Gold Standard

The gold standard possessed broader features than the specie commodity standard.  It originated in England in the seventeenth century when the pound was minted of gold but it was officially announced in 1816 when gold became the official tender for payment of public and private debt.  By the 1870s, the gold standard was widely adopted.  Germany adopted it in 1871, and the United States followed suit in 1879.  The last quarter of the nineteenth century and till the outbreak of the First World War, was the hey-day for the gold standard.  The form of gold standard was not the same in all the countries adopting it.  In the UK and the USA, gold coins were minted and bank notes were also exchanged for gold on demand.  The price of gold was fixed under law.  It was the price at which gold could be bought and sold.  It was the purest form of gold standard and was known as the gold specie standard.  A modified version of the gold standard was known as the gold bullion standard.  It has all advantages of gold standard without any compulsion to maintain gold coinage.Individual bank notes were not convertible to gold directly and for conversion, gold bars were purchased at fixed rates. The gold exchange standard was an even more economical form of gold standard where neither gold coinage was required, nor the convertibility via purchase of gold bars existed.  A country on the gold exchange standard linked its currency to the currency of a country on the gold specie standard.  If a country on the gold exchange standard held the pound as its reserves, its currency was convertible into pounds and the pound was convertible into gold.  Thus, convertibility existed but not directly.  The country reaped the advantages of the gold standard so long as its linked currency continued to be on the gold specie standard.  Many countries maintained the gold exchange standard.  The Scandinavian countries adopted it in 1885 and Russia followed suit in 1894.They all held huge reserves of British treasury bills.