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If "gold standard" had one narrow definition (something like each printed currency unit is back by a specific amount of gold and that amount doesn't float), the
by jtc331 11y ago
If "gold standard" had one narrow definition (something like each printed currency unit is back by a specific amount of gold and that amount doesn't float), then yes, it would render it meaningless.
But if the amount of currency issued can float relative to the gold reserves held, then the values of currencies relative to each other could still flow significantly.
Put another way, it's an issue of trust. If currency X and currency Y are both theoretically backed by gold, but it's far easier or more reliable to convert X into gold than Y, then X as a reserve would be more valuable than Y.
- mikeash 11y agoFor most of the time covered by this graph, "gold standard" meant that the money was actually made out of precious metals, not merely that it had some official exchange rate with gold. Concerns about how the quantity of currency issued changes relative to the amount of gold held, or conversion to/from gold, simply wouldn't apply.
- justincormack 11y agoNot true, there was still debt, so unbacked money.
- mikeash 11y agoHow much of currency reserves at the time consisted of debt?
- justincormack 11y agoDepends when you were talking about exactly. Currency reserves were not necessarily a thing. In most countries all banks were private, so there were no official reserves. For example the Bank of England was only nationalised in 1946. Fractional reserve banking has been around for centuries.