The Gold Standard

The gold standard may correlate to numerous things, these include the fixed monetary regime wherein the government currency has been set and may be freely converted to gold, another would be the freely competitive monetary system that utilizes gold or bank receipts for gold to play the role as the principal medium exchange, and lastly, the standard of today’s international trade, that has a number or maybe even all countries base their exchange rates with the equivalent value of gold between the countries respective currencies.

Through the years the gold standard developed ambiguous definitions, but the most commonly used description is to describe any commodity-based monetary regime that has no need to rely on un-backed fiat money or even money that only has value because of the warranted use by the government.

There are certain gold standards that are dependent on the actual circulation of real, physical gold coins and bars also known as bullion. However there are those that permit other commodities or paper currencies.

The gold standard rose to prominence when it became the monetary system and when paper money was freely converted into a fixed amount of gold, meaning that gold was able to back the value of paper money.

The gold standard saw its fall at the aftermath of the Second World War, with the shifting of political alliances, an increase in the international debt, and the deterioration of government finances. The gold standard was not completely suspended but trapped in limbo, wherein it demonstrated its inability to get through both good and bad times. This demonstration planted the seeds of discouragement and lack of confidence in the gold standard. These events showed that world was in need of something more flexible to become the basis of the global economy.