The Gold Standard Did Not Create The Great Depression; The Federal Reserve Did!
The comments below are an edited and abridged synopsis of an article by Germinal Van
Many believe the Great Depression was created by failure of laissez-faire economics, failure of the free-market, and failure of an unregulated economy. This is taught in all political science and history classes. It is also taught that the gold standard was the real cause of the market failure, thus government intervention was needed to rescue the economy. This is a myth that must be debunked before it indoctrinates the forthcoming generations.
The gold standard did not generate the crash of the stock market of 1929; the Fed did. By definition, the gold standard is a monetary system in which the value of money is determined gold, because it is the most precious and trusted metal.
When Roosevelt became president, he increased the value of gold by enacting the Gold Reserve Act ($20.67 to $35); it asserted that gold could no longer be privately owned. The law required that gold certificates held by the Fed through private ownership be surrendered and vested in the Department of Treasury. Only licensed jewelers were allowed to have gold for sales purposes.
The Gold Reserve Act took the US off the gold standard before it was completely dissolved by President Nixon in 1971. It entrenched the nationalization of money and epitomized an unjustified encroachment of the central government in the economy. The government did not need to take full control of the money supply to restore the economy; the Fed could have changed its monetary policy while leaving commercial banks with the power to freely establish their own exchange rates without government interference. Thus, the gold standard did not create the Great Depression, but the Fed did.
