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The Rise and Fall of the Gold Standard

When I began exploring the topic last year, I expected to find dozens of different, compact histories of the gold standard in the U.S. In fact, I didn't find but one, which left a number of what I considered to be important aspects of the topic unaddressed. I dare to hope, therefore, that no-one will say (as Moses Hades is reported to have said of some poor scholar's book) that my just-released Cato Policy Analysis "fills a much needed gap."

  • MichaelM

    Picked it up and will read at soon as is convenient. I await with bated breath.

    I have a question about something unrelated. You mentioning your book 'The Theory of Free Banking' a couple times recently got me to go back and give re-reading it a try. I came across a citation that I'm having trouble following up on. On page 18, you cite William Ridgeway's 'The Origin of Metallic Currencies and Weight Standards', page 203 for the claim that electrum coins were 'probably in use throughout the Aegean before the reign of Pheidon of Argus', one of the usually cited inventors of coinage.

    However, having dug up a copy of the book in question, I'm having trouble finding anything about the claim. While page 203 does indeed begin the discussion on the invention of coinage, it says nothing about electrum, or any other, coins being used before the supposed Lydian invention. The whole book contains occasionally references or discussion to weighed chunks of metals being used as money throughout the ancient Near East and Mediterranean, but nothing about pre-Lydian coins. I managed to find a few discussions on the topic with some Google searching and, while it remains a perfectly open question as to whether the very first coiners were kings or merchants, I can't find anything about historical evidence for private minting in the period. There are a lot of coins whose origins remain obscure, which could indeed be privately minted coins (it makes sense — its hard to match the punch of a coin to its private minter when that coin is all that remains as evidence of his existence. A lot easier to match a punch to a city whose symbol it has been and would be for centuries around the minting of the coin), but none which are definitively privately sourced.

    I'm not 100% sure that's the point you're making with the line above (I might just be letting my recent readings on the chartalist take of the origin of coins leak into my reading of your work), but the original confusion remains: Where in Ridgeway are you finding that coins were circulating throughout the Aegean prior to their supposed invention by Pheidon?

    • George Selgin

      MichaelM, the most relevant passage in Ridgeway is at the bottom of p. 216, thought the preceding pages offer pertinent background (hence my note referring to "p. 203ff.")

      It's interesting that you mention chartalism, as I also have just been reading some writings on that subject, and have been contemplating a post concerning it.

      • MichaelM

        I'm having trouble finding the relevant passage. Maybe my copy's page numbering is off. Is this the paragraph related to whether or not the Aeginetans borrowed or innovated their silver standard?

        And chartalism has been something of a fascination to me recently. I must not understand it because I'm not getting what's new or innovative about it, but I keep looking through the material I can find to try and figure out why it's such a big deal in some circles.

        What have you been reading lately in the chartalism corpus?

        • George Selgin

          Here is the paragraph (last on p. 216):

          "On the whole then we may assume that the bullet-shaped
          coins of Aegina, which are undoubtedly the earliest coins of
          Greece Proper, are the Pheidonian currency mentioned in the
          ancient authors and on the Parian Marble. As silver was
          probably not at all plenty at Argos, but was brought to Aegina
          by the traders, Pheidon had every motive for minting at
          Aegina instead of at his own capital. The fact that the Romans
          struck silver coins in Campania before they issued any at
          Rome affords a curious parallel. A local supply of the metal
          offers the explanation in each case. "It may be also positively
          asserted that none of the Aeginetan coins are older than the
          earliest Lydian electrum money, and that consequently the
          date of the introduction of coined money into Peloponnesus
          must be subsequent to circ. 700 B.C. It follows that Pheidon
          was not the inventor of money, for already before bis time all
          the coasts and islands of the Aegean must have been acquainted
          with the pale yellow electrum coins of Lydia and Ionian"

          • MichaelM

            Ah, I was looking at 219, not 216. My bad. Thank you for the help. I just like to be able to check sources on things I'm not too familiar with.

            If such things were known by the late 19th century, why do you think it is 'common knowledge' that Lydian king invented coinage?

          • George Selgin

            Because more people know what Herodotus said than know about Ridgeway or any of the various other numismatists who have disputed his claims. (Anyway, when it comes to monetary history myths seem to die especially hard.)

  • George, this is very interesting stuff, I've taken the liberty of passing it on to my twitter followers.

    In my own personal studies I've been familiarizing myself with the decade between 1942-1954, a period which usually gets gets glossed over in the literature. The assumption is usually that the US was on a gold exchange standard, and that the Treasury's promise to redeem upon the request of foreign central banks was sufficient to keep the gold price pinned at $35. But in actuality, gold traded in a number of "free" markets at large premiums to $35, sometimes at twice the price, a pattern that continued well into the 50s. Are you familiar at all with this period? I'm not sure what sort of standard you would call this, but it seems to be a different than the standard that existed from 1954-1968, a period over which the free market price of gold traded at $35 (except for 1960).

  • Aaron Moser

    Dr. Selgin

    Nathan Lewis has done research on the history of world gold standards operations and has written a book on the subject called "Gold:The Once and Future Money". His website is