This chapter examines the end of the international gold standard during World War I. The creation of the Federal Reserve System—with its idea of centralized banking carried out by twelve central banks—ended the United States's long struggle to perfect a sensible, conservative monetary system. Everywhere in the industrial countries money of whatever kind was now exchangeable, without pretense or delay, into gold. The chapter considers how the major industrial participants—Germany, France, Britain, Austria—suspended specie payments and went off the gold standard when World War I broke out; the dumping of securities on the New York market in the first nervous days of the war; the shutdown of the New York Stock Exchange; and how the United States eventually abandoned the gold standard. The increase in whole prices in the United States during all the war years is also discussed.
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