The 20th Century saw the world monetary system transition from a gold standard to a fiat standard.
Gold Wars by Ferdinand Lips (recommended by @saifedean) tells the story of how Switzerland became the last country to abandon its currency's link to gold.
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Gold Wars by Ferdinand Lips (recommended by @saifedean) tells the story of how Switzerland became the last country to abandon its currency's link to gold.
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Lips argues that the confidence gold backing inspired in CHF helped transform landlocked and resource-poor Switzerland into one of the world's most prosperous countries. Switzerland enjoyed the benefits of sound money, high savings, strong growth and low unemployment.
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After the 1971 Nixon shock, CHF was the only world currency left with this direct gold link. As a bastion of sound money it posed a challenge to the international fiat system. Lips recounts the pressure to abandon the link placed on the Swiss by that system's supporters .
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The breaking of the CHF-gold link was made inevitable by Switzerland’s 1992 decision to join the IMF, whose Articles of Agreement prohibit currency gold backing of currencies. The Swiss were not only encouraged to remove CHF's link to gold, but also to sell gold reserves.
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The gold link was officially severed following a referendum on the Swiss constitution in 1999. The Swiss public were given just three weeks to review the complex amendments before voting. Shortly after, the SNB began a selloff that reduced Swiss gold holdings by ~60%.
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Lips regards this event as a sad moment in world history. It broke the last formal link between gold and the international monetary system. In doing this it removed another competitive obstacle to the easy money policies that continue to plague the global economy today.
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