Germany joins the gold standard
Using the 5 billion francs in reparations extracted from France after the Franco-Prussian War, the newly unified German Empire bought enough gold to peg the mark at a fixed rate. Chancellor Bismarck oversaw the transition, demonetizing silver in 1873. France followed in 1878, the US legally in 1879, Japan in 1897. Within a decade most of the industrial world was on gold. For the first time in history, a genuinely global monetary system existed, and cross-border capital flows became nearly frictionless until 1914.
The decades between 1870 and 1914 are sometimes called 'the first era of globalization.' Gold made cross-border capital flows frictionless in a way that wasn't matched again until the 1990s.
04 · Gold Standard
In the late 19th century most major economies agreed to peg their currencies to gold at a fixed rate. Currencies became effectively interchangeable. The arrangement imposed discipline — you couldn't print more money than you held gold — but it also made economies brittle: a gold outflow forced an immediate contraction in money supply, regardless of real-world conditions.
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