Gold Standard

A gold standard is a monetary system in which a fixed weight of gold becomes the store of monetary value. Under the gold standard, bank notes and coins can be exchanged for gold. If multiple countries follow a gold standard, their foreign exchange rates become fixed. The international gold standard emerged in the late nineteenth century following an extended period of monetary instability characterized by disruptions related to silver shortages and the gradual emergence of central banks. The stability subsequently following this international gold standard is credited with facilitating the first era of globalization prior to WWI. A gold standard of some form persisted for about a century, until the Bretton Woods agreement collapsed in the 1970s when the US stopped exchanging dollars for gold. A return to the gold standard has contemporary advocates. They claim the gold standard could help insulate the world economy from government monetary mismanagement.