The Gold Standard Evolution and Collapse

Dawn K. BlessettBusiness GlobalizationDr. John Theodore | The Gold Standard Evolution and Collapse |

7/5/2013 | The Bretton Woods Agreement |

The gold standard is a monetary system in which the standard economic unit of account is based upon a fixed quantity of gold. There are three types of gold standards: gold specie standard, the gold exchange standard, and the bullion standard. The gold specie standard is a monetary unit associated with the value of circulating gold coins or the monetary unit has the value of a certain circulating gold coin, but other coins may be made of less valuable metal. The gold exchange standard usually does not involve the circulation of gold coins. The main feature of the gold exchange standard is that the government guarantees a fixed exchange rate to the currency of another country that does use a gold standard (specie or bullion), regardless of what type of notes or coins are used as a means of exchange. This creates a de facto gold standard, where the value of the means of exchange has a fixed external value in terms of gold that is independent of the inherent value of the means of exchange itself. The gold bullion standard is a system in which gold coins do not circulate, but the authorities agree to sell gold bullion on demand at a fixed price in exchange for circulating currency. Current, no country uses a gold standard as the basis of its monetary system, although most hold substantial gold reserves (http://www.investorswords.com).

The gold specie standard arose from the widespread acceptance of gold as currency. Over the years many different commodities have been used as currency; but

the one that loses the least value over time becomes the accepted form. The use of gold as money dates back thousands of years. During the early and high middle ages, the Byzantine gold Solidus, commonly known as the Bezant, was used widely throughout Europe and the Mediterranean. However, as the Byzantine Empire's economic...