Essay On The Gold Standard

The origin of the gold standard came from the use of gold coins as a medium of exchange, unit of account, and store of value. While gold has played these roles since ancient times, the gold standard as a legal institution dates from 1819, when the British Parliament repealed longstanding restrictions on the export of gold coins and bullion from Britain. Later in the 19th century, the United States, Germany, Japan, and other countries also adopted the gold standard. At the time, Britain was the world’s leading economic power, and other nations hoped to achieve similar economic success by following British precedent. Given Britain’s preeminence in international trade and the advanced development of its financial institutions, London naturally

The gold standard broke down during WWI, as major belligerents resorted to inflationary finance. Governments effectively suspended the gold standard during World War I and financed part of their massive military expenditures by printing money. Further, labor forces and productive capacity were reduced sharply through war losses. As a result, price levels were higher everywhere at the war’s conclusion in 1918. Several countries experienced runaway inflation as their governments attempted to aid the reconstruction process through public expenditures. These governments financed their purchases simply by printing the money they needed, as they sometimes had during the war. The result was a sharp rise in money supplies and price levels. Most countries had lost gold while some had gained it. So, Gold Exchange Standard was put into force from 1925 to

When some countries started to get rid of the gold standard, then it just collapsed as it was a system that could not function unless all of the trading countries agreed to it. Now, countries will have more flexibility in stimulating their economies, as the exit from gold standard gave them back their monetary autonomy and allowed them to depreciate their exchange rates. At the same time, the depreciation in exiting countries increased difficulties for countries with an exchange rate that was still tied to gold and consequently pushed them towards leaving the gold standard as