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2.15 The Gold Standard - The Gold Standard Benefits 1...

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The Gold Standard: Benefits – 1. Stablized national currencies 2. Tight supply of money : Almost no inflation, at that fixed value, good in particular for bankers and creditors 3. Stimulated outflow of money, lots of investments of agriculture and mining 4. Adjustments to shock and imbalances “Automatic”, means gold supply fluctuates but in the end (like economics) it was an exchange. Operation – Economy would seek equillibirium. Shock would be automatic, nations intertwined, price rises and declines in rise of supply and demand. Governments only needed to keep it’s price at where it’s at. Consequences – Bring wages down, where businesses can buy at the price, economies contrapted and expanded. Not a very stable system. 19 th century full of boom and bust. Swings in demand, access to credit, especially countries that followed the theory of comparative advantage. When interest rates went up in England to attract gold, Argentina would feel shock. Debters were always punished while market was in favor of the creditors. Difficult for some nations to adhere to gold standard. Too hard for some political leaders to follow, and forced countries to sacrifice their own people to gold standard. There is a burden of adjustment. No unioun protection, farmers borrowed a lot, debters were at disadvantage. Prices were suppose to fall, but first the wage would cut and fall down before the price of goods would fall. Griled aged: Gold on surface (plated) but not gold all the way through. Cross of gold speech: Shall not crucify ourselves on the cross of gold, US should not tie itself to gold. Wizard of Oz was imparable to the gold standard (path of gold) Oz- interpreted as gold
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