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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: JF Quinnelly who wrote (71615)	10/11/2006 1:22:45 AM
From: glenn_a	Respond to of 110194

Yes, Americans were prohibited from owning gold in 1933, and gold still backed global currencies in the 1930's, but the proximate cause for the financial system coming unglued in the early '30s was the disruption of gold flows between the major money powers of the era: the US, Great Britain, and France. Gold had been artificially sterilized in the 1920s, and this broke down in the early 30s. All three currencies were forced to revalue their currencies against gold, when the artificial pegging mechanisms collapsed. This was the proximate cause to the "loss of investor confidence" in the global financial system that caused such damage to the financial markets in the early 1930s. g

To: JF Quinnelly who wrote (71615)	10/11/2006 1:28:48 AM
From: bart13	Read Replies (1) \| Respond to of 110194

Individuals were prohibited from owning gold in 1933, but gold still backed the money supply in various degrees until 1973. FDR's revaluing the exchange rate of dollars to gold increased the monetary base by nearly 75%. I generally agreed with the rest of your post but still fail to see or understand most of the above portion. The gold backing starting in 1933 basically only applied to international transactions and dollar backing between int'l banks to the best of my knowledge, and therefore only applied to the international value of the dollar - not the value inside the US or the US money supply. If a US citizen can 'own' money, but not gold, the relationship between gold and money (and money supply) is broken. The monetary base is generally currency plus bank reserves (which does not include the Fed or Treasury reserves), and those have always been measured in dollars, not gold. It averaged about $6 billion in 1929, 5.6 in 1930, 6.2 in 1931, 6.6 in 1932, 7.0 in 1933, 7.8 in 1934 and 9.4 in 1935.