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An argumentative essay on the gold standard
An argumentative essay on the gold standard
Gold standard pros and cons
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THE GOLD STANDARD IN THE INTERNATIONAL ECONOMIC SYSTEM
During the late nineteenth century, the global economy was characterized by use of a gold standard. The gold standard helped to unite the economies of the world’s nations, thereby leading to increased prosperity and stability. The success of the gold standard was related to the particular circumstances of the time. As conditions changed, the gold standard became less viable and was eventually dropped. This paper will describe the pros and cons of the gold standard as it existed in the nineteenth century. In this way, an explanation will be provided for why the gold standard rose to prominence and then declined.
The gold standard is a monetary system in which the value of a nation’s currency is attached to the value of gold. In this system, gold can be exchanged for currency and currency can be exchanged for gold. During the nineteenth century, the major nations of the world switched to the gold standard, thereby replacing the previous system of bimetallism (a standard based on the values of both gold and silver). In 1821, Britain was the first nation to adopt the gold standard. At the time, Britain was the wealthiest and most powerful nation in the world. In order to facilitate international trade, other nations began following Britain’s example (Eichengreen 7). The change did not occur smoothly in every country. For example, after the United States adopted the gold standard in 1873, a politician named William Jennings Bryan led a movement to switch to a silver standard instead. At that time, silver was relatively cheap because an abundance of it had been discovered in the mines of the Western U.S. Bryan, an advocate for the rights of farmers and other laborers...
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...ple, monetary authorities were more concerned with convertibility and national interests than they were with economic issues on the domestic level. The gold standard also declined because of the problem of governments needing reserves in order to back up their currencies. Governments were not always able to meet this demand, especially as the world’s supply of gold dwindled over time.
Works Cited
Balachandran, G. “Power and Markets in Global Finance: The Gold Standard, 1890-1926.” Journal of Global History 3 (2008), 313-335.
Eichengreen, Barry. Globalizing Capital: A History of the International Monetary System. Princeton, NJ: Princeton University Press, 1996.
Galbraith, John Kenneth. Economics in Perspective: A Critical History. Boston: Houghton Mifflin Company, 1987.
Weatherford, Jack. The History of Money. New York: Three Rivers Press, 1997.
On a stop in Colorado during a business trip to California in 1883, Coin became fascinated with silver and took up a pick to try his hand at mining. Calling his mine “Silver Bell,” Harvey’s mine was the second largest producer in the area; however, due to the increase in transportation costs, increasing labor unrest, and the plummeting market value of silver, Harvey abandoned his mine. From Coin’s mining days, he formed an interest in silver as opposed to gold as the U.S. monetary system standard. In 1891, he became the chairman of the Trans-Mississippi Congress, whose interest was in promoting legislation that would benefit the states west of the Mississippi.
He states that the financial system was based on competing state banks with no central bank which promoted a rapid economic growth. As the American banking system developed the money supply developed with it. The federal government began the banking system through the issuing of specie but as the capitalist system developed the banking structure developed as well. During the Civil War, the North printed Greenbacks that drove gold from the domestic circulation to help pay for war necessities. The Greenbacks, however, were rarely used in the South expressing the different economies of the North and the South at the time of the Civil War. With differing economies and the growth of specie and paper money, Brands argues that the basis of knowledge about the money system of this time lays a foundation for how Carnegie, Rockefeller, and others were able to manipulate the market and gain wealth. Leading into price manipulation by those in corporate
...h he had favored central banking for most of his life, in 1970 he had begun advocating denationalizing money. In his opinion private enterprise’s that issued distinct currencies, he argued, would have an incentive to maintain their currency’s purchasing power. Which would then mean that customers could choose among competing currencies. Now, whether they would revert to a gold standard or not was a question that Hayek was too much of a believer in spontaneous order to predict. With the collapse of communism in Eastern Europe at the time, some economic consultants had considered Hayek’s currency system as a replacement for fixed-rate currencies.
