The gold standard -- i.e., the gold standard -- was the monetary system more or less continuously in place between Waterloo and World War I. It was simplicity itself. Bank notes were exchangeable into gold, and gold into bank notes, at a fixed, inviolable rate. A central bank's everyday job was to facilitate this exchange. Of what we know today as "monetary policy" -- i.e., manipulating interest rates or the money supply to promote full employment or to pull the economy out of the ditch -- the conscientious central banker would have no part.
This gold standard perished in World War I. In its place, the governments of the postwar world established a system that looked like the gold standard. Currencies were said to be "backed" by bullion. But, in fact, the central bankers overrode the gold-standard rules. They manipulated interest rates and exchange rates and otherwise gummed up the exquisite gold-standard works. What looked like the gold standard bore no real relation to it. People suspected as much, for gold coins, in most countries, disappeared into private hoards rather than circulating from hand to hand as they had done for generations before the Great War.
But gold backing is not, in fact, the essential feature of a properly functioning gold standard. What made that self-regulating system tick was the simple rule that a dollar or a franc or a pound could not be in two places at the same time. Gold movements between debtors and creditors ensured as much.
You might suppose that so basic a feature of the physical world would naturally rule the financial one. But the post-World War I wrecking crew discovered that a certain privileged kind of money could be made to do double duty. This was the "reserve currency." The pound sterling was the original reserve currency, the top monetary brand of the day. The U.S. dollar is its successor. It was given to Britain, later to the U.S., to have it both ways, to consume much more than it produced but never to have to pay its foreign creditors in anything except the paper that it alone could lawfully print. And as if that were not good enough, the creditors dutifully reinvested the pounds or dollars in the securities of the debtor government. It was heaven on earth, while it lasted.
Of course, it didn't last; it never does. Inflation -- of prices or of credit -- brings down the hammer.
Who the hell was claiming that everyday citizens share no part in bearing responsibility, while big business bears all of it? There is an obvious systemic issue, and executives are targeted most frequently because they benefitted most from it at the expense of the public.
