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Political Aspects of the Gold Problem
Published online by Cambridge University Press: 03 February 2011
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The political history of gold in the United States is inseparable from X that of silver. In large measure it is simply the obverse of the history of silver. Looked at positively, the case for silver was an attack on gold monometallism; looked at negatively, the case against silver was a defense of the single gold standard. Another and very practical reason for relating the history of gold to that of silver is that the story of what has happened to silver affords an enlightening parallel to what is happening, and conceivably may happen, to gold.
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- Copyright © The Economic History Association 1949
References
l “Hard Money” Examined (78th Congress, ad Session, Senate Document No. 197, 1944), p. 9.
2 Some students of money would deny that the United States is legally on the gold standard at the present time on the ground that the discretionary elements in the present laws, such as the absence of a specific commitment to sell gold at a fixed price for export and the legal authority of the Secretary of the Treasury to purchase gold at rates and on terms which “he may deem most advantageous to the public interest,” are clearly inconsistent with a true gold standard. On the other hand, it may be argued that these provisions are offset by commitments under the Brctton Woods agreement.
3 Needless to say, the characterization of this as a “free market for gold” was thoroughly foreign to the traditional meaning of the term, as was quickly pointed out by representatives of the Economists National Committee on Monetary Policy, an active gold-standard organization.
4 The monetary background of gold, as is true to a less extent of silver, affects its market behavior in a way that distinguishes it from commodities that never enjoyed this status. For that reason it is somewhat inaccurate to refer to gold as an “ordinary” commodity.
5 Hearings on S. 13 and S. 286 before the Committee on Banking and Currency, United States Senate (Government Printing Office, 1949)) p. 36.
6 The weakening of the international gold standard after 1914 may have been one symptom of the declining relative importance of Great Britain as a political power. William Adams Brown, Jr., has pointed out that what was restored after World War I was a decentralized international financial system. The International Gold Standard Reinterpreted (New York: National Bureau of Economic Research, 1940), Bk. III, Pt IIIGoogle Scholar.
7 See Einzig, Paul, The Fight for Financial Supremacy (London: Macmillan & Co., 1931), chap x, and cf. p. 105Google Scholar: “It is said that Mr. Snowden's remark to the Conference that M. Cheron was talking nonsense cost the Bank of England many million pounds of gold.”
8 An additional advantage of this control was that it helped to forestall the possibility of future claims against the United States on the ground that the purchase of gold from the Axis constituted receipt of stolen property. Prior to 1934 the United States refused to allow the import of Russian gold, according to former President Herbert Hoover (cf. Collier's, April 19, 1940).
9 The introduction of the Marshall Plan coincided fairly closely with the dwindling of gold stocks abroad. As in the case of the passage of the original Lend-Lease Act, the role of gold as an instrument of American foreign policy was made manifest in the resort to other methods of providing foreign aid when this particular instrument became less effective.
10 Cf. Tether, C. Gordon, “Is Gold Too Cheap?”, The Banker (London), April 1949Google Scholar: “Most countries have been and are still willing enough to accept gold in exchange for their own currencies, but only for the sake of the dollar spending power that can be obtained when the gold is re-sold to the U. S. Treasury.…There is no reason to suppose that a higher gold price would widen the demand for gold from other parts of the world—quite the contrary—so that on a strict supply-demand basis the ‘realistic’ price for gold now and perhaps for some time to come would seem to be the price the United States U prepared to pay.”
11 The historical gold standard assumed that the money supply in gold-standard countries would be governed by the action of private individuals operating through the volume of gold reserves. Today the supply of money throughout the world is controlled neither by gold nor by the action of private individuals. When it has appeared that gold reserves might be about to limit the supply of circulating medium we have not hesitated to change the rules in order to forestall such an eventuality. Current proposals would carry the transformation even further. The operation of the gold standard was designed to cut down on the supply of circulating medium when price levels rose. The effect of raising the price of gold, as is currently being urged, would be precisely the opposite. It would increase the effective supply of gold by making existing gold reserves represent a larger sum of money, and it would tend to increase the physical supply of gold by making the production of gold more profitable. In view of such monetary monstrosities it may be fortunate that gold reserves no longer are a controlling influence in determining the money supply.