What is the gold standard?

gold is one of the oldest forms of money used by individuals and companies. The gold standard is a monetary system where money in circulation, often paper money, has a value directly related to the gold trade. The currencies set for this standard also become fixed compared to them, allowing predictable currency exchange. On the contrary, Fiat currency , which means that central banks have the ability to increase or reduce money supply regardless of any solid standard. This standard, which was culminated in the crisis of the silver currency in England, which culminated in the United States and suspended all silver payments. In 1900, virtually all global economic forces followed.

This initial system's first crisis with the advent of World War I. The incredible cost of conducting this war forced Britain to move into fiat currencies. The Treaty of Versaille, the setting of the conditions for surrender, forced Germany to overturn a large part of its gold supply as reparations. AppearanceIt was supposed to strengthen the gold supplies of the winning nations. The side effect, however, was that Germany had no gold enough to stay on the gold standard. Despite the remaining main industrial power, Germany had no other option than to move to the Fiat Currency.

At a time when the Germany and the United Kingdom managed to return to the Golden Standard in the mid -20 years, it was left by other main economies, including the US. The International Gold Standard officially died at the 1933 London Conference, when the participating nations could not agree on the value of gold itself. After World War II, influential economists, such as John MaynardKeynes, successfully argued against returning to this standard and the currencies began to trade on the Bretton Woods agreement. In 1972, Bretton Woods introduced an era of currency with free floating and gold lost its status as the basis for the central bank accounting.

at the system of the tighThe currencies allowed a huge expansion in the global trade, the gold standard was not without significant problems. Because gold reserves grow more slowly than the economies, the standard is highly deflation. For example, the United States has undergone a period of deflation lasting up to 14 years after the transition to it. There may also be a huge distortion of value; For example, during a large potatoine famine, it was preferable to export potatoes to England than to sell to starving locals. The gold standard of tax authorities is putting the gold standard to divert from import tariffs and income and turn and turnover imposed on their own citizens by a more compressive standard of international trade. Credit becomes very close in economies on the basis of this standard, because governments do not have the ability to print more money when the economy needs it.