gold standard

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gold standard:

see bimetallismbimetallism
, in economic history, monetary system in which two commodities, usually gold and silver, were used as a standard and coined without limit at a ratio fixed by legislation that also designated both of them as legally acceptable for all payments.
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; international monetary systeminternational monetary system,
rules and procedures by which different national currencies are exchanged for each other in world trade. Such a system is necessary to define a common standard of value for the world's currencies.
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; moneymoney,
term that refers to two concepts: the abstract unit of account in terms of which the value of goods, services, and obligations can be compared; and anything that is widely established as a means of payment.
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Gold Standard

 

a monometallic monetary system that existed in many countries during the stage of the development of capitalism under which only gold was a universal equivalent and the direct basis of monetary circulation.

The perfect classic form of the gold standard was the gold monetary standard, according to which the monetary unit of a country had a definite, legally established, unchanged gold content (gold parity) and the “price” of gold in token money corresponded to this parity. Gold coins were in circulation and had the unlimited privilege of a legal tender. The central banks of issue had the obligation to redeem bank notes and other token money (paper money and coins of inferior metallic content) for gold at face value. For a small fee or no fee, unrestricted coinage was allowed from gold belonging to private persons, and gold coins could be remelted into gold bullion. Unrestricted export and import of gold of any kind was permitted, and no foreign exchange restrictions were in force.

The gold standard was introduced for the first time in Great Britain (legally at the end of the 18th century and in actuality in 1821). In France, Germany, Russia, Italy, Japan, the USA, and other capitalist countries the introduction of the gold standard was completed in the last quarter of the 19th century. Monetary systems of individual countries turned into a single relatively stable world currency system. This to a great extent contributed to the development of the world capitalist economy, the growth of industrial production, the promotion of domestic commodity turnover and international trade, and the expansion and consolidation of the credit system.

With the beginning of the general crisis of capitalism when World War I broke out, the gold monetary standard went bankrupt. Instead, paper money was put into circulation. After World War I, an attempt was made to reintroduce the gold standard from 1924 to 1928, not in its earlier form but in the form of a gold bullion and gold currency standard. The circulation of gold coins could not be reinstated for lack of gold reserves and the uneven distribution of reserves among countries. Large amounts in bank notes were exchanged for gold ingots of 12–14 kg (in Great Britain and France) or for foreign currencies which in their turn were exchanged for gold bullion (in Germany, Belgium, and other countries). Gold was completely forced out of domestic circulation in all countries except the USA, where it was in circulation until 1933. The redemption of bank notes for gold bullion was effected as a rule only in cases of liquidation of the deficit of an unfavorable balance of payments by means of gold export. These modified forms of the gold standard, however, were also short-lived. Complete bankruptcy resulted from the world economic crisis of 1929–33, when in all capitalist countries, including the USA, paper money circulation was instituted with such inherent consequences as inflation, an increase in commodity prices, and sharp fluctuations of foreign exchange rates. The gold standard was abolished in Great Britain and Japan in 1931, in the USA in 1933, in Belgium and Italy in 1935, and in France, Switzerland, and the Netherlands in 1936.

The international foreign exchange system that arose after World War II is sometimes also called the gold currency standard because, according to the requirements of this system, which was formulated at the Bretton Woods international monetary conference in 1944, all countries had to have reserves in gold and foreign exchange (basically in US dollars) to cover a deficit in their balance of payments. However, there is an essential difference between the prewar forms and the present forms of the gold currency standard: after World War II the domestic circulation in capitalist countries remained completely based on paper money, and the privilege given to the foreign holders of national currencies to redeem their holdings for dollars and through dollars for gold bullion became unrealizable in practice. This was especially true in the United States, which because of its reduced gold reserves abstained in practice from exchanging paper dollars for gold even to governments and central banks of other countries. Such exchange was officially discontinued on Aug. 15, 1971.

M. G. POLIAKOV

gold standard

a monetary system in which the unit of currency is defined with reference to gold
References in periodicals archive ?
The Gold Exchange Standard in the Light of Experience', Economic Journal 19 (74) (June): 190-200.
From the Gold Exchange Standard to the Gold Standard: The Crucial Role of E.
Finally, the decision by France, a major competitor, to join the gold exchange standard in 1926 at a relatively depreciated rate may have increased the overvaluation of sterling against exchange rates other than the dollar in the late 1920s.
The exchange rate system was also in disarray, with most countries still maintaining floating exchange rates and many unwilling to return to the gold exchange standard at their pre-1914 parities.
Before demonstrating these claims, let us first shed some light on the gold exchange standard and international monetary cooperation during the interwar years.
Since most of the major American and European countries were on a gold exchange standard for at least a portion of the interwar period, it is important to ask what these rules entailed.
Initially, it was a gold exchange standard with two key currencies, the dollar and the pound.
The gold exchange standard evolved in the post-World War II period for the same reasons it did in the 1920s--to economize on non-interest-bearing gold reserves.
With the pound no longer backed by gold, the dollar became the gold standard's major reserve currency just when European central banks desired to prevent further losses on foreign exchange reserves by discarding the gold exchange standard and adopting a gold bullion standard.
Nevertheless, European discontent with the gold exchange standard did not subside.
Governments throughout the world, with the United States at the lead, celebrated their liberation from the discipline of the gold exchange standard by printing money with abandon.