What Is The Gold Standard Exactly?

We wouldn’t believe a year ago that even the mainstream media would be talking about “the gold standard” so often as they did over the past few months. Even the number of searches in Google has been increasing, which is a sign that the topic is gaining in “popularity”.

Now what exactly is “the gold standard”? Is it correct how most describe it as a state where money is backed by gold?

In the latest edition of The Gold Standard Journal, an article appeared in which the author Thomas Allen explores this question in more detail. He goes back in time to provide a well argued explanation. We highly encourage readers to read through his piece. We picked out the summary of the author.

A true gold standard has the following attributes:

  1. Gold does not back the money; gold is the money.
  2. The price of gold is not fixed. The monetary unit is a specific weight of gold.
  3. Gold coins circulate as money.
  4. The value of a coin is the value of its metal content.
  5. There is free coinage of gold: Anyone can bring any amount of gold to the mint, which does not have to be owned by the government, and get it coined.
  6. Anyone can melt coins without restriction and use the metal for nonmonetary purposes.
  7. No restrictions are placed on exporting or importing gold.
  8. All paper money is redeemable in gold on demand.
  9. The supply of money is self-regulating and automatically adjusts to meet the demand for metallic money. The government does not manage or otherwise manipulate the money supply. No monetary policy is necessary, and none is desirable.
  10. The government does not buy gold and coin it on its own account.
  11. Gold coins are the property of the individual holding them; they are not the property of the government. No restrictions or controls are placed on the private ownership of gold.
  12. Legal tender laws are unnecessary and undesirable.
  13. The government’s monetary duties are limited to defining the monetary unit, coining all gold presented to it for coinage and guaranteeing the weight and fineness of such coins, punishing counterfeiters of such coins, punishing issuers of paper money who fail to redeem their paper money on demand, and punishing acts of fraud and enforcing contracts in monetary matters.

Continue reading in the Journal on page 8, published by The Gold Standard Insitute.

 

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