[looking through history] from physical currency to gold exchange standard, why is gold no longer suitable for the monetary system?

SMM, 20 Sep: why do humans need money? Perhaps in today's era of currency flooding, few people already know the story of money, in fact, the story of gold, more wonderful than you think.

At the beginning of the 19th century, at the beginning of the traditional gold standard, each country issued its own currency, and each currency was pegged to gold, that is, each currency contained different weights of gold, and the exchange rate between the two currencies was determined according to the amount of gold contained in the currency. This is the gold coin standard, which mainly takes gold as its general equivalent, and the central bank's monetary reserves are also gold, because at that time, only gold in the world could meet the three major characteristics of high liquidity, ease of exchange, and international recognition at the same time. But World War I changed everything.

Before World War I, although Britain was a little old, it was still a world hegemon. The world was full of colonies. World trade was in pounds. Britain controlled US $20 billion in overseas assets, and the United States owed Britain about US $3 billion. After the first World War, the Europeans lost a total of $200 billion. What is the concept? Before the war, the top three European GDP of Britain, France and Germany totaled only $40 billion. During the first World War, Britain spent a total of 43 billion, owed the United States 5 billion, and the 16 European allies owed the United States a total of 12 billion. The most important gold standard has collapsed, because the war needs money so much that gold is simply not enough, so countries issue bonds. To borrow foreign debt, there is no way to start the printing press crazily. It is a pleasure for the United States to profit from it. Both borrowed US dollars and sold arms. In order to avoid danger, gold was shipped to the United States in complete vehicles. The US gold reserve soared from US $2 billion before the war to US $4.5 billion. We should know that at that time, the total amount of gold was only US $6 billion.

After World War I, countries are ready to clean up and return to the gold standard. Britain is worried at this time. It wants to be the boss, the economy is not good, the currency is overissued, and the United States is far ahead of the United States in gold reserves. What should we do? Norman, then governor of the Bank of England, pondered and came up with a brilliant plan. He formally recommended sterling to countries at the 1922 Genoa Conference, saying that sterling was equivalent to gold, ensuring that sterling could be converted into gold at any time. Persuade countries to add pounds to central bank currency reserves. This is the gold exchange standard, that is, the central bank currency reserves in addition to gold, but also can hold foreign exchange, because foreign exchange can be converted into gold at any time. At that time, European countries did not buy it, but the idea was gradually accepted by all countries. In 1925, with the exception of the franc, other countries gradually restored the gold standard, forming a monetary system led by the pound and the dollar, and the stability of the pound and the dollar depended on the link with gold.

If the pound is likely to be on a par with the dollar after World War I, Britain collapsed after World War II. France fell at the speed of light under the fierce attack of Germany, and the United States was also shocked by the rapid consumption of wealth by Britain during the war. London, England, was blown to ruins.

In the end, the United States stepped in, sending planes and loans to help Britain support itself. By the end of the war, in 1944, the United States already had 70 percent of the world's gold reserves, so the United States could not wait to convene the Bretton Woods Conference to establish a world monetary system led only by the United States dollar. Currencies around the world are pegged to the dollar and implement a fixed exchange rate system, while the dollar is pegged to gold, $35 an ounce of gold, promising that governments can exchange gold to the United States at official prices, and the pound has been kicked away. At the same time, the United States has also personally nurtured the two major institutions of the International Monetary Fund and the World Bank. The US dollar has a great potential to carry gold to make princes, and the world can no longer compete with it.

After World War II, the United States, sharp and militaristic, led the Korean War, the Vietnam War, the printing of more and more US banknotes, coupled with the economic rise of Japan and Western European countries, the US trade deficit widened and sprinkled all over the world. Countries have come to exchange US dollars for gold. In 1971, the United States owned less than 10 percent of its foreign reserves. The United States was overwhelmed. Nixon announced that the dollar had depreciated, and foreigners could dispose of dollars at will. At the same time as the Bretton Woods system collapsed, Gold gloomily pulled out of the monetary system, ending its glorious history.

From the withdrawal of the gold coin standard to the collapse of the Bretton Woods system, from the physical currency to the virtual gold exchange standard, gold is no longer suitable for the monetary system, and I am afraid only the printing press can keep pace with the surge in the modern economy. Gold has completed its great historical mission, completed the transition from monetary system to modernization, and left a brilliant legacy in the history of human money.