Gold Standard (Money Tied to Gold)
Under the gold standard banknotes could be swapped for a fixed weight of gold; it gave exchange rates stability until the 1930s and shaped the design of the post-war money system.
Open in the interactive tree →Britain moved to gold in steps after 1816, Germany followed in 1873 and the United States resumed gold payments in 1879, creating the classical gold standard of 1873-1914 with fixed exchange rates. It limited how much money governments could create, and the falling prices and attacks on currencies of the interwar years drove Britain off gold in 1931 and the United States in 1933; Keynes had warned against Britain's return to gold in 1925. The 1944 Bretton Woods conference therefore tied currencies to the dollar and the dollar to gold at 35 dollars an ounce, until President Nixon ended that link on 15 August 1971.
Prerequisites
- Money~600 BC
- Paper Money~1000Banknotes were promised in exchange for a fixed weight of gold.
- Central Bank & State Currency1694Central banks held the gold and had to keep the promise.
Unlocks
- Macroeconomics (Keynes)1936Keynes opposed the return to gold in 1925 and its deflation.
- Bretton Woods, IMF, World Bank1944Bretton Woods was designed to replace the failed interwar gold standard.