In 1821, Britain formally adopted the gold standard, making the pound sterling convertible to a fixed quantity of gold. Other major economies followed: Germany in 1871, the United States in 1879, and most of the industrialized world by 1900. The system worked elegantly: currencies were pegged to gold, exchange rates were fixed, and international trade was settled in bullion. It provided remarkable price stability — a British pound bought roughly the same amount of goods in 1914 as in 1821. But the gold standard also had brutal consequences: governments couldn't expand the money supply during recessions, deflation crushed debtors, and gold discoveries (or their absence) determined economic fate. The system collapsed during World War I when nations printed money to finance the war, was briefly restored, then abandoned for good during the Great Depression.
The Gold Standard Established
Britain formally adopted the gold standard, pegging its currency to a fixed quantity of gold and creating the monetary system that would govern global trade for over a century.
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