My website is: newworldeconomics.com.Opinions expressed by Forbes Contributors are their own.I write about monetary and tax policy for the 21st century. By 560 B.C., the Lydians had figured out how to separate the gold from the silver, and so created the first truly gold coin. Kimberly Amadeo has 20 years of experience in economic analysis and business strategy. Thus, the only way for a gold standard to have caused an event of this sort would have been for gold’s value to change suddenly and by a very large degree – something which is historically unprecedented – and for this change to go unnoticed by people at the time.And what supposedly caused this dramatic change in value? Countries on the gold standard can’t increase the amount of paper money in circulation without also increasing their reserves of gold.From the late 1800s until the 1930s, most countries in the world—including the United States—adhered to an international gold standard.

It was followed by a 38 month recession … Smoot-Hawley put a tariff of 60% on 3,200 items, many of which were not even manufactured in the U.S. All this currency devaluation introduced a new layer of financial chaos and uncertainly to an already rather grim picture. A slowing economy usually increases fear among investors, and gold is a natural refuge when worry strikes. There's always enough gold, it's just a question of price. This happened as something of an accident in Germany in 1931, in the midst of a bank panic. They also increased taxes. Constantine the Great debased it to 70 coins per pound in the years 306 A.D. to 337 A.D. Author: Lindsey Konkel.

They needed more gold so they could be wealthier than each other.

During the Great Depression, the Federal Reserve raised interest rates. The Federal Reserve has been unpopular among libertarian types since it was founded in 1913. That forced many companies out of business. (Credit: Keystone-France/Gamma-Keystone/Getty Images)The U.S. economy boomed during the first part of the 1920s—the But European countries that had borrowed money from the United States during World War I had trouble paying off their debts. Gold is a good investment during recessions due to its role as a safe haven.

At the same time, the In 1944, the major powers negotiated the Bretton-Woods Agreement, making the U.S. dollar the official In 1976, unhinged from the dollar, gold quickly shot up to more than $120 per ounce. This alone was enough to cause a worldwide recession.As governments’ tax revenue faltered in the initial recession, and demands for welfare services and public works spending increased, very large domestic tax increases were implemented around the world according to the conservative conventional wisdom of the time, especially in Britain, Germany and the U.S. (France and especially Japan were much less aggressive here).In the U.S., the big tax hike took place in 1932. It was accumulating U.S. dollars in its foreign reserves since oil is priced in dollars due to fears that the United States would seize its bank accounts as a tactic in the Cold War. The United States never had that problem. All Rights Reserved. As population, the workforce, and overall economic output grow, if the money supply under a gold standard remained static, the demand for new money would outstrip existing stocks. In fact, this is why many advocate a return to the gold standard. Furthermore, the United States could not unilaterally convert to a gold standard if the rest of the world didn't. A fixed money supply, dependent on gold reserves, would limit economic growth.

As  In a gold standard system, a given amount of paper money can be converted into a fixed amount of gold. I think it did this properly, just as it has done so for centuries.Governments touched off a recession due to their tariff wars. Many businesses would not get funded because of a lack of capital.

Americans had to sell their gold to the Fed. Great Britain became the first to drop off the gold standard in 1931. Do you think it is because it is politically unpleasant?I say the proper response to the Great Depression was not currency devaluation.

The Cato Institute’s policy analysis, ”The Gold Standard: An Analysis of Some Recent Proposals,” presents an evaluation of methods for returning to the gold standard.

In those days, the value of the coin was based solely on the value of the metal within, and the country with the most gold had the most wealth. This made the U.S. dollar the de facto The benefit of a gold standard is that a fixed asset backs the money's value.

Whenever a recession or inflation looms, investors return to gold as a safe haven. The Great War proved to be the first nail in the coffin for the international gold standard. After the war, countries realized they didn't need to tie their currency to gold, and that it may in fact be harming the world economy to do so. Britain followed with an intentional devaluation in September 1931, and Japan in December 1931. Whenever a Provides a self-regulating and stabilizing effect on the economyA country's economy is dependent upon its supply of goldActions to protect gold reserves caused significant fluctuations in the economy

One problem with a gold standard is that the size and health of a country's economy are dependent upon its supply of gold. The Soviet Union deposited its dollar reserves in European banks, and these became known as eurodollars.

When the Great Recession hit, for example, gold prices rose. By that time, the government stockpile of gold tripled to $12 billion.

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