The Gilded Age ended on this day in 1933, the end of the gold standard in the US. Gold had dominated monetary systems for about a hundred years, the thinking being that limiting money to the supply of gold would enforce discipline on the various governments. Of course, they all dropped the gold standard like a hot rock whenever they went to war, and its inflexibility meant there was no way to counter swings in the business cycle so the US suffered three depressions during the reign of the soft yellow metal. Gold is still pleasant to heft in the hand, beautiful things are made from it, and of course it's been a topic of discussion for millennia.
Here are some memorable quotes on gold:
Art is like baby shoes. When you coat them with gold, they can no longer be worn.
– John Updike
Truth, like gold, is to be obtained not by its growth, but by washing away from it all that is not gold.
– Leo Nikolaevich Tolstoy, 1828 – 1910
Everything has its limit – iron ore cannot be educated into gold.
– Mark Twain, 1835 – 1910
Gold is a treasure, and he who possesses it does all he wishes to in this world, and succeeds in helping souls into paradise.
– Christopher Columbus, 1451 – 1506
Gold like the sun, which melts wax, but hardens clay, expands great souls.
– Antoine de Rivarol, 1753 – 1801
Gold that's put to use more gold begets.
– William Shakespeare, 1564 – 1616
It’s only a matter of time EW, did not know that Jason, thanks All for the comments!
Thanks for the post and the associated quotes.
Here is a bit of gold trivia for you: China has now surpassed South Africa as the world’s number one producer of gold.
As I say, we about to pay the penalty.
But our congress has repeatedly proved they are beyond redemption when it comes to that kind of discipline.
Very good points, EW. I think you hit the nail on the Head.
Actually, Jim was right about warfare stretching an economy beyond the ability of backing to keep up. The depression did the same thing for the same reasons, and, being compounded in-train by World War II, there was no hope of a backed currency to cover the costs involved, across the breadth of the economy. During the war, defense spending ranged from 73% to 89.5% of government spending (and 17.8% to 37.5% of GDP) . That amount of increase in that short a time-frame is impossible without deficit spending, and as the rest of the industrialized world was also at war, there was no one to borrow it from. The only answer is fiat currency.
When the war ended, we found ourselves with an industrial plant running at 112% of capacity (it’s one of those weird ways economists calculate things) and full employment. And six million men in uniform coming home. Going back to a convertible currency at that point would have contracted the economy by double digits and spiked unemployment – a return to the depression. We sent as many of the returning veterans to college as we could and converted our factories to consumer goods, and the generation that went to Europe and the Pacific eventually went to the Moon, invented computers, communications satellites and revolutionized medicine.
We never could have reached the degree of prosperity we have without a flexible currency (America’s 2000 GDP is equal to the world’s GDP of 1960), but it requires a disciplined government to sustain the blessings without overreaching and debasing the currency faster than it can generate new wealth. We are about to experience the punishment for that overreach.
Thanks for your comments Libby and TV!
There is another thing Roosevelt screwed up.
I enjoy the famous philosophical quotes at the end of each blog very much, Jimr. Nice touch. Keep ’em coming!