As the new century approached, a national crisis began to develop in the United States. The nation faced a severe depression, nationwide labor unrest and violence, and the government’s inability to fix any of the occurring problems. The Panic of 1893 ravaged the nation and became the worse economic crisis of its time. The depression’s ruthlessness contributed to social unrest and weakened the monetary system’s strength, leading to a debate over what would be the foundation of the national currency. As the era ended, the US sought to increase its power and strength.
“In the years which followed the gold discoveries, society was not stratified. Moral and religious principles were often disregarded, and all kinds of irregular situations could be found.”3
Ernst, Joseph Albert. Money and politics in America, 1755–1775; a study in the Currency act of
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
Workers grew concerned about their situation as the century progressed, after the Silver Crash of 1893. The Sherman Act of 1890 (SHRM, 2014) obliged the Treasury to buy silver every month at market value. The government had bought almost all the silver from the mines. This also caused the depletion of gold. People presented their issued notes to the government and received gold instead of silver. Workers organized and tried to improve their lot in life. Management and government opposed their efforts. J.P. Morgan had an upper hand here. Morgan purchased the debt of the Treasury for 3.5 million ounces of gold in exchange for $65 million worth of 30-year gold bonds. During this time of panic, J.P. Morgan acted as the Nation’s bank.
Between 1999 and 2000, there is a Y2K bug with the computers and many other electronic items because of the early setting with the computer program. People set the year with only two digits in the computer program, as the changing of the year 1999 to 2000, the digit will change from “99” to “00” which might cause the confusion of the data storage and might change from “1999” back to “1900” or “19100”(See [1]). As this might have a big influence to the society, the price of the gold also might have a big change. Therefore in the article, Swart gave out the example of the changes of gold’s price between 1999 to 2000 because of the scare from Y2K and the millennium fever. The use of financial concepts and Linear Algebra tells the readers about how the price can be changes at that period of time. The difference of the increasing or reducing the price of gold for $1 will cause the huge difference of profit after 2000. So the business needs to determine a price of gold that fair to both customers and the business. Swart uses the...
In this essay, we initially examine what led to the end of the Bretton Woods System. Although several factors have been identified, the ones highlighted in the essay look at the ‘Growth in capital mobility’ during that period and the ‘Role of the United States’, which is further elaborated in Section I of the essay. Under Section II, the essay aims at analysing the performance of the Bretton Woods System. The analysis is done on the basis of looking at the ‘Role in the transition of economies post World War II ‘ and ‘Growth of trade’ during that period. Factors that led to...
Ferguson, Niall. The Ascent of Money: a Financial History of the World. 1st ed. New York: Penguin, 2008. Print.
Paper money is more complex. From 1900 through 1971 (with the exception of during World War I), the US dollar was backed by gold, meaning its value was legally defined by a certain weight of the metal. That ended in 1971, when Richard Nixon shocked the world by breaking the link to gold and allowing the dollar’s value to be determined by trading in the foreign exchange markets. The dollar is valuable not because it’s as good as gold, but because you can buy goods and services produced in the United States with it—and, crucially, it’s the only form the US government will accept for tax payments. Among the Federal Reserve’s many functions is allowing the issuance of just the right quantity of dollars—enough to keep the wheels of commerce well greased without slipping into a hyperinflationary crisis.
9.stanat,R (2000)global gold : “panning for profits in foreign markets ,journal of consumermarketing“ . Volume 17 no 2
The idea of mercantilism was for nations to export more than they important and accumulate gold or silver, but mainly gold, to make up the difference (Mercantilism, n.d.). At the heart of mercantilism was that by maximizing net exports that would lead them to the best route to national wealth (C.W., 2013). This started “bullionism”, the idea that the only way a person could measure a country’s wealth and success was by the amount of gold that had (C.W., 2013). The best way to achieve “bullionism” was by making fewer imports and much exports. By doing that they make a net inflow of foreign exchange and maximizing the country’s gold stock (C.W., 2013).
Today, couple of monetary forms are completely upheld by gold or silver. Subsequent to most world monetary standards are fiat cash, the cash supply could increment quickly for political reasons, bringing about inflation. The