Money's Sordid Tale of Dirty Floats, Debasement and Doom: Today's Floating Currency System Is Just One of Many That Global Trade Has Operated under. Each Previous System Broke Down after Multi-Nation Wars. This Series Reviews Previous Monetary Systems and Examines History to Shed Some Light on the Viability of the Current Fiat System

By Berg, Ann | Modern Trader, September 2006 | Go to article overview

Money's Sordid Tale of Dirty Floats, Debasement and Doom: Today's Floating Currency System Is Just One of Many That Global Trade Has Operated under. Each Previous System Broke Down after Multi-Nation Wars. This Series Reviews Previous Monetary Systems and Examines History to Shed Some Light on the Viability of the Current Fiat System


Berg, Ann, Modern Trader


Marx extolled it as the numeraire. Keynes damned it as a barbarous relic. In the end, Nixon snuffed it. Yet for more than two millennia, gold was matchless among precious metals, valued in multiples against silver, copper or bronze. Rare, ductile and noncorrosive, it gave reins to commerce, providing a universal medium of exchange.

But not until the 19th century did gold play such an integral role in international trade, the balance of power and societal advancement.

[ILLUSTRATION OMITTED]

The scientific and philosophical discourses of the late 18th century Enlightenment stirred an eruption of new political and economic institutions. The same year Adam Smith wrote The Wealth of Nations, America revolted against the absolutism of monarchial power and soon after developed the first comprehensive contract in history between state and citizenry. Working under a Constitutional framework during the first Congressional Congress in 1789, Alexander Hamilton, the nation's first treasury secretary, brought a fractured country to the international forefront. In three years he restructured the nation's war debt into revenue backed (import tariffs) marketable securities, facilitated the IPO of the Bank of United States and ensured dollar convertibility by linking it to gold. Such confidence arose in the international investment community for this new sovereign that by 1803, half of American issued bonds were held by foreigners. The American financial miracle had begun.

As America ascended, the muscular era of mercantilism characterized by state-chartered trading monopolies was sinking in decline. The embodiment of economic nationalism, mercantilism aimed to enrich the state by forcibly promoting exports and limiting imports through tariffs and the Navigation Acts.

Echoing Smith, the German philosopher Immanuel Kant in 1795 rejected the mercantilist dogma in the prophetic Perpetual Peace, asserting only representative republican governments that respected autonomy and universal hospitality could be trusted to keep citizenries out of war. Five years later, the 200-year-old Dutch East Indies Corporation, once towering in the seas with a fleet of 150 battle and merchant ships and a labor force of 50,000 was bust.

The Napoleonic Wars, which lasted 25 years and bankrupted Austria, Holland and nearly Russia, proved the last outbreak of commercial wars between the Great Powers until the 20th century. In 1815, a quadruple alliance of Britain, Russia, Austria and Prussia, and later France, emerged from Vienna to create the Concert of Europe and brought stability to the continent. A new creed of economic liberalism emerged, and despite brief and mostly localized conflicts, such as the Crimean War (1853) and Franco-Prussian War (1870), the peace continued for a 100 years. The adoption of the gold standard would prove critical to this era and China would play a curious role.

THE CHINA PROBLEM

Just as the trade deficit with China vexes America today, it doubly vexed Britain two centuries ago. China snubbed British manufactures and Britain, a voracious importer of silks and tea, exchanged Chinese goods for silver. The pound sterling (literally a pound of pure silver), Britain's currency since the millennial crusades, was fixed to gold under the tenure of Isaac Newton--Britain's master of the mint from 1700 until his death in 1727--in a ratio of approximately 15 to one. While European trade followed the Newtonian 15:1 ratio, China and Japan valued silver much higher at 9 or 10 pounds per one pound of gold. Drained of silver bullion through the trade deficit with China, in 1816 Britain made the pound sterling note directly convertible to gold.

As the largest economy, Britain led the way in building institutional credit and ridding the market of 18th century restraints. David Ricardo rose on the shoulders of Smith, and after amassing a fortune on the London Stock Exchange, theorized in his 1811 treatise "The High Price of Bullion" that not unlike today, Britain's inflation was due to its lax monetary policy. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Money's Sordid Tale of Dirty Floats, Debasement and Doom: Today's Floating Currency System Is Just One of Many That Global Trade Has Operated under. Each Previous System Broke Down after Multi-Nation Wars. This Series Reviews Previous Monetary Systems and Examines History to Shed Some Light on the Viability of the Current Fiat System
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.