A Retrospective on the Classical Gold Standard, 1821-1931
Michael D. Bordo, Anna J. Schwartz
University of Chicago Press, Feb 15, 2009 - Business & Economics - 689 pages
This is a timely review of the gold standard covering the 110 years of its operation until 1931, when Britain abandoned it in the midst of the Depression. Current dissatisfaction with floating rates of exchange has spurred interest in a return to a commodity standard. The studies in this volume were designed to gain a better understanding of the historical gold standard, but they also throw light on the question of whether restoring it today could help cure inflation, high interest rates, and low productivity growth.
The volume includes a review of the literature on the classical gold standard; studies the experience with gold in England, Germany, Italy, Sweden, and Canada; and perspectives on international linkages and the stability of price-level trends under the gold standard. The articles and commentaries reflect strong, conflicting views among hte participants on issues of central bank behavior, purchasing-power an interest-rate parity, independent monetary policies, economic growth, the "Atlantic economy," and trends in commodity prices and long-term interest rates. This is a thoughtful and provocative book.
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adjustment mechanism arbitrage assets average balance of payments balance-of-payments Bank of England Bank rate Bank's behavior bills Britain bullion business cycles Canada Canadian capital flows central bank changes classical gold coefficients commodity contraction convertibility correlation countercyclical countries currency cyclical decline deposits discount rate domestic effect equation estimates evidence exchange rate exports fixed exchange rates fluctuations foreign Friedman and Schwartz German gold flows gold reserves gold standard gold stock growth high-powered money important income increase inflation interest rates long-run McCloskey and Zecher monetary approach monetary base monetary gold monetary policy money stock money supply movements note issue operation outflow paper percent period price level price of gold procyclical purchasing-power parity regression Reichsbank Reichsbank money relationship relative prices reserve-deposit ratio Riksbank rise role short-run significant specie stability statistics Sweden Swedish tests theory tion trade United Kingdom variables Viner York
Page 48 - The result to the interests of the two countries will be as already pointed out: the paying country will give a higher price for all that it buys from the receiving country, while the latter, besides receiving the tribute, obtains the exportable produce of the tributary country at a lower price.
Page 51 - A panic, in a word, is a species of neuralgia, and according to the rules of science you must not starve it. The holders of the cash reserve must be ready not only to keep it for their own liabilities, but to advance it most freely for the liabilities of others. They must lend to merchants, to minor bankers, to ' this man and that man,' whenever the security is good.
Page 48 - ... exported than before, and fewer imported, and that, on the score of commerce alone, a balance of money will be constantly due from the receiving to the paying country. When the debt thus annually due to the tributary country becomes equal to the annual tribute or other regular payment due from it, no further transmission of money takes place ; the equilibrium of exports and imports will no longer exist, but that of payments will; the exchange will be at par, the two debts will be set off against...
Page 44 - The income of individuals is the general limit in all cases. If, therefore, through any unfortunate circumstance, if through war, scarcity, or any other extensive calamity, the value of the annual income of the inhabitants of a country is diminished, either new economy on the one hand, or new exertions of individual industry on the other, fail not, after a certain time, in some measure, to restore the balance. And this equality between private expenditures and private incomes tends ultimately to...
Page 39 - ... quadruple. The only circumstance that can obstruct the exactness of these proportions, is the expense of transporting the commodities from one place to another; and this expense is sometimes unequal. Thus the corn, cattle, cheese, butter, of Derbyshire, cannot draw the money of London, so much as the manufactures of London draw the money of Derbyshire. But this objection is only a seeming one: For so far as the transport of commodities is expensive, so far...
Page 41 - Gold and silver, whether in coin or in bullion, obeying the law which regulates all other commodities, would immediately become articles of exportation; they would leave the country where they were cheap, for those countries where they were dear, and would continue to do so, as long as the mine should prove productive, and till the proportion existing between capital and money in each country before the discovery of the mine, were again established, and gold and silver restored every where to one...
Page 42 - The most detailed knowledge of the actual trade of the country, combined with the profound science in all the principles of money and circulation, would not enable any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a. country to the wants of trade.
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