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Had occasion to look into this great article today: "The Gold Pool (1961–1968) and the Fall of the Bretton Woods System: Lessons for Central Bank Cooperation" (2019, Journal of Economic History).
Dealing with the Gold Pool (which I've touched upon in MONEY CLASSes -- #764988), there's a segment in the article describing how gold was traded between nation's central banks.
Pretty wild to think that the base settlement media of the entire monetary system shifted ownership by merely re-assigning the label of the gold bars in the Bank of England's vaults. Ownership without custody is some special sort of madness, really.
People sometimes ridicule the rai stones from the island of Yap and how this peculiar "money" changed hands by social convention, the monetary stones rarely even moving location.
...and then the base layer of the Western world's entire monetary system, as late as the 1960s, operated in precisely that way. Cray-cray. Wiiiiild, too, that the cool term for this was "loco"... because that sort of describes the entire patchwork-fake-gold standard.
Could you imagine running an entire bitcoin standard on, like, the FTX ledger(?!) with the bitcoin never actually moving but some Sam Bankman-Fried character re-assigning the nominal ownership every time some banking institutions settle up??
Peace, /J
The way the standard ran before 1933 was by coins. You had gold and silver coins in your hand. The paper currency was 100% redeemable in either gold or silver. Our heroic lefty/Marxist/socialist/communist/murderer president at the time, FDR, changed it to the cra-cra system that followed. He really took us for a ride, didn’t he.
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Yeah, I mean no love for FDR of course.
Your first two sentences, tho, aren't quite right: Notes dominate from mid-19th to post-1933 time, and they were always partially backed by reserves.
Even the smallest gold coins were weeeell above most people's everyday expenses -- tokens, copper coins, or the occasional silver more common. (But, bimetallism aside, they are also roughly speaking fractional/non-money)
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Well, I did note that redeemable notes were used. The most used coins used to be the half dollar and lesser coins, which were held in the hand. Silver dollars were still given in pay, at least in Colorado, until the mid-50s, so payday was heavy in the pocket. The quarter eagles and $2 gold coins were available when the rate was 20 ounces silver/one ounce gold.
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