Chapter 2. A “gold standard” means a monetary system in which a defined mass of gold coin or bullion is the unit of account in which prices are posted and accounts kept, and gold coin or bullion is the medium of redemption that ordinary currency and bank accounts promise to pay. Once modern banking developed, the vast majority of money was held and spent in the form of banknotes and deposit transfers, not coins. A monometallic gold standard with bank-issued money avoids problems created by legally imposing bimetallism. A series of supply-and-demand diagrams explains how a gold standard works to determine the quantity and purchasing power of money. The diagrams show how market forces stabilize the purchasing power of gold in response to various shifts in money demand and supply. A major gold discovery can change the purchasing power of gold by altering the supply from mining, but large discoveries were historically rare. The resource costs of a gold standard, the expenditure of labor and capital to extract and coin gold, have been over-estimated by economists who assume away the role of the banking system in economizing on the amount of gold used for transactions.

A Financial History of Western Europe is Kindleberger’s self-identified masterwork, an attempt to derive robust theories from centuries of accumulated fact, and then to use those theories as a framework for making sense of the momentous events of Kindleberger’s own life. It is a story of financial development in support of economic development at a global scale, both development processes advancing together in Darwinian evolutionary fashion by means of boom and bust.

This chapter argues that questions over what kinds of money Americans should use, often assumed to be settled by the establishment of the Federal Reserve in 1913, persisted throughout the twentieth century and in ongoing debates about who should be allowed what kinds of credit. It narrates the cultural forms of this history by combining critical accounts of the key transitions in the credit economy with new readings of The Wonderful Wizard of Oz. The first section argues that Frank Baum’s 1900 novella is better read through the emergence of retail credit than through the bimetal debates that have dominated its critical reception. The second section reads Victor Fleming’s 1939 film The Wizard of Oz through the debates about the ending of the depression and the shape of New Deal credit and argues that the film’s celebration of this credit obscured its political implications. The final section reads Sidney Lumet’s 1975 The Wiz through the crisis in the New Deal, and the subsequent emergence of neoliberal governance, that the New York financial crisis of the mid-1970s signalled.