From Intrinsic Money to Promissory Notes

Circulating Gold Currencies existed until World War I. Every Circulating Gold Currency has the disadvantage that you cannot increase the gold supply as fast as the economy might grow. Deflation could prevent the economy from booming. Therefore many nations switched to indirect gold currency by having their central bank issue promissory notes (paper money) which were linked to the gold and silver which that nation had in stock. Its value was guaranteed by the option to exchange these promissory notes back to gold when presented to the central bank (Gold Core/Reserve Currency). In this situation the government could issue even more promissory notes than it possessed gold and silver because they knew that not everybody would exchange back to gold and silver at the same time.

This monetary system worked out globally. Even the countries that did not possess gold or silver pegged their national paper money to other currencies which had a gold reserve. At least indirectly there was a link to gold (Indirect Gold Core/Reserve Currency).

If you want these old days back with Gold Reserve / Gold Standard, why not buy some silver and gold bullion coins? Click here, that will help you to replace your promissory notes by “intrinsic money”.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.