What Are Gold Bullion Standard And Its Main Characteristics And Advantages?
Gold Bullion Standard: Gold bullion standard was introduced in 1925 in England. But structure of gold standard was now different than 1914. Its main characteristics are following. Gold Coins Do Not Circulate: The actual currency consists of paper currency notes and other token coins, while gold coins do not circulate. But central bank is under obligation to convert them in gold bullion. Coinage of Gold is not Fee. The holder of gold is not entitled to get it converted in to gold coins. Purchase Sale of Gold: Govt. purchases and sells the gold at a fixed price. The seller of gold is paid in other forms of money, which may be paper or bank money. Gold Reserves: Gold reserves are held in the form of bullion bars by the central bank. No Restriction on Use: There is no restriction on the use of gold bullion on the individuals. The people can even export the gold. Advantages: It economizes the use of gold, because gold coins are not circulated in the country. When gold coins circulate a lot
Its main advantages is that there is only so much gold, so inflation is almost unheard of, and when you save money, it actually becomes worth more instead of less. It keeps politicians from being able to spend like crazy, thus making wars hard to finance and welfare schemes very difficult for politicians to promise in exchange for votes (corruption). They have to raise taxes for every “program” instead of “borrowing” from future generations, who have not even been born yet.
