gold standard

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Gold standard

An international monetary system in which currencies are defined in terms of their gold content, and payment imbalances between countries are settled in gold. It was in effect from about 1870 to 1914.

Gold Standard

A system whereby a currency is linked to the value of gold. That is, one would be able to exchange one unit of the currency for so many ounces of gold on demand. The gold standard makes monetary policy independent from policymaker decisions. Many currencies have been linked to gold over the years, most recently under the Bretton Woods System. The gold standard reduces the likelihood of inflation, but tends to cause higher interest rates and renders a country less able to pursue full employment. The gold standard contrasts with fiat money. See also: Cross of Gold, Silver Standard.

gold standard

A monetary system under which a country's money is defined in terms of gold and convertible into a fixed quantity of gold. A gold standard effectively takes monetary policy out of the hands of government policymakers. While use of the gold standard reduces the likelihood of inflation, the accompanying inability to pursue other economic goals, such as full employment or reduced interest rates, has resulted in the gold standard's fall from favor.

Gold standard.

The gold standard is a monetary system that measures the relative value of a currency against a specific amount of gold.

It was developed in England in the early 18th century when the scientist Sir Isaac Newton was Master of the English Mint. By the late 19th century, the gold standard was used throughout the world.

The United States was on the gold standard until 1971, when it stopped redeeming its paper currency for gold.

gold standard

an INTERNATIONAL MONETARY SYSTEM in which GOLD forms the basis of countries’ domestic MONEY SUPPLY and is used to finance INTERNATIONAL TRADE and BALANCE OF PAYMENTS deficits.

Under the gold standard, EXCHANGE RATES were rigidly fixed in terms of gold. (The gold standard was widely adopted in the 19th century and operated down to the early 1930s.) In theory, the gold standard provided an automatic ADJUSTMENT MECHANISM for eliminating payments imbalances between countries: deficits were financed by outward gold transfers that reduced the domestic MONEY SUPPLY. This in turn deflated (see DEFLATION) the domestic price level, making IMPORTS relatively more expensive and EXPORTS relatively cheaper, thereby reducing the volume of imports and increasing the volume of exports. Surpluses were financed by inward gold transfers, which increased the domestic money supply. This in turn inflated (see INFLATION) the domestic price level, making imports relatively cheaper and exports relatively more expensive, resulting in a fall in the volume of exports and an increase in the volume of imports. In this way, both deficits and surpluses were removed and BALANCE OF PAYMENTS EQUILIBRIUM restored. In practice, however, countries found that a combination of rigidly fixed exchange rates and the complete subordination of domestic economic policy to the external situation was too onerous and opted for more flexible arrangements. See FIXED EXCHANGE RATE SYSTEM, INTERNATIONAL MONETARY FUND.

References in periodicals archive ?
These advocates of central banking, informed perhaps by the very misunderstanding of the nature of the classical gold standard to which we have drawn attention, were convinced, against all experience, that central banks alone could be relied upon to "insulate national monetary management from fire control of political forces" (Helleiner 2003: 148)
Writings on the classical gold standard are sprinkled with references to the "ethos" of that standard (e.
While it is of course hard to imagine any revival of the gold standard unaccompanied by a "return to liberal attitudes," or (to be more specific), classical liberal attitudes, there is an important sense in which Yeager's position, and that of others subscribing to the ethos view of the gold standard's underpinnings, is misleading.
My remarks in the last sections concerned the manner in which currency centralization contributed to the destruction of the gold standard by undermining the credibility of gold redemption pledges, and not the effects of such centralization on the workings of the standard, and especially the pattern of short- and long-run adjustments of national money stocks and price levels to which it gave rise.
By a "pseudo gold standard," Friedman meant an arrangement involving one or more national central banks charged with fixing the price of gold.
A real gold standard is thoroughly consistent with liberal principles, and I, for one, am entirely in favor of measures promoting its development, as, I believe, are most other liberal proponents of floating exchange rates.
either a real gold standard throughout the 1920's and '30's or a consistent adherence to a fiduciary standard would have been vastly preferable to the actual pseudo gold standard under which gold inflows and minor gold outflows were offset and substantial actual or threatened gold outflows were over-reacted to.
Such promises to pay would still not alter the basic character of the gold standard so long as the obligors were not retroactively relieved from fulfilling their promises, and this would be true even if such promises were not fulfilled from time to time [Friedman 1961: 75-76], (10)
I turn now to consider some implications of our analysis of the legal foundations of the historical gold standard for the prospect of a gold standard revival.
The classical gold standard consisted, as we've seen, of a combination of official coinage policies with largely private arrangements guaranteeing the convertibility of paper currencies into gold.
The prospects for a "spontaneous" gold standard revival are, however, considerably dimmer than such scenarios suggest.