Gold standard

A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932[1][2] as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold, effectively ending the Bretton Woods system.[3] Many states nonetheless hold substantial gold reserves.[4][5]

Historically, the silver standard and bimetallism have been more common than the gold standard.[6][7] The shift to an international monetary system based on a gold standard reflected accident, network externalities, and path dependence.[6] Great Britain accidentally adopted a de facto gold standard in 1717 when Isaac Newton, then-master of the Royal Mint, set the exchange rate of silver to gold too low, thus causing silver coins to go out of circulation.[8] As Great Britain became the world's leading financial and commercial power in the 19th century, other states increasingly adopted Britain's monetary system.[8]

The gold standard was largely abandoned during the Great Depression before being reinstated in a limited form as part of the post-World War II Bretton Woods system. The gold standard was abandoned due to its propensity for volatility, as well as the constraints it imposed on governments: by retaining a fixed exchange rate, governments were hamstrung in engaging in expansionary policies to, for example, reduce unemployment during economic recessions.[9][10]

According to a 2012 survey of 39 economists, the vast majority (92 percent) agreed that a return to the gold standard would not improve price-stability and employment outcomes,[11] and two-thirds of economic historians surveyed in the mid-1990s rejected the idea that the gold standard "was effective in stabilizing prices and moderating business-cycle fluctuations during the nineteenth century."[12] The consensus view among economists is that the gold standard helped prolong and deepen the Great Depression.[13][14] Historically, banking crises were more common during periods under the gold standard, while currency crises were less common.[2] According to economist Michael D. Bordo, the gold standard has three benefits that made its use popular during certain historical periods: "its record as a stable nominal anchor; its automaticity; and its role as a credible commitment mechanism."[15] The gold standard is supported by many followers of the Austrian School, free-market libertarians, and some supply-siders.[16]

  1. ^ Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press. pp. 7, 79. doi:10.2307/j.ctvd58rxg. ISBN 978-0-691-19390-8. JSTOR j.ctvd58rxg. S2CID 240840930.
  2. ^ a b Eichengreen, Barry; Esteves, Rui Pedro (2021), Fukao, Kyoji; Broadberry, Stephen (eds.), "International Finance", The Cambridge Economic History of the Modern World: Volume 2: 1870 to the Present, vol. 2, Cambridge University Press, pp. 501–525, ISBN 978-1-107-15948-8, archived from the original on 2021-07-31, retrieved 2021-07-31
  3. ^ Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press. pp. 86–127. doi:10.2307/j.ctvd58rxg. ISBN 978-0-691-19390-8. JSTOR j.ctvd58rxg. S2CID 240840930.
  4. ^ "Gold standard Facts, information, pictures Encyclopedia.com articles about Gold standard". Encyclopedia.com. Archived from the original on 2015-12-01. Retrieved 2015-12-05.
  5. ^ William O. Scroggs (11 October 2011). "What Is Left of the Gold Standard?". Foreignaffairs.com. Archived from the original on 22 February 2015. Retrieved 28 January 2015.
  6. ^ a b Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press. pp. 5–40. doi:10.2307/j.ctvd58rxg. ISBN 978-0-691-19390-8. JSTOR j.ctvd58rxg. S2CID 240840930.
  7. ^ Esteves, Rui Pedro; Nogues-Marco, Pilar (2021), Fukao, Kyoji; Broadberry, Stephen (eds.), "Monetary Systems and the Global Balance of Payments Adjustment in the Pre-Gold Standard Period, 1700–1870", The Cambridge Economic History of the Modern World: Volume 1: 1700 to 1870, vol. 1, Cambridge University Press, pp. 438–467, ISBN 978-1-107-15945-7
  8. ^ a b Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press. p. 5. doi:10.2307/j.ctvd58rxg. ISBN 978-0-691-19390-8. JSTOR j.ctvd58rxg. S2CID 240840930.
  9. ^ Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press. doi:10.2307/j.ctvd58rxg. ISBN 978-0-691-19390-8. JSTOR j.ctvd58rxg. S2CID 240840930.
  10. ^ Polanyi, Karl (1957). The Great Transformation. Beacon Press. ISBN 978-0-8070-5679-0. {{cite book}}: ISBN / Date incompatibility (help)
  11. ^ "Gold Standard". IGM Forum. 12 January 2012. Archived from the original on 29 July 2023. Retrieved 27 December 2015.
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  15. ^ Cite error: The named reference :10 was invoked but never defined (see the help page).
  16. ^ Cite error: The named reference :12 was invoked but never defined (see the help page).
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