MODIFIED GOLD AND DOLLAR STANDARDS (1)

Now that we have surveyed the idealized cases of a pure gold standard and completely flexible exchange-rate system, we can describe the international system as it has fact operated in recent decades , paving the way for Chapter 36’s discussion of future modifications that are on the way.paving the way for s discussion of future modifications that are on the way.
Evolution of the gold standard , There is nothing sacred about gold.Silver ,platinum, lead ,or,for that matter,paper napkins would do,provided they had convenience for exchange ,could not be falsified,and were enough limited in supply to keep the price level from soaring .Actually , the old gold standard prevailed in its heyday only for a brief half-century prior to 1914 .Before the nineteenth century ,England had been more on a silver than on a gold standard ,and had stumbled onto the gold standard as a result of market revaluations of the two precious metals without anyone ’s realizing it .Her great prestige caused France ,the united States,and the rising empires of Germany and Japan to adopt the gold standard later . Even in its brief heyday,several crises caused the gold standard to break down periodically (as,for example ,when our Civil War forced us off gold for more than a decade).