Gold standard one calls the covering of a currency by gold. One calls the rate of exchange between cash and gold gold parity. Thus (theoretical) the obligation of the central bank is connected to exchange cash at any time into an appropriate quantity of gold (obligation to the From the possession of a cash note thus a direct requirement on a certain quantity of gold results, what meant redemption however in Germany according to banking law of the 1875, "§18, only into German money. That was called practical that one received fractional coins and papierne realm cash lights or smaller realm notes - depending upon cash situation - at the bank cashes on demands as a citizen beside gold coins (=Kurantgeld) or Silbertalern (until 1907) possibly also.

The pure gold standard represents a special case of the rate of exchange parity and exists actually only in the theory.

Already at present the silver standard made the governments the experience that all cash notes, e.g. before beginning of war or an economic crisis, were presented never at the same time to the conversion in Kurantgeld at the bank switches for exchange. Therefore the governments could do already in 18. and 19. Jh. over their central banks (even if they were often formally legally private banks) ever more uncovered paper money (and if necessary with compulsory rate) in circulation set, when they had to reproach gold or silver in their safe deposits to the conversion. If necessary one could suspend the redeemability of the notes in immediately by law, which also happened e.g. in England at present the napoleonischen wars. Reminded is here to (only) the third covering of the realm notes and the abolition of the redeemability of these notes in coins at the beginning of the 1. World war in Germany. Which happened then likewise in Austria and the countries of latin

See also Goldmark, bimetalism, monometalism.

Kinds

One differentiates:

• Gold rotating currency: Gold coins serve as currencies.
• Gold core currency: Paper money rotates and gold with the central bank as reserve for the international exchange is held.
• : The central bank reserve can consist of the foreign exchange of other gold standard countries, as this was before the end of the of the US Dollar 1971 in the Federal Republic of Germany the case.

If for the entire quantity finding in the circulation money is present gold in the central bank, one speaks of a full gold standard (100% covering). The full gold standard is however only a theoretical case, there the entire available gold quantity in the world would never be sufficient around all not-golden currencies (including Buchgeld, that in the meantime already approx. 90% of the money supply constitute!) to replace either as gold rotating money or serve as covering of the not-golden currencies deposited with the banks. Even if silver and platinum still came in addition, that would not be sufficient.

History

Historically in most industrial nations the gold standard was inserted between 1871 (Germany) and 1900 (the USA) and replaced the silver-based currencies prevailing before, which had its main cause in the rate of silver purge starting from approximately 1878. In crisis periods (1. and 2. ) Many states moved world war away, world economic crisis from it; afterwards some led the one modification of the gold standard (gold core currency), which excluded however the citizens from the conversion of their notes and accounts into physical gold! 1944 were created with the Bretton Woods system an international monetary system which is based on the gold-deposited US Dollar, which failed however to 1973, after the US Government in consequence of the Viet Nam war became internationally insolvent and gave up to 1971 the gold standard finally. Since then gold-based currencies are the exception and have only theoretical meaning, since the international clearing payment is today adjusted if necessary also by other raw materials than gold.

Consequences

In addition the obligation to the limits the expenditure of cash by the central bank and limits for their capacity to act to react to economic fluctuations with change of the monetary policy. That means: It comes with an enlargement of the overall economic goods quantity without appropriate enlargement of the available gold quantity inevitably to a deflation, in the reverse case to an inflation. However a hyperinflation is on adherence to the gold standard impossible as consequence of the abuse of the by the government - if the government does not change its laws before in time.

Proponents of the gold standard maintain that the abolition the classical gold standard at the beginning 20. Century (e.g. by Great Britain 1914) to an inundation of the world also again created money to the unhealthy restaurant blister in the 20's (the "golden twenties") led, and as consequence to the (black Thursday) and to the economic crisis in the 30's. 1995 - due to the inflation - were actual a U.S. - Dollar from the year 1940 only 8 U.S. - Cent worth. In this connection sometimes the speech is also from a gold conspiracy.

Whether the advantages of the gold standard outweigh the disadvantages, is among economists a classical issue. The one side represents like already John May pool of broadcasting corporations Keynes the thesis that the disadvantages of the gold standard outweigh, particularly in an increasingly globalisierten economy, and the fact that it favours economic crises, by forcing a strong coupling of currencies without consideration for the economic development of the respective countries and money market-political interferences for the stabilization of the economy In addition, the contrary view, dirigistische interferences is common is not solution, but a cause of crises.

Related links

• The meaning of the gold standard (article)
• History of the agreement of Bretton Woods
• GATA: Committee against interferences at the gold market

Articles in category "Gold standard"

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