The history of foreign exchange: the causes and effects of the collapse of the gold standard!

Introduction to foreign exchange/


The history of foreign exchange: the causes and effects of the collapse of the gold standard!


Xiaobian found that after the outbreak of the first World War, the gold standard system came to an end; in August 1971, the U.S. government stopped the exchange of U.S. dollars for gold, and the incomplete gold exchange standard system also collapsed. From 1880 to 1978, the gold standard has been popular for about 100 years


First, the growth rate of gold production is far lower than that of commodity production. Gold can not meet the needs of expanding commodity circulation, which greatly weakens the basis of gold coin circulation.


Second, the distribution of gold stock among countries is unbalanced. At the end of 1913, the United States, Britain, Germany, France and Russia accounted for two-thirds of the world's gold stock. Most of the gold stock is controlled by a few powerful countries, which will inevitably lead to the destruction of the free casting and circulation of gold coins and weaken the basis of the circulation of gold coins in other countries.


Third, with the outbreak of the first World War, gold was used by the Warring States to buy arms, and stopped exporting freely and cashing bank notes, which eventually led to the collapse of the gold standard.


Xiaobian found that the collapse of the gold standard system had a huge impact on international finance and even the world economy


(1) It has opened the door to currency devaluation and inflation policy.


This is because after the abolition of the gold standard, in order to make up for the fiscal deficit or expand the armed forces, countries will issue non convertible banknotes indiscriminately and accelerate the regular inflation, which will not only destroy the circulation of currency and credit system, but also aggravate the contraction of export trade and the deterioration of international balance of payments.


(2) It leads to the drastic fluctuation of exchange rate and impacts the world exchange rate system.


Under the gold standard system, the internal value and external value of currencies in various countries are basically the same, the price ratio between currencies is relatively stable, and the exchange rate system has a relatively solid foundation. However, after the circulation of banknotes, the decision process of exchange rate becomes complicated, which is caused by the balance of payments and inflation


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