Re: Why was Gold Currency made illegal? Will it return?
You are welcome.
I think you misunderstood what gold standard mean, and thinking that gold standard means no paper money, rather an era of silver and gold coins. In reality, if gold standard starts then nothing would change in practice, other than currency having some fixed value in gold that holder of currency note would know.
In present age, when we talk about gold standard, it does not necessarily mean people carrying gold or silver coins instead of paper money. It only means government guarantee a fixed amount of gold for paper money in pocket. For instance, government can declare that for paper money adding to £1000, government would guarantee to replace that £1000 for 1 ounce of gold on demand. For that, we expect that government would have sufficient gold in stock to back-up their promise,
That means, pound has gold standard, where £1000 is worth one ounce of gold.
How that would work?
If one look at currency note of any country, we will see it would be written on it a promise from issuing authority.
For instance in UK on £10 pounds note it would be written:
‘I promise to pay the bearer on demand the sum of ten pounds’
Above statement is bank of England promise to holder of ten pounds note (same is true for all motes … £5, £10, £20 or £50). We do not know what pound is, what pound means, or what pound is worth, still on that promise we work, buy or sell using the note … and market determines the value of that 10 pounds.
But if pound had gold standard where £1000 would be equal to one ounce of gold then promise statement on ten pound note could be:
‘I promise to pay the bearer on demand (10/1000) ounce of gold’
In above situation, a person would know that the paper note a person is holding, what it is worth in gold and that the person can take that note to bank of England or their representative to demand and collect gold if one wants to.