (1914-25)

Depression and World War II (1932–46)

Prolongation of the Great Depression

British hesitate to return to gold standard

Post-war international gold-dollar standard (1946-1971)

Main article: Bretton Woods system

Main article: Gold reserves

A Program for Monetary Reform (1939) - The Gold Standard

Bank for International Settlements

27. ^ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am.gkYZFlB0A “Deflation hurts borrowers and

/article?id=pde2008_B000137&goto=bimetalism&result_number=140) . In Steven N. Durlauf and

What is The Gold Standard? (http://www.uiowa.edu/ifdebook/faq/faq_docs/gold_standard.shtml)

This page was last modified on 17 January 2011 at 06:54.

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