Editing Gold standard (section)

==History before 1873==
{{Hatnote|All references to "dollars" in this section refer to the [[United States dollar]], unless otherwise stated.}}

===Silver and bimetallic standards until the 19th century===

The use of gold as money began around 600 [[Common Era|BCE]] in Asia Minor<ref>{{cite web|title = World's Oldest Coin - First Coins|url = http://rg.ancients.info/lion/article.html|website = rg.ancients.info|access-date = 2015-12-05}}</ref> and has been widely accepted ever since,{{sfn|Lipsey|1975|pp=683-702}} together with various other commodities used as [[money]], with those that lose the least value over time becoming the accepted form.<ref>{{harvnb|Bordo|Dittmar|Gavin|2003}} "in a world with two capital goods, the one with the lower depreciation rate emerges as commodity money"</ref> In the early and high [[Middle Ages]], the [[Byzantine Empire|Byzantine]] gold [[Solidus (coin)|solidus]] or ''[[bezant]]'' was used widely throughout Europe and the Mediterranean, but its use waned with the decline of the Byzantine Empire's economic influence.<ref>{{cite journal|last=Lopez|first=Robert Sabatino|title=The Dollar of the Middle Ages|journal=The Journal of Economic History|date=Summer 1951|volume=11|issue=3|pages=209–234|jstor=2113933|doi=10.1017/s0022050700084746|s2cid=153550781 }}</ref>

However, economic systems using gold as the sole currency and unit of account never emerged before the 18th century. For millennia it was silver, not gold, which was the real basis of the domestic economies: the foundation for most money-of-account systems, for payment of wages and salaries, and for most local retail trade.<ref name="moneylec">{{cite web|pages=13–14 sec 5(f)(g)(h)|url=https://www.economics.utoronto.ca/munro5/MONEYLEC.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.economics.utoronto.ca/munro5/MONEYLEC.pdf |archive-date=2022-10-09 |url-status=live|title=MONEY AND COINAGE IN LATE MEDIEVAL AND EARLY MODERN EUROPE|website=Economics.utoronto.ca|access-date=3 March 2022}}</ref> Gold functioning as currency and unit of account for daily transactions was not possible due to various hindrances which were only solved by tools that emerged in the 19th century, among them:
* '''Divisibility:''' Gold as currency was hindered by its small size and rarity, with the dime-sized [[ducat]] of 3.4 grams representing 7 days' salary for the highest-paid workers. In contrast, coins of silver and [[billon (alloy)|billon (low-grade silver)]] easily corresponded to daily labor costs and food purchases, making silver more effective as currency and unit of account. In mid-15th century England, most highly paid skilled artisans earned 6d a day (six pence, or 5.4&nbsp;g silver), and a whole sheep cost 12d. This made the ducat of 40d and the half-ducat of 20d of little use for domestic trade.<ref name="moneylec" />
* '''Non-existence of token coinage for gold:''' Sargent and Velde (1997) explained how token coins of copper or billon exchangeable for silver or gold were almost non-existent before the 19th century. Small change was issued at almost full intrinsic value and without conversion provisions into specie. Tokens of little intrinsic value were widely mistrusted, were viewed as a precursor to currency devaluation, and were easily counterfeited in the pre-industrial era. This made the gold standard impossible anywhere with token silver coins; Britain itself only accepted the latter in the 19th century.<ref>{{Cite web|url=https://www.chicagofed.org/publications/working-papers/1997/wp-13|title = The Evolution of Small Change - Federal Reserve Bank of Chicago}}</ref>
* '''Non-existence of banknotes:''' Banknotes were mistrusted as currency in the first half of the 18th century following France's failed banknote issuance in 1716 under [[John Law (economist)|economist John Law]]. Banknotes only became accepted across Europe with the further maturing of banking institutions, and also as a result of the Napoleonic Wars of the early 19th century. Counterfeiting concerns also applied to banknotes.

The earliest European currency standards were therefore based on the [[silver standard]], from the denarius of the Roman Empire to the penny (denier) introduced by [[Charlemagne]] throughout Western Europe, to the [[Spanish dollar]] and the German [[Reichsthaler]] and [[Conventionsthaler]] which survived well into the 19th century. Gold functioned as a medium for international trade and high-value transactions, but it generally fluctuated in price versus everyday silver money.<ref name="moneylec" />

A [[bimetallism|bimetallic standard]] emerged under a silver standard in the process of giving popular gold coins like [[ducat]]s a fixed value in terms of silver. In light of fluctuating gold–silver ratios in other countries, bimetallic standards were rather unstable and ''de facto'' transformed into a ''parallel bimetallic standard'' (where gold circulates at a floating exchange rate to silver) or reverted to a mono-metallic standard.<ref>
{{cite web|title=Swedish monetary standards in a historical perspective |author=Rodney Edvinsson |pages=33–34 |url=https://www.riksbank.se/globalassets/media/forskning/monetar-statistik/volym1/2.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.riksbank.se/globalassets/media/forskning/monetar-statistik/volym1/2.pdf |archive-date=2022-10-09 |url-status=live}}</ref> France was the most important country which maintained a bimetallic standard during most of the 19th century.

