ECON 2513 Chapter Notes - Chapter 44444: Fractional-Reserve Banking, Token Coin, Bimetallism
17 Oct 2018
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Emergence of classical gold standard before ww1. Evolved out of the variety of commodity money standards which emerged before development of paper money and fractional reserve banking. Prehistory the gold standard as a basis for international monetary affairs emerged after 1970. Counties settled on gold as the basis for their money supplies. Only then were pegged exchange rates based on the gold standard firmly established. Bimetallic ratio- use of both gold and silver coin. The ratio impacted the supply and circulation of both metals as well as the amount used in coins to lower or increase their value. Until the advent of steam power the gold standard was not technically feasible. One small coin although practical for hand-to-hand use, was too valuable for everyday transactions (cid:449)orth se(cid:448)eral days" (cid:449)ages, hardly ser(cid:448)able for a labourer. Had to be supplemented by less valuable silver coins as bimetallic standard, or by token coins. Token coins became the practice under the gold standard.
