The Fabi and the End of the Global Silver Era, 1933–1937
This chapter recounts the Nationalist government's announcement that it was going off the silver standard and onto a managed currency called the fabi in November 1935. It mentions how the government nationalized silver stocks, limited the note issued to several banks, and promised to buy and sell fabi without limit at certain exchange rates against the U.S. dollar and British pound. It also talks about members of the Silver Bloc in the United States who believed the falling price of silver in the late 1920s and early 1930s caused the Great Depression by taking away the purchasing power of Chinese consumers and contracting U.S. exports. The chapter analyses the Silver Purchase Act, which according to economist Milton Friedman harmed the U.S. silver producers as it destroyed what had been a major market for their output. It tackles the central question in China on how to change the monetary system and how to defend fabi as a new currency.