The characteristics of the monetary system "gold-exchange standard"

Will not go too much in the historical development of money and gold, and replace them with cash proxy or MP, then the money of legal, but we will discuss quickly transfer money to represent a certain percentage of gold, for example (Example) pound paper is no longer representative of the pound gold, but on the part of 0.50%, for example, (Example only).

 Historically, the system of exchange with gold in the country that followed neonates trade relations, which has between a small, or to move it explicitly clear (colonies) linked by a state grand, going on a gold, a subordinate relationship of political and economic, as was the case for India and Egypt Their relationship, England, Britain was colonized both Egypt and India, the because the two states were belonging to the colonies of the British, was colonization by military force (the force of arms) in order to steal the resources of those countries or colonies and carry them to England (colonizer who owns a gun)

The monetary union under this system of a country, not determined directly on the basis of gold, but have linked him closely indirectly, and that was linked to the monetary union at a fixed rate, as we have said previously, or with monetary union coin another country is on the gold system.

 Monetary system under which a nation’s currency may be converted into bills of exchange drawn on a country whose currency is convertible into gold at a stable rate of exchange. A nation on the gold-exchange standard is thus able to keep its currency at parity with gold without having to maintain as large a gold reserve as is required under the gold standard. The gold-exchange standard came into prominence after World War I because of an inadequate supply of gold for reserve purposes. British sterling and the U.S. dollar have been the most widely recognized reserve currencies. The requirement of a fixed rate of exchange for the reserve currency has the effect of limiting the freedom of the reserve-currency country’s monetary policy to solve domestic economic problems. The use of gold reserves is now limited almost exclusively to the settlement of international transactions, on rare occasions.

 Advantages of gold exchange system

Able to countries that followed the system of exchange gold to enjoy the benefits of a system of gold, without the need to maintain a reserve of gold, is directly linked to cash rolling, but that makes it imperative for this country's, that keeps a large part of its reserves of foreign picture critique or image permissions and bonds issued by the State Treasury metropolis. As well as the country applied for this system to invest a large part of its reserves in gold investment projects. He could install a small exchange rates, which is reflected in the presence of a fixed exchange rate between the currency of the country and followed by the country, and to maintain the currency of the country's always strong. Finally, saving the cost of holding gold which is expensive in relation to gold fusion, storage and guard.

 Defects gold exchange system

Leads drainage system with gold to create a dependency in cash for the country which is following this system, which leads to a dependency of political and economic, have exposed the state preceded by the economic crises can be great, is reflected on the state's clearly, of course, leads Alai prejudice the sovereignty of the country's where it becomes inextricably linked to the country followed by economically and politically humiliating, it cannot act alone according to his own vision.

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