This is another post for school…hopefully I can return to my regular posting soon!
William Devane captivates audiences while proving his magnetism drawing rapt attention from viewers as he showcases various hobbies such as horseback riding in the Rosland Capital while encouraging the masses to purchase gold. According to the National Mining Association, gold was first used around 4000 B.C. in Eastern Europe to fashion decorative objects.[1] By 3000 BC, gold was making it’s way to a use continued today; where it was used in Iraq to make jewelry.[2] In 1792 The Coinage Act put the United States on a “bimetallic silver-gold standard,” which defined the dollar as “equivalent to 24.75 grains of fine gold and 371.25 grains of fine silver.”[3] In 1837 the weight of gold in the dollar was reduced to “23.22 grains.”[4] By 1873 silver was eliminated and the United States was simply on a gold standard.[5]
In 1900 the Gold Standard Act was passed into law which committed “the United States to maintain a fixed exchange rate in relation to other countries on the gold standard.”[6] A short thirteen years later in 1913, the Federal Reserve Act required “Federal Reserve Notes be backed 40% in gold.”[7] 40% seems rather a shaky standard. However, our current money system backed by nothing more than our government seems even shakier.
Gold doesn’t make much news through the roaring twenties, but starts making headlines again in the 1930s. In 1933 FDR ordered the prohibition of “private holdings of all gold coins, bullion, and certificates,” to alleviate banking panic.[8] Conspiracy theorists could have a heyday with the 1934 Gold Reserve Act which gave the United States government title to all monetary gold and stopped the minting of gold coins.[9] In 1937 the “bullion depository at Fort Knox, Kentucky” opened.[10] Open the floodgates to all conspiracy theorists with the 1961 declaration forbidding “Americans…to own gold abroad as well as at home.”[11] William Devane’s and others commercials indicate we can own gold…more research is needed to know about this 1961 declaration and the effects of it today on private gold ownership.
Interestingly, the gold standard was completely abandoned prior to the 1961 declaration. In 1919 the gold standard was suspended by several countries, including the United States, during World War I.[12] And, this might be the initial death knell of the United States ecnomomy eventually brining on the Great Depression if Sandeep Mazumder and John H. Wood are to be believed. Mazumder and Wood posit their theory that FDR’s decision to resume the Gold Standard in 1933 with pre-1914 rules.[13] There were even some European economists who suggested, when FDR resurrected the gold standard, that it was the cause of the Great Depression.[14]
Famed economist and once Federal Reserve Chairman Ben Bernanke partially agrees with Mazumder and Wood stating that the evidence showing monetary shocks created “through the workings of the gold standard” resulting in the Great Depression is “quite compelling.”[15] He explains that some governments world-wide responded to the financial crisis of the “early 1930s by quickly abandoning the gold standard.”[16] His study finds that those countries who abandoned gold were able to recover faster from the Great Depression because they could “reflate their money supplies and price levels.”[17] He further explains that in countries, like the United States, where the gold standard remained, “real wages rose or stabilized and employment remained stagnant.”[18] Meanwhile, countries not on the gold standard has “much lower real wages and higher levels of production.”[19]
It appears that countries who could captain their own financial ships may have fared better in the Great Depression, however, it also seems rather counter-intuitive that a standard not backed by gold is better. Gold seems rock solid, it will always have value regardless of whether the government backing it attributes value to it or not. This seems much more secure than the seemingly out of thin air paper or even crypto money systems of today.
[1] “The History of Gold.” National Mining Association, Washington, DC. http://www.nma.org/pdf/gold/gold_history.pdf, 2.
[2] Ibid.
[3] Ibid, 4.
[4] Ibid.
[5] Ibid., 5.
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Ibid., 6.
[11] Ibid.
[12] Ibid, 5.
[13] Mazumder, Sandeep and John H. Wood. “The Cause of the Great Depression: The Decision to Resume the Gold Standard on Prewar Terms.” The Independent Review 26, no. 1 (Summer, 2021): 133-51, http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fcause-great-depression-decision-resume-gold%2Fdocview%2F2627993544%2Fse-2%3Faccountid%3D12085, 134.
[14] Ibid.
[15] Bernanke, Ben S. “The Macroeconomics of the Great Depression: A Comparative Approach.” Journal of Money, Credit and Banking 27, no. 1 (1995): 1–28. https://doi.org/10.2307/2077848.
[16] Ibid, 4.
[17] Ibid.
[18] Ibid., 22.
[19] Ibid.
The History Marm 