Purly Euclid
28-08-2004, 02:34
I just found out about the different currency regimes in a book I'm reading. I didn't know it was so diverse. Historically, there have been three main regimes: the gold standard, the golden dollar, and the free float regime of today.
The gold standard, I'll say right now, sounds like my favorite. It was the closest the world ever came to a single world currency. Sure, different currencies were accepted in different countries, but they were all backed by gold, which had the same value throughout the world. At the time it was used, being in the late 19th and early 20th centuries, it was British led. Until WWI, most of the world's gold was controlled from a few banks in London. In fact, the British had, in effect, control of the global currency, as they had so much of it. The downfall, however, was that it was inflexible. More money, if needed be, couldn't be printed, and it was abandoned by the Great Depression.
The second system was the golden dollar, devised by a series of compromies at the Bretton Woods, NH meeting of 1944. WWII made the US the world's premier economy, and thus, the dollar became the world's premier currency. The system was that all gold, anywhere in the world, had a fixed price of $35. All other currencies had a limited fluctuation from the dollar. They could buy dollars, and then redeem them for gold. There were lots of problems with this, however. For one, it left the other countries vulnerable to inflation, but not the US. Even so, the US was vulnerable to deflation, as dollars were bought throughout the world, and money left the US, creating economic downturn.
The big problem came in the 1960s, when the world economy rebounded from WWII faster than expected. There wasn't enough gold for all of the dollars in demand. Then in 1971, the Nixon Administration unilaterally severed the link between gold and the dollar. Shortly after, the free float regimes that we all know today came into existence.
I find their are problems with this, too. For one, there are currency fluctuations for each country. On a gold standard, such fluctuations would be moderated. For another, these different currencies left to float against one another can be an impediment to trade. I'm sure you know about that a country can export more with a weak currency, and import more with a strong currency. Again, the price of gold would help moderate that.
BTW, while I want a gold currency, it doesn't necessarily have to be gold. It can be silver, platinum, or any other precious metal. But it must meet three conditions: it is easily divisible, homogeonous, and precious.
The gold standard, I'll say right now, sounds like my favorite. It was the closest the world ever came to a single world currency. Sure, different currencies were accepted in different countries, but they were all backed by gold, which had the same value throughout the world. At the time it was used, being in the late 19th and early 20th centuries, it was British led. Until WWI, most of the world's gold was controlled from a few banks in London. In fact, the British had, in effect, control of the global currency, as they had so much of it. The downfall, however, was that it was inflexible. More money, if needed be, couldn't be printed, and it was abandoned by the Great Depression.
The second system was the golden dollar, devised by a series of compromies at the Bretton Woods, NH meeting of 1944. WWII made the US the world's premier economy, and thus, the dollar became the world's premier currency. The system was that all gold, anywhere in the world, had a fixed price of $35. All other currencies had a limited fluctuation from the dollar. They could buy dollars, and then redeem them for gold. There were lots of problems with this, however. For one, it left the other countries vulnerable to inflation, but not the US. Even so, the US was vulnerable to deflation, as dollars were bought throughout the world, and money left the US, creating economic downturn.
The big problem came in the 1960s, when the world economy rebounded from WWII faster than expected. There wasn't enough gold for all of the dollars in demand. Then in 1971, the Nixon Administration unilaterally severed the link between gold and the dollar. Shortly after, the free float regimes that we all know today came into existence.
I find their are problems with this, too. For one, there are currency fluctuations for each country. On a gold standard, such fluctuations would be moderated. For another, these different currencies left to float against one another can be an impediment to trade. I'm sure you know about that a country can export more with a weak currency, and import more with a strong currency. Again, the price of gold would help moderate that.
BTW, while I want a gold currency, it doesn't necessarily have to be gold. It can be silver, platinum, or any other precious metal. But it must meet three conditions: it is easily divisible, homogeonous, and precious.