We Have Gold Because We Cannot Trust Governments

The typical gold standard prior to 1914 was highly automatic. Gold flowed freely in international trade from the places where it was cheap to the places where it was dear, always seeking to maintain its international-value level, with free coinage in a large part of the world and with widespread interconvertibility on demand with other kinds of currency. Normally, man's interference with the automatic functioning of the gold standard prior to the First World War was small and was limited chiefly to the manipulation of discount rates by central banks and to a small-amount of open-market operations. The resort, moreover, to these means of "keeping under control" the international movement of gold frequently did more harm than good. The highly automatic character of the prewar gold standard was one of its great virtues. "We have gold," says an old proverb, "because we cannot trust Governments."

--Edwin Walter Kemmerer, Gold and the Gold Standard: The Story of Gold Money, Past, Present and Future (New York: McGraw-Hill Book Company, 1944), 180-181.