UK and the gold standard

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    Dr. Herbener,

    I’ve been looking at a few charts such as consumer prices, government spending, deficits, and debts in the US and they all explode after 1971 when Nixon closed the gold window.

    Then I went on and looked at the same charts for the UK. After 1931 when the Sterling left the gold standard consumer prices also took off, as was the case in the US. You’d think the same would be true for government debt and spending. However, those didn’t start increasing significantly until the US left the gold standard in 1971.

    Any thoughts?


    The U.S. didn’t leave the gold standard until 1933. The federal budget went into deficit in 1931. By 1934, Federal government expenditures were double their 1930 level. The Federal budget was in deficit every year from 1931-1946. The highest Deficit/Expenditures ratio in the 1930s was 55% in 1934. The highest ratio in the 1940s was was 69% in 1943.

    Fiscal discipline is lax under a fiat money regime as the world had from the early 1930s until the end of the Second World War and after 1971.

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