The second volume is full of glory and splendor in the capital, and the spirit is full of vitality in the foggy city. Chapter 243: The Gold Standard (Part 1)
Chapter Subtitle: Want to read Economics? This is Coming!
Yes, what should I talk about when I go to the American Economic Association?
Our Master Yuan was a little distracted after receiving the call, and hastily finished his dinner with the three Major Arcanas.
After seeing them off, the newly minted PhD in economics locked himself in his study, lit his beloved Cuban cigar, and thought about something big that he wanted to show off.
The reason why economics became the most prominent discipline in the 20th century is that human economic activities have become so complex that they have to rely on specialized theoretical guidance.
The reason why the 20th century was so chaotic was that economic theory could not keep up with the development of the international economy.
In fact, this is the norm of human civilization. Human beings will eventually have to cross the river by feeling the stones, because there are no time travelers in this world who have the foresight of hindsight.
There is a significant difference between the natural sciences and the humanities on this point.
After natural science was "thought out", all you had to do was pick up a piece of paper and a pen to calculate the orbits of the planets, or climb to the top of a tall tower and throw down two iron balls, one big and one small, or catch a bunch of fruit flies to breed for fun.
Once the humanities "come up" with something and start experimenting with it, at best it can bankrupt a political entity, and at worst it can turn the whole world into a sea of blood and corpses.
From this perspective, someone like Yuan Yanshu, a master's degree holder in economics who is well-versed in Western and world history, is truly "terrified." You have to understand that the history he's reading is written by the entire human race, using bones as pens and blood as ink.
For a time traveler like him , making money or not was a minor issue that wasn't even a case. The major issue he cared about was whether or not to cause trouble.
The 1920s was a very critical time point. Please note that this time point was very critical for economists.
If our Master Yuan had traveled through time ten years earlier, the First World War would have been on the verge of breaking out.
The three major contradictions that triggered the First World War, namely the Franco-German conflict over hegemony in Western and Central Europe, the Russian-Austrian conflict over the Balkan Peninsula, and the Anglo-German conflict over whether the balance of power in Europe can be maintained, cannot be eliminated by simple economic means.
Even if he had the Dragon Slaying Technique, he couldn't use it. Of course, as a Seresian, he wouldn't bother with the affairs of Oro's father, since Oro wasn't really his father.
If he had traveled through time ten years later, he would have been too late to prevent the outbreak of the Great Depression. By then, all the major countries in the world would have been unable to take care of themselves and would have had to treat the symptoms instead of the root cause.
World War II was practically inevitable, so of course, as a Serbian, he had no choice but to bite the bullet and find a way to aid the Communists.
The situation was different in 1921. With nearly seven or eight years left, he had ways to both weaken the impact of the Great Depression and increase its power.
Even if the first goal were achieved, it's unclear whether World War II would have occurred. After all, those with "Chuunibyou" (like war) are a minority.
Even if the latter goal were achieved, it is unclear whether there would be a Second World War, because old Europe might have been completely communist before the Second World War.
Back to the previous question, Yuan Yanshu naturally wants to talk about the issues that are of most concern to the current economics community.
So apart from the capitalist-socialist dispute, what other issues can make him act so pretentious?
Three words - gold standard!
In fact, from an economic perspective, the most profound impact of the First World War on human history was the first collapse of the gold standard.
Please note that this "gold standard" does not only refer to a country's monetary system, but here refers to an international monetary settlement system that was formed in 1880 and lasted until 1913.
During this period, the capitalist powers of Britain, the United States, Germany, the Netherlands, some Nordic countries and the Latin Monetary Union (consisting of France, Italy, Belgium and Switzerland) all implemented the purest gold standard - the gold coin standard, which provided a foundation for the smooth progress of international trade .
The gold standard used gold as the sole reserve fund, and gold alone possessed unlimited legal tender. Banknotes (real banknotes), whether issued by central banks or private banks, including silver, copper, and other metal or non-metallic coins, were freely redeemable for gold without restrictions.
During the heyday of the gold standard, gold was the primary international reserve asset for all countries, while the British pound was the primary means of international settlement. Both gold and the British pound became recognized international reserves.
The British pound was so powerful because the bull market was so powerful at the time. This led to the formation of an international gold standard centered around gold and the British pound, also known as the Sterling Exchange Standard System.
Then World War I broke out, and countries including the British Empire stopped exchanging banknotes for gold and banned gold exports.
During the war, countries implemented a free-floating exchange rate system, which caused sharp fluctuations in exchange rates and destabilized the international monetary system. Thus, the gold standard came to an end.
So after World War I, a problem arose: without an international monetary settlement system, how could countries do business?
Well, actually, the inability of everyone to do business is still a small problem. If we don’t want to do it, then don’t do it. It is just right to build non-tariff barriers in accordance with the tradition of mercantilism to protect the industry and agriculture of various countries.
This is why America fell into a "Little Depression" from 1920 to 1921.
However, without gold as a monetary anchor, inflation in various countries inevitably intensified. This was a serious problem. Inflation could even trigger a communist revolution.
The inflation of various countries' currencies is linked to the issue of war reparations between Germany and Austria. This problem has not only become bigger but also more complicated.
After all this talk, I am talking about the two major practical problems faced by economists around the world in 1921:
First, rebuild the gold standard.
Second, sort out the war reparations from the Allies.
These two major issues are accompanied by a small problem. Since we cannot defeat the Soviet Union, we might as well drag the Soviet Union back into the capitalist international system.
Whether it is Mises or Keynes, a large number of European economists are now busy with these things.
Compared with these things, the capitalist-socialist debate is just an academic dispute.
So there were two important economic conferences in 1922, one was the Genoa Conference held in Italy in the spring, and the other was the Geneva Conference held in Switzerland in the fall.
The Genoa Conference was a precondition for all nations to recognize the Soviet Union, pressuring it to acknowledge the foreign debts previously owed by the Tsarist Russia. The result was quite surprising: the Soviets and Hans recognized each other off the court, forgiving each other's foreign debts, and entering a Soviet-German honeymoon period.
The Geneva Conference was a meeting of central banks from various countries to rebuild the gold standard. The result was that it alleviated the immediate difficulties and sowed the seeds of the future Great Depression.
So does our Master Yuan have any way to solve these problems?
Yes, absolutely. It's all written in history books, and it's a permanent solution...
"Pika Pika Pika Pika..."
"A Master Ball will do. Don't worry about losing your account! Isn't it enough for me to push history in the 'right direction'?"
"Host, you must be correct. If you are not, then this system will have to use a real 100,000 volts."
