If the gold standard was not removed would we have significantly less global economic growth and slower social mobility?



Money started some three millennia ago as commodity money--gold, silver, copper, salt (where we get the word "salary"), beaver pelts, cigarettes (among prisoners), and many others--money that had inherent value. In modern times, specie (precious metals) emerged as preferred with gold the preferred of the preferred. The wealthy of England kept their gold in the royal mint until, that is, Charles I confiscated it all in the mid-1600s on the promise of payments over time. Thereafter, gold was placed for safekeeping with London's goldsmiths.


That practice become the basis for Fractional-reserve banking and later the Bank of England, whose notes were esteemed "as good as gold." The unprecedented ability of the Bank of England to finance England's wars insured that the system was copied by other nations, and the gold standard was born. Paper money was in the form of certificates redeemable for a set quantity of gold. In the US, the dollar could be exchanged for 1.5 grams of gold.
 
The Gold Standard, Pro and Con
 
The gold standard was great in many respects--you knew exactly what your money was worth--and terrible in others. Going back to the dawn of money, debasement was a problem. A king would sign a bunch of promissory notes promising to pay so many moolahs and then promptly have the moolah reminted at 7 fine instead of 10 fine. Everybody dealing with the king took it in the shorts. But should a subject be caught filing or clipping the coin of the realm, that was typically treason and punishable by a slow, agonizing death. Methods of coin debasement
 
Another way it was terrible was that gold and silver strikes were inflationary while long periods, especially prosperous ones, without a strike were deflationary. Then there was the gold vs. silver problem which would precipitate Gresham's law as they did not rise or fall in unison. In the US, the period between the California strike (1848) and the Yukon gold rush (1896) featured only a bit of Nevada silver to cause a little inflation. This was a period of rapidly increasing prosperity without a corresponding increase in the volume of money, and so prices started dropping--deflation. As the pressure increased for wages to drop as well, riots ensued.

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