A report on Gold standard

Two golden 20 kr coins from the Scandinavian Monetary Union, which was based on a gold standard. The coin to the left is Swedish and the one on the right is Danish.
Gold certificates were used as paper currency in the United States from 1882 to 1933. These certificates were freely convertible into gold coins.
The British gold sovereign or £1 coin was the preeminent circulating gold coin during the classical gold standard period.
Huge quantities of $20 double eagles were minted as a result of the California gold rush.
The US dollar was said to be on a limping standard due to huge quantities of Morgan silver dollars continuing to circulate at par with gold dollars despite their silver value being less.
William McKinley ran for president on the basis of the gold standard.
Ending the gold standard and economic recovery during the Great Depression.
Gold prices (US dollars per troy ounce) from 1914, in nominal US dollars and inflation adjusted US dollars.

Monetary system in which the standard economic unit of account is based on a fixed quantity of gold.

- Gold standard
Two golden 20 kr coins from the Scandinavian Monetary Union, which was based on a gold standard. The coin to the left is Swedish and the one on the right is Danish.

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Cordell Hull, U.S. Secretary of State 1933–44

Bretton Woods system

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The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement.

The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement.

Cordell Hull, U.S. Secretary of State 1933–44
Roosevelt and Churchill during their secret meeting of 9–12 August 1941, in Newfoundland resulted in the Atlantic Charter, which the U.S. and Britain officially announced two days later.
John Maynard Keynes (right) and Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia, U.S., 8 March 1946
Gold prices (US$ per troy ounce) with a line approximately marking the collapse of Bretton Woods.

The Bretton Woods system required countries to guarantee convertibility of their currencies into U.S. dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold (or 0.88867 gram fine gold per dollar).

The Spanish silver dollar created a global silver standard from the 16th to 19th centuries.

Silver standard

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Monetary system in which the standard economic unit of account is a fixed weight of silver.

Monetary system in which the standard economic unit of account is a fixed weight of silver.

The Spanish silver dollar created a global silver standard from the 16th to 19th centuries.

The move away from the silver to the gold standard began in the 18th century when Great Britain set the gold guinea’s price in silver higher than international prices, attracting gold and putting them on a de facto gold standard.

The Eccles Federal Reserve Board Building in Washington, D.C. houses the main offices of the Board of Governors of the United States' Federal Reserve System

Central bank

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Institution that manages the currency and monetary policy of a state or formal monetary union,

Institution that manages the currency and monetary policy of a state or formal monetary union,

The Eccles Federal Reserve Board Building in Washington, D.C. houses the main offices of the Board of Governors of the United States' Federal Reserve System
The European Central Bank building in Frankfurt
Central bank independence versus inflation. This often cited research published by Alesina and Summers (1993) is used to show why it is important for a nation's central bank (i.e.-monetary authority) to have a high level of independence. This chart shows a clear trend towards a lower inflation rate as the independence of the central bank increases. The generally agreed upon reason independence leads to lower inflation is that politicians have a tendency to create too much money if given the opportunity to do it. The Federal Reserve System in the United States is generally regarded as one of the more independent central banks
Sealing of the Bank of England Charter (1694), by Lady Jane Lindsay, 1905.
The Bank of England, established in 1694.
Walter Bagehot, an influential theorist on the economic role of the central bank.
The Bank of Finland in Helsinki
The headquarters of the People's Bank of China (established in 1948) in Beijing.

At the most basic level, monetary policy involves establishing what form of currency the country may have, whether a fiat currency, gold-backed currency (disallowed for countries in the International Monetary Fund), currency board or a currency union.

The Hatter's hat shows an example of the old pre-decimal system: the hat costs half a guinea (10/6).

Pound sterling

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Official currency of the United Kingdom and its associated territories.

Official currency of the United Kingdom and its associated territories.

