The gold standard and the origins of the modern international monetary system

This article explores the ways in which the classical gold standard established the foundations for a modern international monetary system with its distinctive forms of crisis and regulatory frameworks. The specific nature of this transformation is often overlooked because of a tendency in the literature to compare the gold standard in relation to subsequent monetary systems, such as Bretton Woods. To remedy this historical bias, the classical gold standard is compared with previous monetary systems and it is concluded that it contributed to expand the array of monetary instruments for conducting monetary policy. By progressively subjecting the management of fiduciary money to state control the institutions of the gold standard created a new monetary framework that opened the way for central banking. However, the commitments taken to this effect, such as provisions on the convertibility of banknotes, created new opportunities for speculation. I argue that this new weakness would become the main preoccupation of monetary policy in the 20th century and lay down the foundations for international cooperation and its novel emphasis on monetary stability.