Central Banks Under the Gold Standard

On Monday, the Vatican released an 18-page document titled «Toward Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority.» Since then, it has been celebrated by advocates of bigger government the world over. What’s ignored is that the document —released to stimulate debate, not offer official doctrine— embraces a sound economic theory concerning the cause of the world financial crisis: the breakdown of the postwar Bretton Woods monetary system and the unleashing of fiat currencies and central-bank printing presses. Let’s look at a representative passage, while keeping in mind several important markers: 1971 was the year that the Nixon administration killed the gold standard, and along with it Bretton Woods and hard currencies; in the early 1980s, financial deregulation in many countries removed the last major barriers to virtually unlimited amounts of credit; and the 1990s was the decade when the drive to suppress interest rates became the common policy of central banks around the world. Since the 1990s, we have seen that money and credit instruments worldwide have grown more rapidly than revenue, even adjusting for current prices. From this came the formation of pockets of excessive liquidity and speculative bubbles which later turned into a series of solvency and confidence crises that have spread and followed one another over the years.

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The Limits to Central Bank Co-operation, 1916–36

Contemporary European History ◽

10.1017/s0960777300000175 ◽

1992 ◽

Vol 1 (3) ◽

pp. 259-279 ◽

Cited By ~ 3

Author(s):

Kenneth Mouré

Keyword(s):

World War I ◽

Central Bank ◽

Gold Standard ◽

International System ◽

Central Banks ◽

World War ◽

Central Bankers ◽

National Experience

Central bankers failed in their efforts to reconstruct the international gold standard on a durable basis after World War I. The gold-exchange standard did not unite them in a managed international system in the 1920s, and it perished with little regret in 1931. Stephen V. O. Clarke's monograph on central bank co-operation sees ‘considerable merit’ in the stabilisation efforts from 1924 to 1928, followed by failure to maintain the system from 1928 to 1931.1 Critics have pointed out with justice that co-operation was irregular before 1928, and that central banks continued to co-operate after 1931.2 Clarke recognizes that no conceivable improvements in central bank co-operation could have coped with the combination of political and economic convulsions in 1931; national goals necessarily took priority in central bank policies, and international objectives were determined by national experience and interest.3

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Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle

IMF Working Papers ◽

10.5089/9781498326773.001 ◽

2019 ◽

Vol 19 (161) ◽

Cited By ~ 1

Author(s):

Eric Monnet ◽

Damien Puy

Keyword(s):

Institutional Change ◽

Gold Standard ◽

Central Banks ◽

Bretton Woods ◽

The Us ◽

Monetary Authorities ◽

Institutional Memory ◽

Central Bankers

Why did monetary authorities hold large gold reserves under Bretton Woods (1944–1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers.

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The bank

Money ◽

10.23943/princeton/9780691171661.003.0004 ◽

2017 ◽

Author(s):

John Kenneth Galbraith ◽

James K. Galbraith

Keyword(s):

Gold Standard ◽

Banking Industry ◽

Central Banks ◽

Open Market ◽

Bank Rate ◽

Bank Of England ◽

Long Time ◽

History Of ◽

The Government ◽

The Guardian

This chapter discusses the history of central banks, with emphasis on the case of the Bank of England. For a long time after John Law, Frenchmen remained deeply suspicious of banks and bank notes, of any money that was not made of metal. The chapter considers the reforms that occurred in the banking industry, led by the Bank of England, which gradually emerged as the guardian of the money supply as well as of the financial concerns of the government of England during the period 1720–1780. It also examines the 1811 debate on the nature of money and its management, focusing on David Ricardo's arguments about money in relation to the gold standard. Finally, it looks at the Bank of England's role in introducing the use the two historic instruments of central bank policy: open-market operations and the bank rate.

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Diskussionsbeitrag / Discussion. Paper David Hume und die Target-Salden

Jahrbücher für Nationalökonomie und Statistik ◽

10.1515/jbnst-2012-0407 ◽

2012 ◽

Vol 232 (4) ◽

Author(s):

Peter Spahn

Keyword(s):

Gold Standard ◽

David Hume ◽

Policy Making ◽

Central Banks ◽

Capital Flight ◽

Flow Mechanism ◽

Discussion Paper ◽

Positive Target ◽

Current Account Imbalances ◽

Money Creation

SummaryAccording to David Hume, the specie flow mechanism allows a stabilisation effect in the case of diverging current account imbalances in a gold standard system. Likewise in EMU, trade deficits and capital flight in GIPS countries generate a transfer of euro reserves into surplus countries. Positive Target balances do not represent credit claims on deficit countries. Money creation on behalf of GIPS national central banks contradict wise principles of monetary policy making, but it may contribute to the necessary restoration of price competitiveness.

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International Cooperation and Central Banks

The Oxford Handbook of Banking and Financial History ◽

10.1093/oxfordhb/9780199658626.013.18 ◽

2016 ◽

pp. 363-394

Author(s):

Harold James

Keyword(s):

Gold Standard ◽

International Monetary System ◽

Central Banks ◽

Monetary Integration ◽

Political Systems ◽

European Monetary ◽

International Context ◽

Bretton Woods ◽

Monetary System ◽

Definition Of

Why do central banks attempt to cooperate with other central banks? Why should those political systems (in practice, in the advanced modern industrial world, democratic states), to whom ultimately the central banks are accountable, accept a cooperative strategy of the central banks? What overall gain do they expect to achieve? The answers clearly depend on the definition of the fundamental tasks of central banks, and thus on how cooperation might be envisaged as a tool in the accomplishment of those goals. The purposes and functions of central banks, however, have changed dramatically over the course of time, in accordance with the changing international monetary system from the gold standard, through the Bretton Woods system to the post-1973 order, including European monetary integration. This chapter reviews the pattern, motivation, and record of central bank cooperation in the broader international context of debate about macroeconomic cooperation from the nineteenth century onwards.

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