"One of the key elements was that the dollar would be pegged to gold at $35 an ounce. Other central banks could exchange the dollars they held for gold. In that sense, the dollar was as good as gold. Every other currency had a fixed exchange rate to the dollar."
Has anything like this ever happened in human history before this? It almost seems like a magic trick that we could tie "fiat currency" (if I'm using the term currently) to gold. We're on the tail end of a crazy one-of-a-kind experiment, if I understand everything correctly.
Kind of. The British Pound functioned essentially the same way before WW1. It was an international currency because the Bank of England guaranteed its value against gold & silver, so people everywhere wanted to hold it. Every other currency was evaluated against it. I don't think it was an "official" status, but it was a de facto international currency the same way the dollar was under Bretton Woods. Britain did sever the link several times in order to raise money for war.
Also keep in mind that the vast majority of money is now, and has always been, credit. That is, there has always been more money circulating than there were precious metals--it was really more of a way to give people confidence in the currency than a true 1:1 ratio. So it's kind of the same--the central bank holds the gold, it's theoretically redeemable, but really most of the money people use has no relationship to it. If you can access it, here's a good article: https://www.newyorker.com/magazine/2019/08/05/the-invention-of-money
Great summary of this exceptional century. It reminds me of how deep ecosystems respond when a whale corpse drops to the sea floor. How the various complex systems respond to growing energy scarcity will be very interesting. In ecology reliable resource limits tend to spur the creation of hyperdiverse ecosystems. If we can avoid tearing each other apart there could be an unexpected long tail of increasingly efficient use of the remaining oil output.
"One of the key elements was that the dollar would be pegged to gold at $35 an ounce. Other central banks could exchange the dollars they held for gold. In that sense, the dollar was as good as gold. Every other currency had a fixed exchange rate to the dollar."
Has anything like this ever happened in human history before this? It almost seems like a magic trick that we could tie "fiat currency" (if I'm using the term currently) to gold. We're on the tail end of a crazy one-of-a-kind experiment, if I understand everything correctly.
Kind of. The British Pound functioned essentially the same way before WW1. It was an international currency because the Bank of England guaranteed its value against gold & silver, so people everywhere wanted to hold it. Every other currency was evaluated against it. I don't think it was an "official" status, but it was a de facto international currency the same way the dollar was under Bretton Woods. Britain did sever the link several times in order to raise money for war.
Also keep in mind that the vast majority of money is now, and has always been, credit. That is, there has always been more money circulating than there were precious metals--it was really more of a way to give people confidence in the currency than a true 1:1 ratio. So it's kind of the same--the central bank holds the gold, it's theoretically redeemable, but really most of the money people use has no relationship to it. If you can access it, here's a good article: https://www.newyorker.com/magazine/2019/08/05/the-invention-of-money
Truly a very insightful analysis. Thank you for sharing your perspective.
Great summary of this exceptional century. It reminds me of how deep ecosystems respond when a whale corpse drops to the sea floor. How the various complex systems respond to growing energy scarcity will be very interesting. In ecology reliable resource limits tend to spur the creation of hyperdiverse ecosystems. If we can avoid tearing each other apart there could be an unexpected long tail of increasingly efficient use of the remaining oil output.