Gold Standard
Can somebody please tell me why Franklin Roosevelt suspended the Gold standard during the US depression?
I know that Great Britain was the first to abandon the gold standard, but why did that lead Roosevelt to follow suit?
There were both domestic and international reasons for abandoning the gold standard. This is a very complicated issue, but a brief synopsis is as follows:
Domestically the economy was being ruined by deflation. Prices were falling to an extent that it was bankrupting farmers and manufacturers. Taking America off the gold standard gave the Federal Reserve the ability to reflate the currency and stop further price declines.
Internationally the dollar was becoming very expensive compared to currencies that that were no longer based on gold. This in turn made American products very expensive. This was one factor in the collapse of export shipments which was forcing companies to lay off workers and close plants.
The Gold Standard in Theory and Myth (by Joseph Salerno)
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