When they Hang Bankers – The New “Financial Terrorists”? Beware!
Those who think the Gold Standard brings stability must also believe in the Tooth Fairy. There was a huge CONTAGION that became widespread because of debasements during the 14th century. The silver to gold ratio was disrupted everywhere in Europe thanks to French debasements. The ratio stood at 13.1 in Florence compared to 12:1 in France during 1316 who was trying, like the Silver Democrats of the 19th US Century to overvalue the price of silver. By driving the price of silver even higher relative to gold, they forced the ratio in France down to 5:1 in 1343, setting off riots in Florence. Silver was being drained from the local economy flowing to France where it was over-valued and this created a sharp recession in Florence with the shortage of money (silver) for domestic use.
Why? For you see, wages and local commerce were conducted in silver. Gold was used only for international trade. Driving the price of silver higher raised the cost of production which simultaneously reduced the value of trade and even outstanding loans made to individuals and sovereigns alike. This caused a drop in production and rising unemployment. Hence, the first riot came in 1343 whereby the French Debasement had contributed to the impatience of the population. Switzerland did the same thing pegging the franc to the euro because the franc was rising and manufacture threatened to leave. Hence, Switzerland has imported massive inflation raising the cost of living and doing business there to TWICE that of the United States.
The Florence monetary system was a Two-Tier system whereby gold was used ONLY for settling international trade and silver was used for domestic commerce. Those who simply think because coins were precious metals and thus were not “fiat” yielding some land of Utopia where the value of money was constant while assets rose and fell, cannot grasp the simply concept that assets rise and fall ONLY in terms of purchasing power of the currency regardless what you use for money be it gold or St Patrick’s discovery or Slave Girls that were the unit of account for money in Ireland.
