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Once off the gold standard, it became free to engage in such money creation. The gold standard limited the flexibility of the central banks' monetary policy by limiting their ability to expand the money supply. In the US, the central bank was required by the Federal Reserve Act (1913) to have gold backing 40% of its demand notes. [65]
Stability came when national banks guaranteed to change silver money into gold at a fixed rate; it did, however, not come easily. The Bank of England risked a national financial catastrophe in the 1730s when customers demanded their money be changed into gold in a moment of crisis. Eventually London's merchants saved the bank and the nation ...
A Series 1934 $10,000 gold certificate depicting Salmon P. Chase, Smithsonian Institution. Gold certificates were issued by the United States Treasury as a form of representative money from 1865 to 1933. While the United States observed a gold standard, the certificates offered a more convenient way to pay in gold than the use of coins
The plaintiffs in all cases received paper money, instead of gold, despite the contracts' terms. The contracts and the bonds were written precisely to avoid currency debasement by requiring payment in gold coin. The paper money which was redeemable in gold was instead irredeemable based on Nortz v. United States, 294 U.S. 317 (1935).
Gold has become increasingly desirable over the years. In the late 1300s, Great Britain shifted its economy to a system based on silver and gold. The first U.S. gold coin was produced in the late ...
Peel's Bill, or the Resumption of Cash Payments Act 1819 (59 Geo. 3.c. 49), marked the return of the British currency to the gold standard, after the Bank Restriction Act 1797 saw paper money replacing convertibility to gold and silver under the financial pressures of the French Revolutionary Wars.
Plus, gold has maintained its value over centuries, Boston says. This track record explains why central banks worldwide hold over 36,000 metric tons of gold in their vaults.
It became completely academic after the 1971 Nixon shock; since then, all of the world's currencies have operated as more or less freely floating fiat money, unconnected to the value of silver or gold. Nonetheless, academics continue to debate, inconclusively, the relative use of the metallic standards.