Categorized | Gold Standard

The Three Distinct Kinds of Gold Standard Definition

The gold standard definition as a monetary system that adopts a unit of currency (which is a fixed weight or quantity of gold) is found in various reference materials. Going by this definition, notes, bank deposits and all other forms of money are converted to gold unrestrictedly at the fixed price.

Four Different Kinds of Gold Standard

The Gold Specie Standard

Here, the unit of currency is associated with the circulated gold coin. Put differently, the monetary unit is linked with a specific circulated gold coin’s unit of value, including the unit of value of any secondary coinage. According to history, gold specie standard has existed since the medieval age. Here’s an instance: the Byzant is the name of a gold coin used by the Eastern Roman Empire. The British West Indies is the first in the entire world to utilize the gold specie standard. The United States used the American Gold Eagle as a unit of payment when it adopted the gold specie standard in 1873.

The Gold Exchange Standard

When the gold exchange standard is involved, the coins used are only circulated coins minted from silver or other metals valued less than gold. However, the government involved must have adopted a fixed exchange rate of a nation operating the gold standard system. Shortly before the twentieth century, countries that are still using the silver standard resorted to attaching their monetary units to UK or US gold standard.

Gold Bullion Standard

Going by this gold standard, gold bullion was offered at a fixed price on demand. The same British Parliament act that voided the gold specie standard also ushered in the gold bullion standard in 1925. In 1931 (six years after), the UK chose to quit the gold bullion standard temporarily due to the huge volume of gold passing across the Atlantic Ocean.

In terms of advantages, one notable plus of the gold standard is the way it somewhat restricts the power of government in hiking prices. On the other hand, it may render monetary policy ineffective when economic meltdown sets in.

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