1816
A single law made gold the only foundation for money.
Silver became a secondary coin. The starting point wasn't a gold coin, but a law.
Tracing the Era of the Gold Standard
How did money tied to gold change trade and banking? We will trace the developments in various countries during the 19th century.
Time to read the text: about 10 min ／ Time to read the in-depth book: about 129 min
The review questions are optional and not included in this time.
What you can read: the course opening and contents are free; the full text is for those who have purchased
After purchase, you can read the full text once your access starts.
The Age of the Gold Standard in 3 Minutes
1See it
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The next year
The sovereign, a gold coin worth exactly 1 pound, was born.
7.32 grams
Weight of a sovereign gold coin
1844
A law tied the issuance of banknotes to gold reserves.
During every panic, the government temporarily suspended this rule.
1848 & 1851
Gold rushes in faraway lands tipped France's balance toward gold.
Silver coins were melted down and left the country.
1858
By exchanging foreign silver for Japanese koban gold coins and taking them abroad, one could get 3 times as much silver.
Japan's gold-to-silver ratio was 1 to 5; outside Japan, it was about 1 to 15.
1873
Germany used its war indemnity gold to mint gold marks and sold off its silver.
The global price of silver tumbled downhill.
1893
India closed the doors of its mints, and silver became just a commodity.
The rate was fixed at 15 rupees to 1 pound.
Being on the gold standard was a qualification for borrowing from abroad.
Japan kept its indemnity payment in London as a reserve.
1907–1913
In a house with no firefighters, 12 district reserve banks were built.
The Panic of 1907 was stopped not by the government, but by a single banker.
2In numbers
154,000,000francs
Silver brought to the French mint in the single year of 1873
3times
How much silver multiplied when exchanging foreign silver for koban to take abroad
3What would you do?
You are a finance minister at the end of the 19th century. You've decided to adopt the gold standard. What is the biggest reason?
Pick one
To show the nation's prestige
If you read it as a story of prestige, you miss something. It's the reason why Japan received its indemnity in pounds, which could be converted to gold, and left it in London.
To borrow money from foreign markets
This is how this course reads it. More than being about prestige, the gold standard was a qualification for borrowing from abroad. Japan later raised funds in London by issuing sterling-denominated bonds.
In countries that borrowed and couldn't pay back, officials from the creditor nations moved in. The order in which countries adopted the gold standard differed.
4Read more
What you will understand after this course
- Can state that establishing only gold as the standard and deciding how much paper money can be issued are separate tasks.
- Can state in order how one indemnity and one law in 1873 affected the world's silver.
- Can explain, with examples from three countries, that the gold standard was not about prestige but a qualification for borrowing from abroad.
The book for this course
『Tracing the Era of the Gold Standard』
A complete illustrated book. 30 figures, about 129 min
Free sample: 1816 — A law for gold alone, and the apparatus of four nations
More about this course
Course number: A06
Supervised by: Mitsuru Hayama
Beyond the text: 6 exercises · 1 coins · 3 readings How reading times are calculated
You will also understand
- Explain why the role of 'lender of last resort' was articulated and formalized at the end of the nineteenth century.
You can start this course without reading any other course.
Also worth reading, to see the connections (optional)
- Where Did Money Come From?
What you learn: Can explain what was eliminated from transactions by the stamping of a mark, using the language of time rather than metal.
Assessment
6 exercises in this course (4 check, 0 compare, 2 written). Progress is recorded by self-assessment.
The 8 chapters of this course
- 1816 — A Law for Gold Alone, and the Apparatus of Four NationsThe starting point of the gold standard world was not a gold coin, but a single law in 1816. Four nations answered the same question with different apparatuses.
- How much paper money can be issued? — Peel's Act and the forest of banknotesA restrictive law was loosened in times of crisis, while unrestricted freedom yielded thousands of types of paper money and financial panics. Bagehot put into words the three conditions for the lender of last resort.
- Correction and Fortune from the Earth — An Era of Unification, and the Countries Where Gold Came and Did NotTo unify means to standardize weights and conversions. In the countries where gold came, the scales tipped; in those where it did not, face values were inflated a hundredfold.
- The World's Standard and the Paper of War — Descendants of the 8 Reales, and GreenbacksTrust resided not in the issuer, but in the unchanging content. Wartime paper money was valued in gold by the market, and peace demanded a reckoning.
- The Union and 1873 — Uniform specifications, reparations, and the collapse of silverA single war indemnity created the gold mark, and the released silver collapsed the world price of silver. One nation's choice of monetary standard reverberated in the wallets of a distant country.
- From the Silver Side — Closing the MintsWhen the door closed, silver became a mere commodity. The rupee was linked on paper not to gold but to the pound, creating the model known as the gold exchange standard.
- A License to Borrow, and the Empire of the LedgerThe order of adopting the gold standard differed by country. Qualified nations borrowed; for those unable to repay, it was not the sword but double-entry bookkeeping that took root.
- 1913 — The House Without a FiremanA house without a lender of last resort calmed a panic in a private citizen's library. Twelve banks were built to structure fear, and the following summer, the cloth was halted.
Real-life examples in this course (3)
- The sovereign is born Britain 1816 Westminster, the Parliament
The starting point of this volume. A single law that established only gold as the standard. - Reparations — becoming a paying country France 1873 The mints of Berlin and Paris
Five billion francs become gold marks, breaking the back of the union. The crux of Chapter 8. - The Gold Never Came India 1898–1913 The Reality of Circulation
The gold never came. A form of the gold exchange standard, tied to the pound on the books.
Read next
Comparing the Origins of Money →What you learn next: You can say which part of "money came from the inconvenience of barter" has never been verified.
Time to read the text: about 10 min ／ What you can read: the course opening and contents are free; the full text is for those who have purchased
Price
After purchase, the full courses, the illustrated books, every country’s story and the numismatics examination are open to you.
See the price →