The Hatter's hat shows an example of the old pre-decimal system: the hat costs half a guinea (10/6).
King Offa penny (eighth century)
Penny of Henry III, 13th century
Edward III noble (80 pence), 1354–55
Crown (5/–) of Edward VI, 1551
Guinea of James II, 1686. The "Elephant and Castle" motif below his head is that of the Royal African Company: the gold came from Britain's trade in African slaves from the Guinea region of West Africa
"Shield reverse" sovereign of Queen Victoria, 1842
The cost of £1 in US dollars (from 1990)
The cost of one Euro in sterling terms (from 1999)
Reverse of a £5 Series G Bank of England note
The British Islands (red) and overseas territories (blue) using sterling or their local issue
Selection of current sterling banknotes printed by all banks
GBP/USD exchange rate
UK inflation history
Uk bonds 1960-2022 Government borrowing for debt (10 year bond) increased to over 15% in the 1970s and early 1980s

But without addressing the problem of underweight silver coins, and with the high resulting gold-silver ratio of 15.2, it gave sterling a firmer footing in gold guineas rather than silver shillings, resulting in a de facto gold standard.

Spanish silver eight-real or peso of 1768

United States dollar

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Official currency of the United States and several other countries.

Official currency of the United States and several other countries.

Spanish silver eight-real or peso of 1768
Alexander Hamilton finalized the details of the 1792 Coinage Act and the establishment of the U.S. Mint.
Continental one third dollar bill (obverse)
Series of 1917 $1 United States Note
Gold double eagle ($20 coin), 1907
John Maynard Keynes (right) and Harry Dexter White at the inaugural meeting of the International Monetary Fund in 1946. They were instrumental in drafting the provisions of the post-war global financial system.
The Headquarters of the Federal Reserve System in Washington, D.C.
U.S. Consumer Price Index, starting from 1913
100 usd
100 usd
Worldwide use of the U.S. dollar:
United States
External adopters of the US dollar
Currencies pegged to the US dollar
Currencies pegged to the US dollar w/ narrow band
Worldwide use of the euro:
Eurozone
External adopters of the euro
Currencies pegged to the euro
Currencies pegged to the euro w/ narrow band
EUR/USD exchange rate

From implementation of the 1792 Mint Act to the 1900 implementation of the gold standard the dollar was on a bimetallic silver-and-gold standard, defined as either 371.25 grains (24.056 g) of fine silver or 24.75 grains of fine gold (gold-silver ratio 15).

Keynes in 1933

John Maynard Keynes

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English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Keynes in 1933
King's College, Cambridge. Keynes's grandmother wrote to him saying that, since he was born in Cambridge, people will expect him to be clever.
Keynes's colleague, David Lloyd George. Keynes was initially wary of the "Welsh Wizard," preferring his rival Asquith, but was impressed with Lloyd George at Versailles; this did not prevent Keynes from painting a scathing picture of the then-prime minister in The Economic Consequences of the Peace.
The Great Depression and its periods of worldwide economic hardship formed the backdrop against which the Keynesian Revolution took place. This image is Migrant Mother, taken by photographer Dorothea Lange in March 1936.
Caricature by David Low, 1934
Keynes (right) and the US representative Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia in 1946
Prime Minister Clement Attlee with King George VI after Attlee won the 1945 election
Neo-Keynesian IS–LM model is used to analyse the effect of demand shocks on the economy
The economist Manmohan Singh, the then prime minister of India, spoke strongly in favour of Keynesian fiscal stimulus at the 2008 G-20 Washington summit.
Friedrich Hayek, one of Keynes's most prominent critics
Painter Duncan Grant (left) with Keynes in 1912
Lydia Lopokova and Keynes in the 1920s
46 Gordon Square, where Keynes often stayed while in London. Following his marriage, Keynes took out an extended lease on Tilton House, a farm in the countryside near Brighton, which became the couple's main home when not in the capital.
Blue plaque, 46 Gordon Square
Tilton House, 2021

Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for domestic policy autonomy.

Croeseid bimetallic equivalence: 1 gold Croeseid of 8.1 grams was equivalent in value to 10 silver Croeseids of 10.8 grams.

Bimetallism

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Monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.

Monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.

Croeseid bimetallic equivalence: 1 gold Croeseid of 8.1 grams was equivalent in value to 10 silver Croeseids of 10.8 grams.
Achaemenid bimetallic equivalence: 1 gold Daric was equivalent in value to 20 silver Sigloi. Under the Achaemenids the exchange rate in weight between gold and silver was 1 to 13.
1896 Republican poster warns against free silver.

