Why does gold represent money?

Gold also has several financial advantages compared to other assets. Gold has no time limit or lifespan; most of the gold found still exists. Gold is also portable and divisible; dividing it doesn't change its value, unlike other metals, such as diamonds. Gold is the metal we'll turn to when other forms of currency don't work, which means that gold will always have value in difficult and good times.

Gold has always played an important role in the international monetary system. Gold coins were first minted by order of King Croesus of Lydia (an area that is now part of Turkey), around 550 BC. C. The gold standard is a currency measurement system that uses gold as a way to establish the value of money.

Ensures that currency under a gold standard system can be exchanged for gold. The gold standard means an agreement between society and its monetary institutions that the currency they spend and earn is a substitute for gold. Commodity money is inconvenient to store and transport in large quantities. In addition, it doesn't allow a government to manipulate the flow of trade as easily as a fiat currency does.

As such, commodity money gave way to representative money, and gold and other species remained as backup. It wasn't until 1925, when Great Britain returned to the gold standard along with Australia and South Africa, that the gold standard of species officially ended. It covers the period from the establishment of the UK gold standard in the early 19th century to the re-establishment of the gold standard after World War I. In the last years of the dollar period (1862-1887), gold production increased, while gold exports declined.

Once paper money was introduced, coins maintained an explicit link to gold (paper can be exchanged for gold on demand). While greenbacks were an adequate substitute for gold coins, the US implementation of the gold standard was hampered by the continued overissuance of dollars and silver certificates as a result of political pressure. Gold can stimulate a subjective personal experience, but it can also be objectified if adopted as an exchange system. Starting in the second half of the 19th century, Great Britain introduced its gold standard in Australia, New Zealand and the British West Indies in the form of circulating gold sovereigns, as well as banknotes convertible into both sovereigns or Bank of England notes.

In turn, the gold exchange standard was just one step away from modern fiat currency, with notes issued by central banks and whose value is guaranteed by the bank's reserve assets, but whose exchange value is determined by the central bank's monetary policy objectives on purchasing power rather than a fixed equivalence with gold. It can be said that the gold exchange standard exists when gold does not circulate in a country appreciably, when the local currency is not necessarily exchangeable for gold, but when the Government or the Central Bank make provisions for the supply of foreign remittances in gold at a fixed maximum rate in terms of the local currency, and the reserves needed to provide these remittances are largely held abroad. In 1900, the gold dollar was declared the standard unit of account and a gold reserve was established for government-issued paper notes. This effectively ended what was left of the gold standard; in 1971, President Richard Nixon announced that dollars could no longer be exchanged for gold.

Finally, countries can implement a gold exchange standard, in which the government guarantees a fixed exchange rate, not to a specific quantity of gold, but to the currency of another country that is under a gold standard. Most of continental Europe made the conscious decision to switch to the gold standard and, at the same time, to allow the mass of inherited (and previously depreciated) silver coins to remain unlimited, legal tender and convertible at face value into a new gold coin. The United States dollar was also bimetallic de jure until 1900, with a value of 24,0566 g of fine silver or 1,60,377 g of fine gold (ratio 15.0); the latter became 1,50463 g of fine gold (ratio 15.9) between 1837 and 1934.Therefore, the classic gold standard of the late 19th century was not simply a superficial change from circulating silver to circulating gold. France's measures to keep the French franc at 4.5 g of fine silver or 0.29032 g of fine gold stabilized the ratio between the world price of gold and silver close to the French ratio of 15.5 in the first three quarters of the 19th century, offering to mint the cheapest metal in unlimited quantities: gold coins of 20 francs when the ratio is less than 15.5 and silver coins of 5 francs when the ratio is less than 15.5 It is greater than 15.5.


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