What Is Left of the Gold Standard?

Courtesy Reuters

WHILE there is much dispute today concerning the rôle which gold prices have played in the economic deterioration of the last five years, the disputants generally agree on at least one point: that the international gold standard has broken down. The causes and the effects of this breakdown, and the practicability of a prompt restoration of the gold standard by international action, are moot questions with which this article is not concerned. Its purpose is to indicate briefly the extent to which the nations have departed from gold and the extent to which the gold standard still survives.

An examination of some sixty-odd national currencies shows seventeen quoted in the foreign exchange markets at or near their gold parity, while the remainder show a depreciation ranging from 10 to 90 percent. This does not mean that seventeen countries are still on the gold standard. About one-half of these have succeeded in holding their currencies at nominal parity with gold only through such drastic measures as foreign exchange restrictions, the subsidizing of exports and the rationing of imports. Germany supplies the most conspicuous example of a country whose currency is quoted in the exchange markets at a price only slightly below its gold parity, although in business transactions involving external payments this currency shows an actual depreciation of more than 30 percent. For some time the Reichsbank's "cover" for its notes, in gold and foreign exchange, has been fluctuating around 2 percent. Obviously, Germany is no longer on the gold standard, and the German reichsmark is no longer stable. The highly complicated system of "blocked" reichsmarks has in effect created for Germany a whole series of subsidiary exchange rates with as many different discounts from parity as there are channels through which the blocked currency is handled. The action of the Foreign Exchange Control Board in July, calling upon German exporters to refuse payment in German money from their foreign customers, was virtually a repudiation by the Reich government of its currency. And yet, on

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