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1、国 际 金 融 英 语ENGLISHFORINTERNATIONAL FINANCE顾 维 勇GU WEIYONGSCHOOL OF FOREIGN LANGUAGESNANJINGXIAOZHUANGCOLLEGE2008. 02. 2008. 06.LESSON 1 The Gold Standard Era, 1870 1914Origins of the Gold StandardThe gold standard had its origin in the use of gold coins as a medium of exchange, unit of account, and
2、store of value. While gold has been used in this way since ancient times, the gold standard as a legal institutiondates back to 1819, when the British Parliament passed the Resumption Act. The Resumption Act marks the first adoption of a true gold standard because it simultaneously repealedlong-stan
3、ding restrictions on the export of gold coins and bullion from Britain.Later in the nineteenth century, Germany, Japan, and other countries also followed suit. The U.S. effectively joined the gold standard in 1879 and institutionalized the dollar-gold link through the U.S. Gold Standard Act of 1900.
4、 With Britains preeminence in international trade and the advanced development of its financial system, London naturally became the center of the international monetary system built on the gold standard.The Gold Standard RulesThe gold standard regime has conventionally been associated with three rul
5、es of the game. The first rule is that in each participating country the price of the domestic currency must be fixed in terms of gold. Since the gold content in one unit of each currency was fixed, exchange rates were also fixed. This was called the mint parity. The second rule is that there must b
6、e a free import and export of gold. The third rule is that the surplus country, which is gaining gold, should allow its volume of money to increase while the deficit country, which is losing gold, should allow its volume of money to fall. The first two rules together ensure that exchange rates betwe
7、en participating countries are fixed within fairly narrow limits. With the price of any two currencies fixed in terms of gold the implied exchange rate between the two currencies is also fixed and any significant deviation from this fixed rate will be rapidly eliminated by arbitrage operations.The t
8、hird rule, requiring the volume of money to be linked in each participating country to balance of payments developments, provides an automatic mechanism of adjustment which ensures that, ultimately, any balance of payments disequilibriawill be corrected.The Automatic Adjustment Mechanism under the G
9、old StandardThe gold standard contains some powerful automatic mechanisms that contribute to the simultaneous achievement of balance of payments equilibrium by all countries. The most important of these was the price-specie-flow mechanism (precious metals were referred to as specie). Humes descripti
10、on of this mechanism has been translated into modern terms. Assume that Britains current account surplus is greater than its non-reserve capital account deficit. In this case, foreigners net imports from Britain are not being financed entirely by British loans. The balance must be matched by flows o
11、f international reserves that is, of gold into Britain. The gold inflows into Britain automatically reduce foreign money supplies and increase Britains money supply, driving foreign prices downward and British prices upward. As a result, the demand for British goods and services will fall and at the
12、 same time the British demand for foreign goods and services will increase. Eventually, reserve movements stop and both countries reach balance of payments equilibrium. The same process also works in reverse, eliminating an initial situation of foreign surplus and British deficit. However, the respo
13、nse of central banks to gold flows across their borders furnished another potential mechanism to help restore balance of payments equilibrium. Central banks experiencing persistent gold outflows were motivated to contract their domestic asset holdings for the fear of becoming unable to meet their ob
14、ligation to redeem currency notes. Thus domestic interest rates were pushed up and capital would flow in from abroad. Central banks gaining gold had much weaker incentives to eliminate their own imports of the metal. The main incentive was the greater profitability of interest-bearing domestic asset
15、s compared with barren gold. Central banks that were accumulating gold might be attempted to purchase domestic assets, thereby increasing capital outflows and driving gold abroad. These domestic credit measures, if undertaken by central banks, reinforced the price-specie-flow mechanism in pushing al
16、l countries toward balance of payments equilibrium. Because such measures speeded up the movement of countries toward their external balance goals, they increased the efficiency of the automatic adjustment processes inherent in the gold standard. However, research has shown that countries often reversed the steps mentioned above and sterilized gold flows, that is, sold domestic assets when foreign re
