What is the gold standard?
The gold standard is a currency system in which the economic unit of account has a fixed weight of gold is. When several countries use such a fixed unit of account, the exchange rates between different national currencies are effectively fixed. This standard was of great importance for the development of Gold Bars and gold coins.
Three possible systems can be distinguished. Sometimes gold is used directly as a currency (gold circulation). A second possibility is to issue paper money that can be exchanged for gold at any time, where the total value of the money issued is equal to the total amount of gold of the central bank. In a third possible system, money can only be exchanged to a limited extent; More paper money has been issued than the value of the central bank's gold reserves (the so-called "paper standard").
Why gold?
Due to its rarity and durability, gold and silver were used as a means of payment for centuries. The exact nature of the evolution of money varies considerably with respect to time and place, although it is believed by historians that the high utility value of gold and silver, its density, corrosion resistance, uniformity, and easy divisibility made it useful both for stores of value and as a unit of account for other types of stored value – in Babylon a certain amount of wheat was the unit of account, with a weight in gold or silver that was used as a unit to transport value. The early coinage systems, which were based on cereal grains, used gold or silver to represent the stored value. Banking was created when deposited gold or silver could be transferred from one account to another by means of a giro system and borrowed at interest.
Currency in the beginning
The first metal to be used as a coin was silver, as early as 2000 BC, when silver bars were used in trade, and then it took another 1500 years for the first coins of pure gold to be introduced. Nevertheless, gold was the basis of trade contracts in Akkadia, and later in ancient Egypt, much earlier. Silver remained the most widely used coin metal for everyday transactions until the 19th century. A gold coin represented a small capital. A ducat of 3.5 grams, for example, represented at least two average weekly wages in the Middle Ages. So the little man seldom got his hands on anything but silver or copper coins. Gold Coins were the currency of the rich and merchants.
Machiavelli
The Persian Empire levied taxes in gold and, after being conquered by Alexander the Great, this gold served as the basis for the gold coins used in his empire. Paying mercenaries and armies in gold made its importance hard: gold became synonymous with paying for military operations, as mentioned by Niccolò Machiavelli two thousand years later in the Prince.
Roman Empire
The Roman Empire minted two major gold coins: the aureus, which weighed about 7 grams of gold alloyed with silver, and the smaller solidus, which weighed 4.4 grams, of which 4.2 grams were gold. Roman coins were particularly active – the Romans minted and circulated millions of coins during the period of the Republic and Empire.
