When World War I began, many analysts believed that the international gold standard would keep the war short. A war of attrition was not thought to be possible because the disciplining effects of the gold standard — capital flight and gold outflow — were supposed to restrain the ability of states to mobilize resources in times of war. As many believed at the time, states under the gold standard would quickly run out of money to pay for soldiers and resources. No one ever imagined that the war would last four long years and that most countries would stop using the gold standard, turning instead to debt and inflation to pay for the war.
The gold standard was never the same after World War I. It survived in a modified form until August 15, 1971 — 45 years ago this month — when President Nixon cut the last link between the world monetary system and gold. The initial idea was to temporarily suspend the limited converti