Why Gold Standard didn’t help during Great depression and financial crisis of 1954? Because of Fractional Reserve Banking?
Thank you
We didn’t have a true gold standard. The Federal Reserve controlled the money supply and backed only 40% of all dollar bills with gold. When it inflated the money supply, the government simply devalued the dollar relative to gold.
In 1954, the U.S. was operating under the Bretton Woods system. This was a gold-exchange standard and meant that only foreign central banks could exchange dollars for gold. A gold standard requires that anyone can exchange currency for gold at any time.
The dynamics of why the gold standard didn’t save the country from the great depression are somewhat complex. In a nutshell, inflation was caused by increases in reserves coupled with fractional reserve banking. I suggest that you read America’s Great Depression by Murray Rothbard, particularly chapter 4, inflationary factors, for more details.