The gold exchange standard represents the final stage in the development of all variations of the gold forms of money circulation. This was the last system in which just a person, at least theoretically, had the opportunity to exchange his paper money for real gold. Unfortunately, the standard had some serious shortcomings, which ultimately led to the fact that all countries of the world abandoned it.
The history of the gold standard
Despite the fact that mankind used precious metal coins for most of its history, it was only in the 18th century that the first version of the gold standard was officially adopted. Gradually, he underwent various changes, and ultimately the countries of the world, in order to avoid the financial crisis, abandoned such a system. From the gold coin gold exchange standard, in the end, only a reference to the precious metal was obtained. Yes, and she eventually disappeared anyway.
Gold standard features
This kind of financial system implied free circulation of both gold coins and paper banknotes. They could at any time be exchanged by the owner directly for gold, equivalent to the cost of these means of calculation. This standard was highly stable and reliable, but there were significant problems.
So, for example, there wasn’t enough gold at all, the number of people on the planet steadily increased, and already after the First World War it was decided to abandon the system in favor of a more advanced one. As you can see, it was global wars that led to the gradual abolition of the binding of the currency to gold. Many experts associate both changes in the world’s monetary system, economic breakthroughs, and even the industrial potential of different countries directly with global conflicts, forcing to radically revise everything that existed before.
Gold bullion standard
This is the second version of the currency settlement scheme. According to this scheme, the gold bullion and gold exchange standards, like the earlier gold coin type standard, still retained the ability to exchange cash for real precious metal. True, now a rather serious limitation has arisen, which was that the exchange could be made exclusively on bullion of a certain size and value. Such an approach automatically excluded from the list of people wishing to receive gold in the hands of everyone who simply could not pay it. The price of such an ingot was quite high, and only with a long accumulation process or the presence of very high incomes did a person have the opportunity to "touch" a real precious metal.
In fact, it was accessible to a very narrow circle of people, but even this approach did not completely eliminate the problem of a lack of gold reserves, because most countries simply did not have access to cheap reserves of precious metals. As a result, there is a need for further changes.
Gold Exchange Standard
It was at this stage that the whole history of the system ended, taking into account the availability of reserves of precious metals. She was the last, and for ordinary people already inaccessible. It disappeared relatively recently, in 1976. It also existed for a relatively short time, less than thirty years, starting in 1944, when World War II was almost over.
The currency system of the gold exchange standard was a scheme in which all currencies were tied to a single one - the US dollar. And only this money could be exchanged for gold, and even then exclusively by large banking organizations. A simple person was deprived of such an opportunity. For some time stability in the economy saved the situation, but gradually the number of dollars so increased that the available stocks simply did not suffice to provide all these means of payment. As a result, this standard was also abolished.
Pros and Cons of Standards
At its core, a gold coin, gold bullion, gold exchange standard is simply a system for distributing a precious metal among the world's population. The more people, the less gold for each. We have to change, correct and modify something. The first variation, which has been used by mankind for most of its history, has one huge plus - each individual citizen of any country always knew for sure that he has a certain amount of money that will not go anywhere. In fact, no world financial crises, wars, and similar phenomena could devalue money in such a situation.
The second variation of the standard still retained such advantages, but they became available only to an extremely limited number of people. And after the latest changes, when the gold standard was introduced, the restrictions became so global that even a sufficiently wealthy person could not get the precious metal in his hands. This opportunity remained only with large banking institutions. At the same time, the gold deficit still gradually increased and ultimately forced to completely abandon the binding of any currency to this precious metal.
Current situation
After it became clear that the gold exchange standard did not solve the problem, but only postponed it for a not too long period, it was decided to abandon payments in gold in general. Almost all leading world countries agreed with this at different times, the rest were simply confronted with a fact. Now, currency prices are floating, depending on such a huge number of factors that even a professional with a very long experience in this field can not always foresee where the course will swing.
A similar situation is now with the cost of various goods. If earlier the price for them was formed on the basis of the principle of total costs for the creation, transportation, storage, salary, and so on, then now all these indicators are rather secondary. And in the first place came the principle of how much they are willing to pay for this product. In fact, the cost of most of any modern products is not worth a tenth of the money that is asked for. But as long as there are people who agree to lay out the requested amounts for these goods, the situation will not change.