gold standard presentation new

8/8/2019 Gold Standard Presentation New

1/12

Gold Standard


2/12

Objectives

Meaning and definition

Domestic gold standards

International gold standards

Merits

Demerits


3/12

Meaning and definition

The gold standard is when the value ofa

country's money is tied to the amount of

gold the country possesses.Anyoneholdingthat country's paper money could

present it to the government and receive an

agreed upon value (par value)from

that country's gold reserves.


4/12

DOMESTIC GOLDSTANDARD

When a country adopts gold standard two

important functions must be performed:

Should regulate the volume ofcurrency in thecountry.

It should maintain thestability offoreign

exchange rate.


5/12

INTERNATIONAL GOLDSTANDARD

Medium ofexchange and standard ofvalue.

When the value ofmonetary units ofdifferent

countries arefixed in terms ofspecific weightofgold.

Prices between different countries are closely

related to gold movement.


6/12

Advantages

Long-term pricestability can be described.

limits the power ofgovernments to inflate

prices throughexcessive issuance ofpapercurrency

fixed international exchange rates and

reduces uncertainty in international trade.

prevents governmentsfrom 'inflating away'

the real value oftheir debts


7/12

Disadvantages

Size and health ofa country's

economy is dependent upon itssupply of

gold. Obsessed with keeping their gold.

Largefluctuations in theeconomy.


8/12

gold specie standard-system in which the

monetary unit is associated with circulating

gold coins, or with the unit ofvalue defined interms ofone particular circulating gold coin in

conjunction withsubsidiary coinage made

from a lesser valuable metal.

Types ofgold standard


9/12

gold exchange standard- the circulation of

only coins made ofsilver or other metals, but

where t

he aut

horities guarantee a fixedexchange rate with another country that is on

the gold standard.This creates a de facto gold

standard the value ofthesilver coinshas a

fixed external value in terms ofgold that isindependent ofthe inherent silver value


10/12

gold bullion standard- is a system in which

gold coins do not circulate, but in which the

auth

oritiesh

ave agreed to sell gold bullion ondemand at a fixed price in exchangefor the

circulating currency.


11/12

Rate of exchange under gold

standard Mint par system - the value ofone currency is

determined in terms ofother by equating the

gold content or gold equivalent ofeach

currency i.e. the number ofunits ofone

currency whichshould legally contain the

same amount ofpure metal as does (legally)

a given number ofunits ofanother currency.


12/12

Species points- the points at which country

finds it cheaper and advantageous to import

or export gold instead ofbuying and sellingbills, draftsetc to settle international debts.

When the country thus resort to importation

ofgold, it is gold import point and when a

country exports gold it is gold export point.

gold standard presentation new

Documents