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Gold Standard is a fiscal system in which a predetermined weight of gold is a standard numerical unit of measurement. Due to high durability and malleability, gold came to be used as a standard unit of measurement.Governments that employed such a standard shared a ‘fixed-currency relationship’ with other Governments.
Many contradictions prevail regarding the correct phase of adoption of the Gold standard. Historically, Germany adopted this system in 1871 as an aftermath of the Franco-Prussian War. Gradually this was followed by other countries also such as the USA, France, Spain, India, Austria, Russia and many more. This resulted in the international establishment of the gold standard.
The reason behind its adoption was that it was considered to be the best method to check inflation for the government could not create money randomly and was being backed by the gold standard. But, even this system did not prove to be full proof and led to a number of depressions in the United States of America and United Kingdom especially during the early half of the 20th century. This was followed by protest against Gold Standard from different corners of the world. Even though gold standard was renewed during 1925, ultimately it phased away with the introduction of other monetary systems.
Debate on the viability of the gold standard dates back to the days of its introduction and still continues. Even today, though it is no longer in use, its advocates still refer to the expanding industrialization and globalization of the 19th century in which the ‘gold standard’ played a significant role.
Currently, gold standard is no longer in use and has been replaced by fiat currency. However, private institutions still make use of this monetary system.
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