End of Finance (9780745683652) by Amato Massimo; Fantacci Luca

Author:Amato, Massimo; Fantacci, Luca
Language: eng
Format: epub
Publisher: John Wiley & Sons Inc

9

Orchestra rehearsal . The international gold standard and the dissolution of gold (1871)

The story is well known, or so it seems. The gold standard saw the light of day, almost by chance, in the United Kingdom at the beginning of the eighteenth century, and for a century and a half remained a national peculiarity of the British economic system; a peculiarity, moreover, thanks to which Great Britain was able to build up an ‘avant-garde’ financial system, at least in the sense that it was able to finance, simultaneously and inextricably, the country’s economic advance and the military construction of its empire – in a word, to underpin the engineering of its hegemony. From the 1870s, the gold standard became the international monetary system through which the first western, colonial and Eurocentric globalization reached the threshold of the first globalized war (Figure II 9.1).

Beginning with Germany, in 1871, the major European and extra-European countries subscribed to the gold standard one by one, committing themselves to immutable gold convertibility for their units of account and thereby giving rise to a system of fixed exchange rates; in practice, this meant attributing gold with the function of unit of measure, means of payment and international reserve.

Unlike its attempted reincarnations after the two world wars, the ‘classical’ gold standard was at that time a system based officially on the prompt and direct convertibility into gold of all the currencies of the countries subscribing to it. This, too, is well known, or at any rate it seems to be. Had this been the actual state of affairs, we would have had a monetary system able to provide a means of international payment of last resort for all debts: in other words, a system designed to make the payment of debts possible, and therefore a system that retained the distinction between money and credit. Had it been so, we would have to conclude that the financial markets that were built on the foundations of the gold standard as international monetary system and that opened the way to what has been called, with good reason, the first globalization were not really based on the principle of liquidity that we have seen at work so far, the ultimate effect of which was to preclude settlement between debtors and creditors, the end of finance. It would then have been true that, as Rueff argued, with the gold standard every disequilibrium must be paid for by an effective transfer of gold.

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