During the 19th century there was a great deal of scholarly debate and political controversy regarding the use of bimetallism in place of a gold or silver standard (monometallism).

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.

Great Depression

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Severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States.

Severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States.

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.
The unemployment rate in the U.S. during 1910–60, with the years of the Great Depression (1929–39) highlighted
The Dow Jones Industrial Average, 1928–1930
Money supply decreased considerably between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States.
Crowd gathering at the intersection of Wall Street and Broad Street after the 1929 crash
U.S. industrial production, 1928–1939
The Great Depression in the U.S. from a monetary view. Real gross domestic product in 1996-Dollar (blue), price index (red), money supply M2 (green) and number of banks (grey). All data adjusted to 1929 = 100%.
Crowd at New York's American Union Bank during a bank run early in the Great Depression
Crowds outside the Bank of United States in New York after its failure in 1931
Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas, 1938
The Depression in international perspective
The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period. Dotted red line = long-term trend 1920–1970.
A female factory worker in 1942, Fort Worth, Texas. Women entered the workforce as men were drafted into the armed forces.
An impoverished American family living in a shanty, 1936
Unemployed men march in Toronto, Ontario, Canada.
Adolf Hitler speaking in 1935
Benito Mussolini giving a speech at the Fiat Lingotto factory in Turin, 1932
Unemployed people in front of a workhouse in London, 1930
Unemployed men standing in line outside a depression soup kitchen in Chicago 1931.
Burning shacks on the Anacostia flats, Washington, D.C. put up by the Bonus Army (World War I veterans) after the marchers with their wives and children were driven out by the regular Army by order of President Hoover, 1932
Buried machinery in a barn lot; South Dakota, May 1936. The Dust Bowl on the Great Plains coincided with the Great Depression.
CCC workers constructing drainage culvert, 1933. Over 3 million unemployed young men were taken out of the cities and placed into 2,600+ work camps managed by the CCC.
The WPA employed 2–3 million at unskilled labor.
Black Friday, May 9, 1873, Vienna Stock Exchange. The Panic of 1873 and Long Depression followed.

One reason why the Federal Reserve did not act to limit the decline of the money supply was the gold standard.

Clockwise from top-left: Federal Reserve, Bank of England, European Central Bank, Bank of Canada

Monetary policy

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Policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency.

Policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency.

Clockwise from top-left: Federal Reserve, Bank of England, European Central Bank, Bank of Canada
Banknotes with a face value of 5000 in different currencies. (United States dollar, Central African CFA franc, Japanese yen, Italian lira, and French franc)
Reproduction of a Song dynasty note, possibly a Jiaozi, redeemable for 770 mò.
Yield curve becomes inverted when short-term rates exceed long-term rates.
2016 meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C.
Mechanics of open market operations: Demand-Supply model for reserves market
1979 $10,000 United States Treasury bond
A run on a Bank of East Asia branch in Hong Kong, caused by "malicious rumours" in 2008.
Gold certificates were used as paper currency in the United States from 1882 to 1933. These certificates were freely convertible into gold coins.
The Bank of Japan, in Tokyo, established in 1882.
The Bank of Finland, in Helsinki, established in 1812.
The headquarters of the Bank for International Settlements, in Basel (Switzerland).
The Reserve Bank of India (established in 1935) Headquarters in Mumbai.
The Central Bank of Brazil (established in 1964) in Brasília.
The Bank of Spain (established in 1782) in Madrid.

The establishment of national banks by industrializing nations was associated then with the desire to maintain the currency's relationship to the gold standard, and to trade in a narrow currency band with other gold-backed currencies.

Gold can be drawn into a monatomic wire, and then stretched more before it breaks.

Gold

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Chemical element with the symbol Au and atomic number 79, making it one of the higher atomic number elements that occur naturally.

Chemical element with the symbol Au and atomic number 79, making it one of the higher atomic number elements that occur naturally.

