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← Every Nation Abandoned Gold in 1914
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Question
Why was the pre-war gold standard fundamentally incompatible with modern total war?
1
Gold standard rules prohibited deficit spending, which all belligerent governments needed to finance military operations
2
The gold standard required fixed exchange rates between belligerents, making trade-based financing impossible
3
International gold standard rules prohibited countries at war from issuing new debt instruments
4
Maintaining gold convertibility required balanced budgets; industrial-scale warfare required spending multiples of peacetime revenue that no country could cover without money creation
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