RE: The Gold Standard Myth
1 yr
1 Min Read
141 words
The Coinage Act of 1792 set the US dollar as a particular weight in silver.
People in the US were using worn out Spanish Dollars; so they took a stack of coins from circulation and set the dollar equal that amount of silver.
The founders thought that the ratio of the price of gold to silver was a given; so they created a gold coin based on this ratio.
The system didn't work. Every time there was a gold or silver discovery, there would be a financial crisis. It was also absurd to leave one's economy hostage to the ups and downs of the mining sector.
The idea that the US dollar was equal to the price of a given weight in silver held for a few hundred years. The gold standard is not a total myth.
Posted Using LeoFinance Beta
Certainly it is. There were Demand Notes printed during the Civil War. In fact, didnt Southern States create their onw currency? That was not backed by gold. Yet it encompassed a significate portion of the US GDP.
Ironic how it is easy to overlook and focus only on the USD when there were dozens of different currencies created during the time period you mention.
Posted Using LeoFinance Beta
I agree that there was never a time when there was a perfect economy based on gold or silver.
I will have to check my history books, but I think the Civil War came after 1792.
The best way to point out that the US never had true and perfect gold standard is to point out that the US started with a huge unfunded war debt. Many of the founders opposed central banks, however, Hamilton led the creation of a central bank that engaged in practices similar to other central banks.
The Coinage Act of 1792 did, in fact, set the value to a weight in silver and people used this as the basis for their financial calculations. They didn't mint enough coins and people still used Spanish dollars.
The International community tended to use weights in gold as the standard unit of exchange. The "gold standard" really only applied to international trade.
The US attempted to peg gold to a given amount of silver creating a bimetallic standard. This kept leading to problems and the prices of silver and gold fluctuated with discoveries of deposits of silver and gold.
The silver coins on the market tended to be shaved. People preferred using silver certificates to heavy silver coins.
Despite those problems the US currency was pegged to a precious metal for a long. International businesses tended to use weights in gold for their finances.
When conservatives reminisce about the gold standard, they are thinking of a day when people used silver coins.
Attempts to peg currencies to the price of a precious metal has the same problem as attempts to peg currencies to each other.
I think the biggest argument against the gold standard is simply that people have different definitions of what the term "gold standard" means. What most people mean is that the dollar was pegged to a weight in silver for a long time.
Posted Using LeoFinance Beta