Currency Convertibility: The Gold Standard and Beyond

By Jorge Braga De Macedo; Barry Eichengreen et al. | Go to book overview

5

THE GEOGRAPHY OF THE GOLD STANDARD *

Barry Eichengreen and Marc Flandreau


INTRODUCTION

The gold standard is a subject that has garnered much attention, but its geography remains strangely uncharted. Monetary systems in which gold coin and assets convertible into gold provided the basis for the domestic circulation are commonly portrayed as the normal state of affairs prior to 1913. England, in this view, was on the gold standard for two centuries, ever since Sir Isaac Newton, in his role as Master of the Mint, set a high silver price for the gold guinea in 1717, driving full-bodied silver coins out of circulation. Portugal, which relied heavily on the British market for exports and on British industry for imported manufactures, adopted gold in 1854. Germany's accession to the gold standard dated from her Bismarckian unification. In conventional accounts, virtually the entire world was on some form of gold standard during the final part of the nineteenth century.

These 'conventional accounts' serve us, admittedly, in the capacity of straw men. Scholars like Bloomfield (1959) have been careful to note that not all gold standards were alike, distinguishing gold coin standards from gold bullion standards, coin and bullion standards from gold-exchange standards, and full gold standards from limping gold standards. But by focusing on the experience of Western Europe and North America, most of their studies run the risk of distorting the geography of the monetary system and hence of misrepresenting its evolution. 1

A better rounded portrait reveals a situation in which gold was the basis for the domestic circulation in only a limited number of countries. In many places, especially outside Europe, gold convertibility was first established only in the final years preceding World War I. Fathoming the operation of the international monetary system thus requires comprehending how it worked prior to the completion of these transitions. Tracing its evolution requires understanding the timing and nature of these monetary regime transformations.

Some studies have acknowledged the limited domain of the nineteenth century gold standard, emphasizing the distinction between gold and silver convertibility. Gold, it is said, was the basis for the circulation in advanced

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Currency Convertibility: The Gold Standard and Beyond
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables ix
  • Preface xiii
  • Part I - Overview 1
  • 1 - Introduction 3
  • 2 - The Operation of the Specie Standard 11
  • Part II - Myths and Realities of the Gold Standard 85
  • 3 - The Origins of the Gold Standard 87
  • 4 - Short-Term Capital Movements Under the Gold Standard 102
  • 5 - The Geography of the Gold Standard 113
  • Comment 144
  • Comment 151
  • Part III - Portuguese Currency Experience 157
  • 6 - First to Join the Gold Standard, 1854 159
  • 7 - Last to Join the Gold Standard, 1931 182
  • 8 - Monetary Stability, Fiscal Discipline and Economic Performance 204
  • Comment 228
  • Comment 233
  • Part IV - Implications for Europe in the 1990s 239
  • 9 - Converging Towards a European Currency Standard 241
  • Index 266
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