Significance of Coinage and the Gold Standard

Nowadays, people are so accustomed to making payment with coins, paper bills, checks, credit cards or debit cards. Nevertheless, have you ever thought about how people traded in the past when coins had not even been invented? They used to barter things. However, sometimes it is hard to reach a consensus and build up trust between people. The appearance of coinage smoothed out the problems of trading. The value of the coins were guaranteed and people could rely on the stated value.

All coins were stamped the mint marks which indicated the credibility. Thus, stamped coins became the main currency when trading. People were more willing to do business in the place where the stamped coins were circulated. The place became wealthy due to lots of trade were brought in by people. As we always hear, money talks. When someone is rich, people are inclined to follow that person and want to take advantages of him. Power can always be gained by accumulating people as they can work for the rich ones. Political power is a typical example as rich people always have enough financial ability to do reformation.

The use of coins started the use of the gold standard for few centuries, but it was abolished later. Although it limits the inflation rate and fixes the exchange rate, it also has shortcomings. The unequal distribution of gold as a natural resource makes the gold standard much more advantageous in terms of cost and international economic empowerment for those countries that produce gold. Moreover, the total amount of gold in the world is limited and this amount is too small to serve as a monetary base. At last, following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence it is hard to stabilize the economy in times of economic recession.