How and why does gold standard disappear?
To understand how and why the gold standard disappear it’s important to know what we are talking about. Gold standard is basically a monetary system used until First World War.
The gold standard world works simply, bills or paper money could be exchanged or converted into the same amount of gold and vice versa.
At that time and putting emphasis on the history of gold, central banks were tasked with providing everything necessary for these types of exchanges. At that time the major assets that banks had was undoubtedly gold but with the advantage of having passive assets in bills.
How and why does gold standard disappear?
Gold standard disappeared when the First World War started and when it happened, the governments most affected were tasked with establishing a new similar system with which was possible to have the same earnings per share.
At that time, bankers stopped making more gold bullions and increased the coins, bills and paper money production. This kind of action was too negative and people start supposing that it was a fraud. Then, every country decided to keep the gold as precious commodity and the free circulation of gold stopped as with the gold standard happened.
This happened after the First World War, however when the Second World War finished, everything was different and countries had to create an economic system based on strongest currency at the moment. The resolution was to create a system based on American dollar as reserved currency that was available at that time to exchange the gold.
Now we don’t have a gold standard but the history of gold left us the regulation of the notes and coins by the central bank and supported by titles or foreign currency that every country have.
Although the gold standard doesn’t exist, still some forms survive. The Gold Pattern Changes allows all countries buying and selling currencies to other countries which can keep the gold standard in bullions and exchange gold for notes.
With this, we can better understand how gold standard disappears and the evolution of this metal in the history of gold.
