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Do we need the gold standard?


Every time gold is in the headlines, the gold standard becomes hot news, and why not, gold is a valuable commodity and people have always liked the idea of owning some gold. What does a gold standard mean? A gold standard means that the value of currency is backed by a certain amount of gold. There was a time when governments did business with each other using gold. They had to be ready to buy and sell gold to anyone at a certain set price. The value or strength of a country’s currency was fixed by this gold standard meaning that paper currency was worth some amount of gold. A person could exchange their paper currency for actual gold and vice versa.

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To determine the value of a country’s currency, the gold standard established a fixed price for buying and selling gold.

The Gold Standard’s History

The concept of the gold standard is an ancient one. Since civilisations began trading goods for money gold became important. This precious metal was used for more than funding trade but it was used to fund wars, build infrastructure and do so much more. People tend to trust something that is tangible, when everything else is falling around you, having gold bullion Brisbane to sell might come in handy. Gold retains its value better than most assets. The fact that there is only a finite amount of gold available means that gold will always be useful in the jewellery market but in other industries too. Gold is recyclable. Old and damaged gold can be melted and refined to make new gold products. It is for this reason that there is a burgeoning industry of gold dealers Brisbane and in other major cities like Brisbane.

In the olden days, people hoarded most of their gold because they feared that the government would confiscate it. People who hoard gold only cause a shortage in the supply of gold which can be catastrophic.

When the great depression of the 1920s hit, people began hoarding gold instead of keeping it in banks. This caused a global shortage of gold. The U.S. used the gold standard for domestic transactions right up until 1933. When President Nixon of the United States came into the picture, he finally did away with the gold standard on August 15, 1971. According to some economists, the gold standard is ideal because it requires the government to impose limits on how much money government central banks can issue “new money”, this would preserve the value or stability of a country’s economy and more importantly, its currency thereby preventing inflation.

Why can’t we return to the gold standard?

It would seem that the gold standard would have solved the world’s currency problems. The gold standard could help a country’s currency retain its value but there are some significant problems:

  • The gold standard cannot guarantee economic stability. There are too many factors that affect a country’s financial stability.
  • For the gold standard to work gold would have to be available in infinite quantities.
  • Countries with the most gold or who are in charge of the world’s supply would have more power than countries that don’t.

The gold standard could cause a serious imbalance in the political power struggles. The scrapping of the gold standard drove the price of gold from $35 an ounce to the rates we are currently seeing.

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The gold price was When the gold standard was first abolished the $35 but now the price has gone 50 times higher. According to the World Gold Council, gold is now one of the most liquid assets in the world, with a daily trading volume of $145.5 billion. There are a lot of gold dealers Brisbane who are looking to buy gold from individuals and will offer great prices, especially in this current economic environment we are in.

Where’s does that leave us today?

A return to the Gold Standard might sound ideal but is highly unlikely. We are stuck with the monetary system we have but you can still make the most of the situation by investing in gold. Having gold bullion might prove to be handier that having lots of money saved up in a bank account.

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