The Rise and Fall of the Gold Standard

Why do you think the gold standard failed?

While the Gold Standard was never officially implemented until 1821, in Britain, for as long as recorded history, people have loved gold.

Gold gained more prominence in the middle ages but so did paper money. The Chinese were the first to experiment with paper money and Fiat currency (which means the value is based on law). The Chinese actually used Fiat currency (the type of money we use today) in the 1100’s.
The Europeans would soon play a more prominent role in the economics of the world. As the British Empire, or the empire with which the sun never set on, rose to prominence between the 1500’s to 1700’s so did the rise of gold. Silver was the big currency before gold.

Until the mid 1600’s Britain was on a mostly silver standard. The word pound (used in the British pound) derived from the Latin word Poundus, which meant weight and the symbol (£) is an ornate L, from Latin. The letter L was used because the Latin word Libra meant weight/scale.
The Chinese indirectly accelerated the rise of the gold standard because they valued silver more highly than gold. This led to British citizens shipping their silver abroad for gold.
In 1821, Britain was the first country to tie its currency to gold, meaning as more gold was found the money supply increased, or said another way, if the money supply increased (more gold was found) and the economy didn’t (production of goods and services did not expand) then there would be inflation.

We next turn to the rise of the United States because it would play an increasingly important role in the world economy. Like Britain, the U.S. slowed moved onto a gold standard. In 1871, the gold standard peaked and many international nations adopted it from 1871 to 1900, but the standard soon failed at the start of World War I (in 1914). The gold and commodity standards of money often fail in times of stress. After WWI, the U.S., now with a large portion of the world’s gold, tried to re-establish the gold standard. Britain, France and a few other countries reluctantly agreed in the mid 1920’s, but soon the Great Depression would make the gold standard fail again, and most countries abandoned the gold standard during the 1930’s.
The Bretton Woods Agreement (negotiations started in 1944) was the last remnants of the gold standard.

Finally, we summarize the 6 reasons why the Gold Standard Failed.
Let us know in the comments what monetary standard you would choose?

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[TheMarketisOpen]

Hey guys, we hope you enjoyed the in-depth video or at least it spurred you on to a monetary debate.
*A* *couple* *of* *notes* :
* A lot of people are suggesting that gold didn't fail but the government failed gold or something poetic like that. However, this is precisely our point as shown at the end of the video. If government can't be trusted running the monetary system then how would you run the system?
** Bretton Woods was not a gold standard. It was a way for US to convince international countries to accept US currency with the promise they could redeem it for dollars backed by gold. US citizens were banned from convertibility and the U.S. money supply was not based on gold during the Bretton Woods period.

[jeffsingleton]

"Governments became more trustworthy" hahahaha

[realmikemartins]

To expensive to go to war using a gold standard

[constitutionalstacker]

Gold was what kept government's limited in inflating currency through printing. The currency failed when it's tie to gold was severed, not the other way around.

[jatpack]

Seems obvious .
People control the gold.
Governments control currencies. Governments hate competition.

[davideyt]

Gold never failed as a currency of exchange (money), it was intentionally abolished by corrupted governments and their banker friends, because it was near to impossible to manipulate with - then the fiat system was introduced, a system that made it very easy for governments and banks to manipulate currency, cause inflations, deflations and financial crisis on-demand etc..

[dansullivan]

"They had to get off the gold stand in 1914 because of the war." Ummm, don't you see that keeping the gold standard would mean they wouldn't be able to finance that ridiculous war. The gold standard keeps governments in line.

[the_real_economics]

Gold never failed. Gold standard guaranteed by banks failed. That is a huge difference.

[chesterg.]

Gold didn't fail. The government did by allowing banks to operate as a pozy scheme, lending more gold then there was supply.

[nicholastam]

Gold never fail. Gold is not a currency, it is real money. Paper currency has value because of government decree by law. Gold's value is derived from market value, not by government decree. The reason US ditch the gold standard because they printed more paper currency than the gold reserve they must have. If everyone send back their dollars to redeem gold, the US will not be able to honour all the paper currency they had printed. Thus they stop the convertibality of USD to gold. Gold standard is in place is basically a shackle on government ability to expand money supply unless there is enough hard asset to back it up. In other words, to keep government in-check with their fiscal discipline.

[paydenallen]

Gold never failed. It has never been devalued once despite great effort and force. It certainly failed politically and your video was an excellent summary of that history.

[venusrise]

I need to watch this a few times, but it goes against everything I believe. I’m open to good new arguments, but the argument that government corrupts the gold-standard is NOT a good argument against the gold standard

[lcmendez]

It may have failed for those who dont know better but it's still the only real currency in my book

[christofour]

Gold did not fail as a currency. Gold is money. It is all paper fiat currency, by dictate that has failed.

[thebluechipinvestor]

No currency survived longer than gold. And that’s a fact

[WidebodyLotty]

No mention of Mansa Musa? The man who flooded the Mediterranean market with so much gold that he singlehandedly collapsed the market. That would be a significant point to make in this video.

[MrJucesar]

We can't talk about money, gold or fiat if we do not understand fractional reserve banking.

[argentumtaibhsear]

Interesting video. The real problem is governments. People need to realize it always ends the same way.

[behrensf]

My money is like grease. It helps turn the gears of the economy, too little and the gears rust, too much and you make a mess...

[rodrigo]

It didn't failed. It served as money during the most prosperous times of the Western World.