Gold standard: the history, the essence

Gold standard is the final stage of development of all variations of gold forms of money turnover. This was the last system, in which just a man at least theoretically had the opportunity to exchange his paper money for real gold. Unfortunately, the standard had some serious shortcomings, which ultimately led to the fact that all the countries of the world abandoned it.

History of the gold standard

Despite the fact that mankind used coins from precious metals most of its history, only in the 18th century the first version of the gold standard was officially adopted. Gradually, he underwent various changes, and ultimately the countries of the world, to avoid a financial crisis, abandoned such a system. From the gold-coin gold standard, in the end, only the reference to the precious metal was obtained. And she eventually disappeared anyway.

Features of the gold coin standard

This kind of financial system meant free circulation of both gold coins and paper banknotes. They could at any time be exchanged by the owner directly for gold, equivalent to the value of the specified means of calculation. Such a standard was characterized by high stability and reliability, but there were also significant problems.

So, for example, there was not enough gold at all, the number of people on the planet was steadily increasing, and after the First World War it was decided to abandon the system in favor of a more advanced one. As you can see, it was the global wars that led to the gradual elimination of the peg to gold. Many specialists associate both changes in the world monetary system, and economic jerks, and even the industrial potential of different countries directly with global conflicts, which make it necessary to radically revise everything that existed before.

Gold Standard Rate

This is the second version of the scheme for performing currency settlements. According to this scheme, the gold and gold standard, gold standard as well as the standard of the gold coin type, still retained the possibility of exchanging cash for a real precious metal. True, now there was a rather serious restriction, which consisted in the fact that the exchange could be made exclusively on ingots of a certain size and value. This approach automatically excluded from the lists of those wishing to receive gold in the hands of all those who simply could not pay it. The price for such an ingot was high enough, and only with a long process of accumulation or having very high incomes a person had the opportunity to "feel" a real precious metal.

In fact, this was available to a very narrow circle of people, but this approach did not completely eliminate the problem of shortage of gold reserves, because most countries simply did not have access to cheap precious metal reserves. As a consequence, there was a need for further changes.

Gold standard

It was at this stage that the entire history of the system ended, taking into account the availability of precious metal reserves. It was the last, and for ordinary people already inaccessible. Disappeared relatively recently, in 1976. It also existed for a relatively short time, less than thirty years, since 1944, when the Second World War was almost over.

The currency system of the gold and gold standard was a scheme in which all currencies were tied to a single currency - the US dollar. And only this money could be exchanged for gold, and even then exclusively by large banking organizations. A simple man was deprived of such an opportunity. For some time the stability in the economy saved the situation, but gradually the amount of dollars so increased that the available stocks simply did not have enough to provide all these means of payment. As a result, this standard was also abolished.

Pros & Cons of Standards

At its core, the gold coin, gold and gold, gold standard is just a system of distribution of precious metal between the population of the planet. The more people, the less gold for everyone. We have to change, correct and refine something. The first variation, which was used by mankind for most of its history, has one huge plus - every single citizen of any country has always known for sure that he has a certain amount of money that will not go anywhere. In fact, no world financial crises, wars and the like could not depreciate money in this situation.

The second variation of the standard still retained similar advantages, but here they are available only for a very limited number of people. And after the latest changes, when the gold standard appeared, the restrictions became so global that even a rich enough person could not get the precious metal in his hands. This possibility has remained only with large banking institutions. At the same time, the gold deficit was still gradually increasing and eventually forced to abandon the binding of any currency to this precious metal.

Current situation

After it became clear that the gold standard did not solve the problem, but only pushed it aside for a not too long period, it was decided to abandon the calculations in gold in general. Almost all of the leading world countries agreed with this at different times, the rest simply put before the fact. Now the prices for the currency are floating, depending on such a huge number of factors that even a professional with a very long experience in this area can not always foresee where the rate will swing.

A similar situation now and with the cost of different goods. If earlier the price for them was formed on the basis of the total costs for the creation, transportation, storage, wages, and so on, now all these indicators are rather secondary. And in the first place came the principle of how much for a given commodity is ready to pay. In fact, the cost of most of any modern products is not worth a tenth of the money that it is asked for. But while there are people willing to pay the requested amount for these goods, the situation will not change.