World War I ended the gold standard. International financial relations are
greatly strained by war, because merchants and bankers must be con-
cerned about the probability of countries suspending international capital
flows. At the beginning of the war both the patriotic response of each
nation’s citizens and legal restrictions stopped private gold flows. Since
wartime financing required the hostile nations to manage international
reserves very carefully, private gold exports were considered unpatriotic.
Central governments encouraged (and sometimes mandated) that private
holders of gold and foreign exchange sell these holdings to the
government.