Market price, legal price

Stabilizing Arbitrage

Gresham's Law

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The Gold Standard goes international

Between 1871 and 1900 every major country except China left their silver or bimetallic standard for a full gold standard. (SLIDE BELOW) The reason is, after the Franco-German war of 1871, the victorious Germans asked for a very heavy "war indemnity" to be paid in gold by France. They used this gold to finance a new gold standard for their country. The effect was to increase the demand for gold and to unload tons of silver on the neighboring countries. These countries decided to follow Germany, in fear of silver inflation.The silver freed by Germany was now far cheaper on the market than at the mint, and if they had kept their bimetallic standard, no one would have been using gold as money anymore and the abundant silver supply would have caused outright inflation. That was, at least, the reason invoked to institute a Gold Standard.

Please take note, as Roy Davies remarked, that England already was on a gold standard since 1816, and thus do not figure in the table below, because it was not part of the wave of the last quarter of the century that killed once for all the bimetallic standards.


Date of first Gold Standard

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Gold and silver coins used around the world during the 19 th century

Germany 1871
Scandinavia* 1874
Denmark 1875
Norway 1875
Sweden 1875
Holland 1875
Belgium 1873
Italy 1873
Switzerland 1873
France 1876
Spain 1876
Austria 1879
Russia 1893
India 1898
USA (officially) 1900

* as a monetary union
formed that year

By 1900, China is the only

major country to remain on silver

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