Gold and the Gold Standard.pdf

GOLD AND THE GOLD STANDARD
and when, under the gold-coin standard, currency
contraction would have been effected by gold exports.
Under such requirements the central ,bank could
expand its credit and increase its note circulation
when its reserves were low and declining, but only at a
progressively increasing expense to the borrower and/or
at a progressively declining rate of profit to itself.
On the whole, and allowing for a few important
exceptions, the postwar gold-exchange standard
functioned successfully for several years, under
principles laid down by the Genoa Conference, many
of which had been widely adopted. Then, however, as
the pressures·that led to the world crisis beginning
in 1928 to 1929 began to be felt, these principles
were increasingly ignored, and gold-exchange standards,
like gold-bullion standards and gold-coin
standards, broke down in the crisis and depression
of the early thirties.
Weaknesses of the Postwar Gold-exchange Standard
Here one enters a technical and controversial field,
in which only a few of the outstanding points need
be considered in a study such as the present one.
The principal criticisms that have been made
against the gold-exchange standard are the following:
1. The PyramidingofGold Reser{)es. Criticsclaimed
that, in effecting an economy in the use of gold, the
gold-exchange standard often carried too far the
pyramiding of gold reserves. A computation, in a
typical situation, of the "ultimate gold reserve
[ 170 ]