Excellent information, Algernonpj. Inflation to the body politic is like an insidious cancer to the physical body. If it is not ended, it will kill the host.

I have wondered about that over the years. If a loaf of bread cost a nickle in 19XX, why does it cost $3.40 now?

There's some interesting stuff in Wikipedia; I'm trying to absorb it all:

"Impact of World War I

Governments with insufficient tax revenue suspended convertibility repeatedly in the 19th century. The real test, however, came in the form of World War I, a test which "it failed utterly" according to economist Richard Lipsey.[5]

By the end of 1913, the classical gold standard was at its peak but World War I caused many countries to suspend or abandon it. According to Lawrence Officer the main cause of the gold standard’s failure to resume its previous position after World War 1 was “the Bank of England's precarious liquidity position and the gold-exchange standard.” A run on sterling caused Britain to impose exchange controls that fatally weakened the standard; convertibility was not legally suspended, but gold prices no longer played the role that they did before.[17] In financing the war and abandoning gold, many of the belligerents suffered drastic inflations. Price levels doubled in the US and Britain, tripled in France and quadrupled in Italy. Exchange rates change less, even though European inflations were more severe than America’s. This meant that the costs of American goods decreased relative to those in Europe. Between August 1914 and spring of 1915, the dollar value of US exports tripled and its trade surplus exceeded $1 billion for the first time.[18] Because inflation levels varied between states, when they returned to the gold standard at a higher rice that they determined themselves.[5]

Ultimately, the system could not deal quickly enough with the large balance of payments deficits and surpluses; this was previously attributed to downward wage rigidity brought about by the advent of unionized labor, but is now considered as an inherent fault of the system that arose under the pressures of war and rapid technological change. In any case, prices had not reached equilibrium by the time of the Great Depression, which served to kill off the system completely.[5]

For example, Germany had gone off the gold standard in 1914, and could not effectively return to it because reparations had cost it much of its gold reserves. During the Occupation of the Ruhr the German central bank (Reichsbank) issued enormous sums of non-convertible marks to support workers who were on strike against the French occupation and to buy foreign currency for reparations; this led to the German hyperinflation of the early 1920s and the decimation of the German middle class.

The US did not suspend the gold standard during the war. The newly created Federal Reserve intervened in currency markets and sold bonds to “sterilize” some of the gold imports that would have otherwise increased the stock of money. By 1927 many countries had returned to the gold standard.[14] As a result of World War 1 the United States, which had been a net debtor country, had become a net creditor by 1919.[19]"

..."Great Depression

Some economic historians, such as Barry Eichengreen, blame the gold standard of the 1920s for prolonging the economic depression which started in 1929 and lasted for about a decade.[25] Adherence to the gold standard prevented the Federal Reserve from expanding the money supply to stimulate the economy, fund insolvent banks and fund government deficits that could "prime the pump" for an expansion. Once off the gold standard, it became free to engage in such money creation. The gold standard limited the flexibility of the central banks' monetary policy by limiting their ability to expand the money supply. In the US, the Federal Reserve was required by law to have gold backing 40% of its demand notes.[26] Others including Federal Reserve Chairman Ben Bernanke and Nobel Prize-winner Milton Friedman place the blame for the severity and length of the Great Depression at the feet of the Federal Reserve, mostly due to the deliberate tightening of monetary policy even after the gold standard.[27] They blamed the US major economic contraction in 1937 on tightening of monetary policy resulting in higher cost of capital, weaker securities markets, reduced net government contribution to income, the undistributed profits tax and higher labor costs.[28] The money supply peaked in March 1937, with a trough in May 1938.[29]"

..."Other factors in the prolongation of the Great Depression include trade wars and the reduction in international trade caused by barriers such as Smoot-Hawley Tariff in the US and the Imperial Preference policies of Great Britain,[35] the failure of central banks to act responsibly,[36] government policies designed to prevent wages from falling, such as the Davis-Bacon Act of 1931, during the deflationary period resulting in production costs dropping slower than sales prices, thereby injuring business profits[37] and increases in taxes to reduce budget deficits and to support new programs such as Social Security. The US top marginal income tax rate went from 25% to 63% in 1932 and to 79% in 1936,[38] while the bottom rate increased over tenfold, from .375% in 1929 to 4% in 1932.[39] The concurrent massive drought resulted in the US Dust Bowl.

Milton Friedman stated that "the severity of each of the major contractions – 1920–1, 1929–33 and 1937–8 is directly attributable to acts of commission and omission by the Reserve authorities"[40]"

http://en.wikipedia.org/wiki/Gold_standard

I'm trying to understand global economics after having successfully ignored it for most of my life.

Thanks, Algernon. This is one area in which I am woefully uninformed.