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The difference is, when you go to the gold standard, how much gold you acquire to support the currency. After that, they are the same (but keep in mind, the va

The difference is, when you go to the gold standard, how much gold you acquire to support the currency. After that, they are the same (but keep in mind, the value of a currency is dependent on a lot of factors, and not just the gold that is backing it. Otherwise currencies backed by nothing would all be worth nothing, which we know isn't true).

thaumasiotes 7y ago
> (but keep in mind, the value of a currency is dependent on a lot of factors, and not just the gold that is backing it. Otherwise currencies backed by nothing would all be worth nothing, which we know isn't true). True, but once you've pegged the currency to gold, it can't fluctuate very far from the price of gold. A change in one is necessarily an equal change in the other. Currency that isn't backed by gold is free to fluctuate independently of the gold price, but gold-backed currency isn't. You could have a currency backed by a weighted basket of commodities, but that would be "backed by a weighted basket of commodities", not "backed by gold, but the backing is metaphysically different than you might expect".
- topmonk 7y ago
  > True, but once you've pegged the currency to gold, it can't fluctuate very far from the price of gold. I think this depends on what your definition of backed means. If you include the government not just buying the currency for a given amount of gold, but also selling the currency for the same amount of gold, I agree. But, otherwise, if the government guarantees it will only buy the currency for gold and not vice versa, then I disagree. For example, I could state tomorrow that I will guarantee to give anyone 1 oz. of gold is they give me $100 trillion in USD, and then technically USD would be backed by gold (by me), but such an offer would have no real effect on the how the market would value USD. I might be wrong about what backed means, but if so, then I also don't understand what is meant by partially backed.

thaumasiotes 7y ago

> (but keep in mind, the value of a currency is dependent on a lot of factors, and not just the gold that is backing it. Otherwise currencies backed by nothing would all be worth nothing, which we know isn't true). True, but once you've pegged the currency to gold, it can't fluctuate very far from the price of gold. A change in one is necessarily an equal change in the other. Currency that isn't backed by gold is free to fluctuate independently of the gold price, but gold-backed currency isn't. You could have a currency backed by a weighted basket of commodities, but that would be "backed by a weighted basket of commodities", not "backed by gold, but the backing is metaphysically different than you might expect".

topmonk 7y ago
> True, but once you've pegged the currency to gold, it can't fluctuate very far from the price of gold. I think this depends on what your definition of backed means. If you include the government not just buying the currency for a given amount of gold, but also selling the currency for the same amount of gold, I agree. But, otherwise, if the government guarantees it will only buy the currency for gold and not vice versa, then I disagree. For example, I could state tomorrow that I will guarantee to give anyone 1 oz. of gold is they give me $100 trillion in USD, and then technically USD would be backed by gold (by me), but such an offer would have no real effect on the how the market would value USD. I might be wrong about what backed means, but if so, then I also don't understand what is meant by partially backed.