Finance: The Gold Standard Explained

Finance: BUSINESS

LegacyFX Introduction

THE GOLD STANDARD EXPLAINED

THE GOLD STANDARD EXPLAINED

The gold standard is an outdated monetary system in which the value of a currency or paper money is directly linked to the value of gold. It has not been in use in the UK or the US since the early 1930s and is not currently in use in any country, having been replaced by the fiat system.

Avoiding Inflation One of the key advantages of having a gold standard as monetary policy is that is arrests inflation. Where the value of money is tied to a fixed and finite quantity of gold, inflation and deflation can be prevented and a stable monetary environment promoted. However, adhering too strictly to that rule can cause political unrest and economic instability, as has been shown in US history over the last century.

The Fiat System The fiat system replaced the gold standard as monetary policy in the UK in 1931. In the fiat system, a government order means that the currency of a country must be accepted within that country as a means of payment for goods or services.

GOLD IS STILL VALUABLE, WIDELY TRADED AND SEEN AS A SOLID INVESTMENT.

YOU CAN LEARN MORE ABOUT GOLD TRADING

BY VISITING THE BLOG OF LEGACYFX.