Gold and silver have long served as monetary standards throughout the world.
However, the debates which were about their relative values and which precious metals should be preferred over the other in the monetary system usually occurred in this period of time. But then the introduction of paper currency complicated this debate because it usually promised to pay gold or silver upon demand. Such payments in coin were often suspended in times of monetary stress. The Civil War (1861 - 1865) was one such event:
In 1879, the United States set the gold price to US$ 20,67 and returned to the gold standard. After the war, the question of whether the country should return to a specie based monetary system was hotly contested.
A populist movement sought to inflate farm prices through:
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The high point of that movement was the "Cross of Gold" speech, given by the lawyer and politician William Jennings Bryan to the Democratic convention in 1896. Bryan became the Democratic candidate for president but lost in the general election, and the United States went onto a gold standard in 1900 with the adoption of the Gold Standard Act. |
After the 1900
- During world war 1, 1914 - 1918, the central banks printed more paper money to help the people financing the war.
- After the war, in 1922, the conference of Genoa central banks proposed to return to a partial “ classical gold standard” to foster international trade and economic stability. But during the time :
=> One such a “ great example” is the creation of the “gold exchange standard”, a weak monetary system, where essential currencies British pound and the American dollar rather than to gold itself
=> This created a pyramid of paper claims upon other paper claims, with gold playing a far lesser role.
=> The new gold standard immediately collapse as a regulation of the international monetary system.
=> Eventually this led to the Great Depression in the 1930s
The Dreat Depression in the 1930s
The Great Depression in the 1930s :
=> The stock market crash => Downturn in spending and investment => Slow down production and construction of many factories and investment and begin firing their workers. By 1933, when the Great Depression reached its nadir, some 13 - 15 million Americans were unemployed and nearly half of the country’s banks had failed. Many Americans fell into debt, and the number of foreclosures and repossessions climbed steadily. President Franklin Roosevelt changed the valuation of gold to $35 per ounce of gold as an inflationary measure. Farmers, for example, will get more dollars for their grain, but they will have to pay more for the goods purchased with the inflated grain sale proceeds. |
Though the relief and reform measures put into place by President Franklin D. Roosevelt which did help lessen the worst effects of the Great Depression but the economy didn't fully turn around until after 1939, when World War II kicked American industry into high gear.
The adherence of gold standard didn't only affect the America but also all over the world. |
Nazis Gold event
During the World War 1, the nature had not blessed Germany with all the vital products and the high – grade steel that was needed for the country’s war machine such as tanks bombers.
For example, in Germany:
Therefore, in order to survive in the war and win, Germany needed to buy the materials from other countries |
Nazi gold refers to the run-up to and during Second World War when the bullion was looted by the Nazis.
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Paying for War
After the wartime, those five countries required gold as Germain Reichsmarks payment for all the war goods. However, Germany didn't have enough gold to pay, but they knew part of the world’s bullion resides in central banks. Therefore, the Nazis robbed central banks while Swiss bankers being the financial middlemen in the transactions. Austria was the first victim of Nazi aggression in the spring of 1938 because Schacht knew that the Austrian central bank had about 100 tons of gold. That was almost four times as much as the Germans had at the time. |
More information of how the looted gold:
On Saturday morning, March 12, Nazi commandos and a few people arrived at the Austrian Central Bank and took the Austrian gold to Berlin. The Germans also forced the Austrian central bank to transfer an additional 5.7 tons that it had shipped to London for safekeeping. The Nazis also demanded that Vienna’s large and wealthy Jewish community hand over to Berlin 14.3 tons of their private gold. In conclusion: => The looting of country gold served effectively as a weapon in their campaign to take-down whole nations. => The Nazis consolidated their power by holding gold whilst their victims were consigned to weak paper currencies. |
After the Treaty of Versailles and the hyperinflation in the interwar period, Germany itself had already learnt a lesson: in order to return the economic glory, a country needed to had a stable monetary system and be backed up by gold. Therefore, Nazis were well aware of the devastation caused by a lack of sound money.
=> In the conclusion, gold clearly played a strong role in history, both a political and economic weapon during the Wars of the 20th Century.
=> In the conclusion, gold clearly played a strong role in history, both a political and economic weapon during the Wars of the 20th Century.
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- At the conclusion of World War II, the United States and Great Britain created the International Monetary Fund (IMF). That body set a "value" of $35 per ounce for gold.
- In the 1960s, that system fell apart as countries began exchanging dollars for gold from the U.S. Treasury. Therefore, on August 15, 1971, President Richard Nixon announced that the U.S would no longer exchange dollars for gold under the IMF standard.
- Within two years, currency exchange rates were allowed to float against each other. These floating currency rates are set by market forces rather than the artificial parity rates set by the IMF. The currencies also change constantly in foreign exchange transactions which was conducted through banks and currency dealers.
- In 1975, the IMF eliminated gold as the basis for international monetary standards, and two years later, the prohibition against gold clauses was repealed, allowing private sales of gold.
Reference to:
http://www.encyclopedia.com/doc/1G2-3407400146.html
http://knowledge.wharton.upenn.edu/article/historys-biggest-robbery-nazis-stole-europes-gold/
http://fee.org/freeman/detail/did-the-gold-standard-cause-the-great-depression
http://therealasset.co.uk/nazi-gold-bullion/
http://www.encyclopedia.com/doc/1G2-3407400146.html
http://knowledge.wharton.upenn.edu/article/historys-biggest-robbery-nazis-stole-europes-gold/
http://fee.org/freeman/detail/did-the-gold-standard-cause-the-great-depression
http://therealasset.co.uk/nazi-gold-bullion/