The Right to Have Real Value Supporting Your Dollars - Gold History Part 4
Britain and USA adopt the Gold Standard and the France experience of bankruptcy.
The Right to Have Real Value Supporting Your Dollars The right to protect one's wealth from inflation was well understood by the Founding Fathers who enshrined it in the American Constitution, which took effect in 1789.
They believed that their currency should have real value behind it in the form of precious metals.
This hard-learned lesson was seared on their memories by the likes of the Mississippi Bubble in the 1720s, where the French were bankrupted during their first dalliance with paper money.
There were more salutary lessons from their own era also, when once again the French proved to be the whipping-boys of finance.
Their profligate policies, coupled with the assistance given to America in the War of Independence, proved to be their undoing.
The build-up of massive debts resulted in a tax burden that fell most heavily on the poorest members of society.
The end result of this stalemate is well known: abject poverty leading to revolution in 1789 - the same year as the birth of America's Constitution.
The French clergy and aristocracy stood aloof from these taxes so it was not surprising that the ensuing revolutionary wrath fell directly on their heads (or necks in this case).
A currency backed by gold and an absence of deficits was therefore a big issue in the formation of the United States.
Running deficits at the height of one's imperial power has not always been problematic.
Britain's debt levels during the Napoleonic Wars were truly crushing, relative to the size of her economy.
In spite of this burden, long-term borrowing rates during the period remained below 5 per cent and exchange rates returned to pre-War levels soon after the Battle of Waterloo.
It was just after this era that both Britain and America adopted formal gold standardswhich set a stable value of a currency relative to the price of gold and sometimes silver.
The downside of this action was a bout of poverty and scarcity as banks were forced to call in war-time loans.
The problem for a superpower currency becomes apparent when imperial power wanes and the weight of debt can no longer be carried.
The last time we witnessed such a decline was for Sterling after 1945 when the sun had truly truly set on the British Empire.
This is the 4th article in the series Gold History
The Right to Have Real Value Supporting Your Dollars The right to protect one's wealth from inflation was well understood by the Founding Fathers who enshrined it in the American Constitution, which took effect in 1789.
They believed that their currency should have real value behind it in the form of precious metals.
This hard-learned lesson was seared on their memories by the likes of the Mississippi Bubble in the 1720s, where the French were bankrupted during their first dalliance with paper money.
There were more salutary lessons from their own era also, when once again the French proved to be the whipping-boys of finance.
Their profligate policies, coupled with the assistance given to America in the War of Independence, proved to be their undoing.
The build-up of massive debts resulted in a tax burden that fell most heavily on the poorest members of society.
The end result of this stalemate is well known: abject poverty leading to revolution in 1789 - the same year as the birth of America's Constitution.
The French clergy and aristocracy stood aloof from these taxes so it was not surprising that the ensuing revolutionary wrath fell directly on their heads (or necks in this case).
A currency backed by gold and an absence of deficits was therefore a big issue in the formation of the United States.
Running deficits at the height of one's imperial power has not always been problematic.
Britain's debt levels during the Napoleonic Wars were truly crushing, relative to the size of her economy.
In spite of this burden, long-term borrowing rates during the period remained below 5 per cent and exchange rates returned to pre-War levels soon after the Battle of Waterloo.
It was just after this era that both Britain and America adopted formal gold standardswhich set a stable value of a currency relative to the price of gold and sometimes silver.
The downside of this action was a bout of poverty and scarcity as banks were forced to call in war-time loans.
The problem for a superpower currency becomes apparent when imperial power wanes and the weight of debt can no longer be carried.
The last time we witnessed such a decline was for Sterling after 1945 when the sun had truly truly set on the British Empire.
This is the 4th article in the series Gold History
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