The Gold Standard
In the history of money, the gold standard represents a very important part of it. In the present days this standard is no longer used, but this system influenced the economy and the history of our world. It is worth discovering what the gold standard was?
Briefly, the gold standard was an agreement of several countries to establish a certain value for their national currency related to a certain amount of gold. People who owned gold could exchange it for banknotes representing the exact same value as their gold. The only condition to maintain this system was to mint just as many coins, and to only print banknotes according to the national reserve of gold. All the gold of a country could have been expressed in currency.
This system insured good economic life in many countries all-over the world, for many years. Nevertheless, the economy was frozen in a fixed pattern. Any development lead to a decrease of the value of products. When the economy had a boost the operations necessary for making one product were repeated several times at the same cost as before.
There were three major gold standards throughout the history. The first was the gold specie standard. It was used in the Byzantine Empire where their currency was a gold coin. Later on in the nineteenth century, the gold exchange standard appeared. It referred to the fact that different countries, like the British India, established the value of their silver coins in relation to the gold standards in the United Kingdom and the USA. The third was the gold bullion standard which referred to the fact that gold bullion could be sold at a fixed price.
The economical increase and the high demand of money in our times. The national gold reserves can no longer be expressed in currency. Of all that was the gold standard we could remember the fact that it restricted governments possibility to decide upon the increase of prices as they wished.
Article Source: FxTradingStock.com
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You should take professional advice before you decide to buy gold bullion in times of recession.
by: Jack Wogan
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Word Count: 338
Date: Fri, 20 Aug 2010
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