{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

fis200_week1_reading3 (1)

Gold flowed out of reserves and interest rates rose

Info iconThis preview shows pages 15–17. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Gold flowed out of reserves and interest rates rose on fears of devaluation. The crisis passed instantly after Bryant lost the election. The cit- izenry of the United States had voted to maintain the gold standard. Silver would continue to be used in India and China, but in the major Western countries it had finally been abandoned. After thou- sands of years of experimentation, the global citizenry had, at the end of a long debate, finally whittled its monetary options down to one and one only. No longer would the United States, or any other major world financial power, allow itself to be wracked by the vagaries of bimetallism or any other basket standard. The United States formally adopted a monometallic gold standard with the Gold Standard Act of 1900. The closure of the western frontier with the creation of the state of Arizona in 1912 was followed in 1913 by the Sixteenth Amendment, which legalized the federal income tax. There was nowhere left to run from the tax collector. However, this allowed the federal govern- ment to finally free itself from its dependence on tariff revenue, which had offered continuous temptation toward protectionism. Since 1861, protection of big business had become standard policy. The purpose of protectionism is to achieve what every big business desires, monopoly control and the suppression of competitors. In response, antimonopoly agitation arose in the latter decades of the nineteenth century. Democratic president Woodrow Wilson desired lower tariffs, but felt he had to make up for lost revenue by enacting an income tax, which began at 1 percent on personal or corporate income over $4,000 (about $70,000 today) and had a top rate of 7 percent on income over $500,000 ($8.750 million today). Though these rates may seem minuscule by today’s standards, they were, except for during the Civil War, the first income taxes the country had ever seen. Even with the tariff reduction, the economy went into recession in 1913–1915 until the flood of overseas demand for war materials and domestic war spending counteracted the contraction in 1916. Northeastern business interests attempted once more, in Money in America 53 1929–1930, to reinstate the protectionist policies of the past, with disastrous results. The last major monetary hiccup in the United States, before the tectonic shifts of the 1930s, was a brief cycle of inflation and defla- tion during and after World War I. The outbreak of hostilities in Europe in 1914 was soon followed by a flood of demand for U.S. products by all the combatants to fight the war. At the same time, exports of European goods were reduced as factories retooled for wartime. All in all, delivery of roughly $1 billion in gold, sales of $1.4 billion in U.S. securities (accumulated over a century of investment in U.S. industries), and $2.4 billion of borrowing in U.S. financial markets were undertaken by European countries to finance their imports of U.S. goods....
View Full Document

{[ snackBarMessage ]}

Page15 / 22

Gold flowed out of reserves and interest rates rose on...

This preview shows document pages 15 - 17. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online