Creature From Jekyll Island by G. Edward полностью

She had abandoned the gold standard early in the war in order toremove all limits from the creation of fiat money, and the result hadbeen extreme inflation. But now she wanted to regain her formerposition of power and prestige in the world's financial markets anddecided that, to accomplish this, it would be necessary to return tothe gold standard. It was decided, further, to set the exchange valueof the pound sterling (the British monetary unit) at exactly $4.86 inU.S. currency, which was approximately what it had been before thewar began.

To say that she wanted to return to the gold standard actually ismisleading. It was not a pure standard in which every unit of moneywas totally backed by a stated weight of gold. Rather, it was a 1- See "Head of Rothschilds' Paris House Is Dead," The New York Times, May 27, 1905, p. 9.

420 THE CREATURE FROM JEKYLL ISLAND

fractional gold standard in which only a certain fraction of all themonetary units were so backed. But, even that was much to be desired over no backing whatsoever for three reasons. First, it createdgreater consumer confidence in the money system because of theimplied promise to redeem all currency in gold—even though suchpromises are always broken when based on a fractional-reserve.1

Secondly, it provided an efficient means of settling financial accounts between nations, gold always being the international medium of choice. Thirdly, it applied some braking action to theproduction of fiat money, thus, providing a certain degree of restraint to inflation and the boom-bust cycle.

The decision to return to a fractional gold standard, therefore,while it left much to be desired, was still a step in the right direction.

But there were two serious problems with the plan. The first wasthat the exchange value of gold can never be decided by politicaldecree. It will always be determined by the interplay of supply anddemand within the marketplace. Trying to fix the number of dollarswhich people will be willing to exchange for a pound sterling waslike trying to legislate how many baseball cards a schoolboy willgive for a purple agate. The international currency market is like ahuge auction. If the auctioneer sets the opening bid too high, therewill be no takers—which is exactly what happened to the pound.