Gold can be drawn into a monatomic wire, and then stretched more before it breaks.
A gold nugget of 5 mm in size can be hammered into a gold foil of about 0.5 m2 in area.
Different colors of Ag–Au–Cu alloys
Gold(III) chloride solution in water
Schematic of a NE (left) to SW (right) cross-section through the 2.020-billion-year-old Vredefort impact crater in South Africa and how it distorted the contemporary geological structures. The present erosion level is shown. Johannesburg is located where the Witwatersrand Basin (the yellow layer) is exposed at the "present surface" line, just inside the crater rim, on the left. Not to scale.
Oldest golden artifacts in the world (4600 BC - 4200 BC) from Varna necropolis, Bulgaria - grave offerings on exposition in Varna Museum.
An Indian tribute-bearer at Apadana, from the Achaemenid satrapy of Hindush, carrying gold on a yoke, circa 500 BC.
The Muisca raft, between circa 600-1600 AD. The figure refers to the ceremony of the legend of El Dorado. The zipa used to cover his body in gold dust, and from his raft, he offered treasures to the Guatavita goddess in the middle of the sacred lake. This old Muisca tradition became the origin of the legend of El Dorado. This Muisca raft figure is on display in the Gold Museum, Bogotá, Colombia.
Ancient golden Kritonios Crown, funerary or marriage material, 370–360 BC. From a grave in Armento, Basilicata
Gold coin of Eucratides I (171–145 BC), one of the Hellenistic rulers of ancient Ai-Khanoum. This is the largest known gold coin minted in antiquity (169.2 g; 58 mm).
An early mention of gold in the Beowulf
Gold crafts from the Philippines prior to Western contact.
The Agusan image, depicting a deity from northeast Mindanao.
Time trend of gold production
A miner underground at Pumsaint gold mine, Wales; c. 1938.
Grasberg mine, Indonesia is the world's largest gold mine.
Relative sizes of an 860 kg block of gold ore and the 30 g of gold that can be extracted from it, Toi gold mine, Japan.
Gold prospecting at the Ivalo River in the Finnish Lapland in 1898
Gold Nuggets found in Arizona.
Two golden 20 kr coins from the Scandinavian Monetary Union, which was based on a gold standard. The coin to the left is Swedish and the right one is Danish.
Gold price history in 1960–2020.
Moche gold necklace depicting feline heads. Larco Museum Collection, Lima, Peru.
A 21.5k yellow gold pendant watch so-called "Boule de Genève" (Geneva ball), ca. 1890.
Cake with gold decoration served at the Amstel Hotel, Amsterdam
Mirror for the James Webb Space Telescope coated in gold to reflect infrared light
Kamakshi Amman Temple with golden roof, Kanchipuram.
Iron pyrite or "fool's gold"
Minoan jewellery; 2300–2100 BC; various sizes; Metropolitan Museum of Art (New York City)
Pair of Sumerian earrings with cuneiform inscriptions; 2093–2046 BC; Sulaymaniyah Museum (Sulaymaniyah, Iraq)
Ancient Egyptian statuette of Amun; 945–715 BC; gold; {{cvt|175x47|mm}}; Metropolitan Museum of Art
Ancient Egyptian signet ring; 664–525 BC; gold; diameter: {{cvt|30|x|34|mm}}; British Museum (London)
Ancient Greek stater; 323–315 BC; {{cvt|18|mm}}; Metropolitan Museum of Art
Etruscan funerary wreath; 4th–3rd century BC; length: {{cvt|333|mm}}; Metropolitan Museum of Art
Roman aureus of Hadrian; 134–138 AD; 7.4 g; Metropolitan Museum of Art
Quimbaya lime container; 5th–9th century; gold; height: {{cvt|230|mm}}; Metropolitan Museum of Art
Byzantine scyphate; 1059–1067; diameter: {{cvt|25|mm}}; Cleveland Museum of Art (Cleveland, Ohio, USA)
Pre-Columbian pendant with two bat-head warriors who carry spears; 11th–16th century; gold; overall: {{cvt|76.2|mm}}; from the Chiriqui Province (Panama); Metropolitan Museum of Art
English Neoclassical box; 1741; overall: {{cvt|44|x|116|x|92|mm}}; Metropolitan Museum of Art
French Rococo glass bottle mounted in gold; circa 1775; overall: {{cvt|70|x|29|mm}}; Cleveland Museum of Art

In the past, a gold standard was often implemented as a monetary policy.