Thomas Tooke

Replacement of 100% Gold to 40% of the Gold by the Fed in 1913-1919. Withdrawal of Gold from circulation by the Fed.

In Gold vs monetary base, Inflationary Period of 1913-1920 on April 25, 2012 at 1:52 am

In the previous post we discussed the monetary expansion in the US during the 1913-1919.

As Kemmener wrote:


Two important items in this great increase in the monetary circulation were:

(1) the heavy net imports of Gold from Europe resulting from our large exports of war materials to the belligerent countries, and (2) the policy of the federal reserve authorities of withdrawing gold certificates and gold coin from active circulation, and substituting  therefor so far as possible federal reserve notes, thereby substituting for money representing 100 gold as form of money which required only a legal gold reserve of 40% per cent. The period studied witnessed a very large expansion of federal reserve notes. In 1913 there were no federal reserve notes, and on November 7th, 1919 there were $2.8 billions of federal reserve notes in circulation against which a reserve of 45.3 per cent was held, giving a net circulation of uncovered by gold of $.15 billions. At the present writing (March 26th, 1920) the circulation of federal reserve notes is $3,048 millions against which a reserve of 40.1 per cent is held, giving a circulation uncovered by gold of $1,826. […]


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