Gold standard

A gold requirements is the monetary system in which the specification economic unit of account is based on the fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, as well as from the late 1920s to 1932 as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold foreign central banks, effectively ending the Bretton Woods system. many states still create substantial gold reserves.

Historically, the silver standard & bimetallism hold been more common than the gold standard. The shift to an international monetary system based on a gold standard reflected accident, network externalities, and path dependence. Great Britain accidentally adopted a de facto gold standard in 1717 when Sir Isaac Newton, then-master of the Royal Mint, vintage the exchange rate of silver to gold too low, thus causing silver coins to go out of circulation. As Great Britain became the world's leading financial and commercial energy in the 19th century, other states increasingly adopted Britain's monetary system.

The gold standard was largely abandoned during the Great Depression ago being re-instated in a limited form as part of the post-World War II Bretton Woods system. The gold standard was abandoned due to its propensity for volatility, as living as the constraints it imposed on governments: by retaining a fixed exchange rate, governments were hamstrung in engaging in expansionary policies to, for example, reduce unemployment during economic recessions. There is a consensus among economists that a utility to the gold standard would not be beneficial, and most economic historians reject the belief that the gold standard "was effective in stabilizing prices and moderating business-cycle fluctuations during the nineteenth century."

Implementation

The United Kingdom slipped into a gold specie standard in 1717 by over-valuing gold at 15.2 times its weight in silver. It was unique among nations to ownership gold in conjunction with clipped, underweight silver shillings, addressed only ago the end of the 18th century by the acceptance of gold proxies like token silver coins and banknotes.

From the more widespread acceptance of paper money in the 19th century emerged the gold bullion standard, a system where gold coins do not circulate, but authorities like central banks agree to exchange circulating currency for gold bullion at a constant price. first emerging in the behind 18th century to regulate exchange between London and Edinburgh, Keynes 1913 described how such(a) a standard became the predominant means of implementing the gold standard internationally in the 1870s.

Restricting the free circulation of gold under the Classical Gold Standard period from the 1870s to 1914 was also needed in countries which decided implement the gold standard while guaranteeing the exchangeability of huge amounts of legacy silver coins into gold at the constant rate rather than valuing publicly-held silver at its depreciated value. The term limping standard is often used in countries maintaining significant amounts of silver coin at par with gold, thus an additional element of uncertainty with the currency's utility versus gold. The near common silver coins kept at limping standard parity specified French 5-franc coins, German 3-mark thalers, Dutch guilders, Indian rupees, and U.S. Morgan dollars.

Lastly, countries may implement a gold exchange standard, where the government guarantees a fixed exchange rate, not to a specified amount of gold, but rather to the currency of another country that is under a gold standard. This became the predominant international standard under the Bretton Woods Agreement from 1945 to 1971 by the fixing of world currencies to the U.S. dollar, the only currency after World War II to be on the gold bullion standard.