The Gold Standard in Theory

The foundation of the gold standard is that a currency's value is supported by some weight in gold. Inherently, it makes sense to value currency by some tangible and precious resource, otherwise, currency is just paper bills. Therefore, by tying paper money to an amount of gold, it gives the holder of the paper money the right to exchange her paper bills for actual gold. Ideally, this requires that paper money be readily exchangeable for gold. If a bank does not have gold, then the paper money has no value. But theoretically, actual gold would flow between nations to ensure that all currencies would be supported by gold.

 

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Thanks @ Ginger for posting this info. I've followed the link as well, so i am joined this forum. I'll search around with bullionist a little more and i feel very good.

 

@tailor, Welcome to bullionist. I hope you find everything you are looking for here.

 

Very educational it is good to know that gold plays very important role for every nation.Currencies become valuable because of gold.

 

And they tend to devalue, debase, and fail when they ignore gold.

 

Thanks tailor and welcome to the board. I wish you may have a better investing plan on bullions. Please discus your views.

 

Yeah Taylor I would also like to hear your insights.

 

What makes you say that currency becomes more valuable because of gold?

 

Because the more a government holds in gold reserves, the less they are susceptible to games played by banks and government printing presses.

 

The less gold a government has the less it is worth compared to other nations currencies.

 

well, you have beautifully answered the question. Thanks!

 

But what is the key point of having less gold government in terms of commodity backed currencies.

 

Do you think most currencies are backed by enough commodities to be worth the amount of cash in circulation?

 

I would absolutely agree with. That’s why Gold prices are still stable and gets up move every now and then.

 

The gold supported currency is real money .So it has value than the mere paper.