Let us start with the definition of gold standard. The Encyclopaedia of Economics and Liberty, an essay on gold standard, defines the gold standard as “a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National currency and other forms of money like bank deposits and notes were liberally transformed into gold at the permanent price.”
The first gold coin in the history has been by the Lydia in 643 B.C. They were made of a crude material naturally occurring, and were a mixture of gold and silver. The Midas touch and the Celts are prominent historical achievements towards the evolution of modern-time gold standard setting. Then the Romans came with gold, silver, bronze and copper coins. After the death of Julius Caesar, gold coinage became very important in the Roman Coinage system.
The first ever one-pound coin was the gold sovereign, which came into existence in the year 1489 under the kingdom ship of King Henry VII. The Pound Sterling has been regarded as a unit of currency for centuries. This coin denomination was circulated with a weight of 240 grains equal to 0.5 troy (15.55 g) and was smelted using the standard gold coinage alloy of about 23 carat (95.83% fine).
In 1900, a complete gold standard was introduced according to the Gold Standard Act. In 1933, President Franklin D. Roosevelt abandoned the gold standard act, and at that time, nobody could own private gold except in the form of jewellery. It was against the law to hold gold in possession in solid form.
During the reign of Mary, sovereigns worth a value of 30 shillings were issued. However, during Philips rule, none were circulated or minted. During Queen Elizabeth rule, very high quality coins with 99.4% of gold constituent were issued worth 33 shillings. And, a separate one pound coin was also issued worth 20 shillings.
Britain too was the initial industrialized power and had embraced the gold standard around the 1820s. The United States did not follow the trend till 1873, when the Coinage Act took place. France and Germany then followed the steps of the US after some time.
It was the gold standard that reigned in most of the industrialized countries.
There are some benefits of gold standard that could insure about low level inflation. In these benefits, first benefit of the gold standard is that the supply of money increases with it. Second benefit is that the supply of goods goes down. Then, gold standard reduces the demand for money and increases the demand of goods.
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