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The Gold Standard

During the American Revolutionary (1775 – 1783) and the Napoleonic Wars (1799 - 1815), the Bank of England’s notes were legal tender and the value of these printed notes fluctuates and floated relative to gold.

During this period of time, there was a severe shortage of silver and The Bank of England had to issue silver tokens to alleviate the shortages of silver coins. This silver shortage merely accelerated the need for another monetary standard, this time using gold instead of silver.

In 1816, the British officially adopted the gold standard.

During that time, France and United States were in favor of a bimetallic standard and an international conference was held in 1867 in Paris to examine and widen common currencies based on standard weights of gold and silver.

Germany chose to go with the gold standard in 1871 followed by Scandinavian shortly afterwards. France adopted the gold standard in 1878 and Japan in 1897. Finally in 1900, the United States officially adopted the gold standard.

England suspended the gold standard at the outbreak of the First World War in 1914. This World War proved to be a disaster financially for the United Kingdom. Prior to the war, The UK had one of the world’s strongest economies, holding up to 40% of the world’s overseas investment. However, by the end of the war, the country owed 850 million British pounds, with very high interest payments, mostly to the United States.

In 1925, in an attempt to resume stability, a variation on the gold standard was reintroduced. This was quickly abandoned on the 21st September, 1931, during the Great Depression.

However, the United States of America kept the link of their dollar to the gold standard. This is in spite of many countries severing their currency links to gold during the First World War, The Great Depression and the Second World War.

Want to know more?

• The Silver Standard
• The Gold Standard
• The Bretton Woods System
• Breaking the Link
• Fiat Money