===Gold standard origin in Britain===
The English [[pound sterling]] introduced {{Circa|800 CE}} was initially a silver standard unit worth 20 shillings or 240 silver pennies. The latter initially contained 1.35&nbsp;g fine silver, reduced by 1601 to 0.464&nbsp;g (hence giving way to the shilling [12 pence] of 5.57&nbsp;g fine silver). Hence the pound sterling was originally 324&nbsp;g fine silver reduced to 111.36&nbsp;g by 1601.

The problem of clipped, underweight silver pennies and shillings was a persistent, unresolved issue from the late 17th century to the early 19th century. In 1717 the value of the [[Guinea (coin)|gold guinea (of 7.6885&nbsp;g fine gold)]] was fixed at 21 shillings, resulting in a gold–silver ratio of 15.2, higher than prevailing ratios in Continental Europe. Great Britain was therefore ''de jure'' under a bimetallic standard with gold serving as the cheaper and more reliable currency compared to clipped silver<ref name=":4" /> (full-weight silver coins did not circulate and went to Europe where 21 shillings fetched over a guinea in gold). Several factors helped extend the British gold standard into the 19th century, namely:
* The [[Brazilian Gold Rush]] of the 18th century supplying significant quantities of gold to Portugal and Britain, with [[Portuguese real|Portuguese gold coins]] also legal tender in Britain.
* Ongoing trade deficits with China (which sold to Europe but had little use for European goods) drained silver from the economies of most of Europe. Combined with greater confidence in banknotes issued by the [[Bank of England]], it opened the way for gold as well as banknotes becoming acceptable currency in lieu of silver.
* The acceptability of token / subsidiary silver coins as substitutes for gold before the end of the 18th century. Initially issued by the Bank of England and other private companies, permanent issuance of subsidiary coinage from the [[Royal Mint]] commenced after the [[Great Recoinage of 1816]].

A proclamation from [[Anne, Queen of Great Britain|Queen Anne]] in 1704 introduced the [[British West Indies]] to the gold standard; however, it did not result in the wide use of gold currency and the gold standard, given Britain's [[mercantilism|mercantilist policy]] of hoarding gold and silver from its colonies for use at home. Prices were quoted ''de jure'' in gold pounds sterling but were rarely paid in gold; the colonists' ''de facto'' daily medium of exchange and unit of account was predominantly the [[Spanish dollar|Spanish silver dollar]].<ref>{{Cite magazine|url=https://time.com/4675303/money-colonial-america-currency-history/|title=Early American Colonists Had a Cash Problem. Here's How They Solved It|magazine=Time}}</ref> {{Crossreference|(Also explained in the [[Trinidad and Tobago dollar#History|history of the Trinidad and Tobago dollar]].)}}

[[File:Sovereign_Victoria_1842_662015.jpg|thumb|right|The British [[Sovereign (British coin)|gold sovereign]] or £1 coin was the preeminent circulating gold coin during the classical gold standard period.]]
Following the Napoleonic Wars, Britain legally moved from the bimetallic to the gold standard in the 19th century in several steps, namely:
* The 21-shilling guinea was discontinued in favor of the [[Sovereign (British coin)|20-shilling gold sovereign]], or £1 coin, which contained 7.32238&nbsp;g fine gold
* The permanent issuance of subsidiary, limited legal tender silver coinage, commencing with the [[Great Recoinage of 1816]]
* The 1819 Act for the Resumption of Cash Payments, which set 1823 as the date for resumption of convertibility of Bank of England banknotes into gold sovereigns, and
* The [[Bank Charter Act 1844]], which institutionalized the gold standard in Britain by establishing a ratio between gold reserves held by the [[Bank of England]] versus the banknotes which it could issue, and by significantly curbing the privilege of other British banks to issue banknotes.

From the second half of the 19th century Britain then introduced its gold standard to Australia, New Zealand, and the [[British West Indies]] in the form of circulating gold sovereigns as well as banknotes that were convertible at par into sovereigns or Bank of England banknotes.<ref name=":4" /> Canada introduced its own gold dollar in 1867 at par with the [[U.S. dollar|U.S. gold dollar]] and with a fixed exchange rate to the gold sovereign.<ref>{{cite web|url=https://www.bankofcanada.ca/wp-content/uploads/2010/07/dollar_book.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.bankofcanada.ca/wp-content/uploads/2010/07/dollar_book.pdf |archive-date=2022-10-09 |url-status=live|author=James Powell|title=A History of the Canadian Dollar|publisher=Ottawa: Bank of Canada|date=2005|pages= 22–23, 33}}</ref>

===Effects of the 19th century gold rush===
[[File:NNC-US-1849-G$20-Liberty_Head_(Twenty_D.).jpg|thumb|right|Huge quantities of $20 [[double eagle]]s were minted as a result of the [[California gold rush]].]]
Up until 1850 only Britain and a few of its colonies were on the gold standard, with the majority of other countries being on the silver standard. France and the United States were two of the more notable countries on the [[bimetallism|bimetallic standard]]. France's actions in maintaining the [[French franc]] at either 4.5&nbsp;g fine silver or 0.29032&nbsp;g fine gold stabilized world gold–silver price ratios close to the French ratio of 15.5 in the first three quarters of the 19th century by offering to mint the cheaper metal in unlimited quantities – gold 20-franc coins whenever the ratio is below 15.5, and silver 5-franc coins whenever the ratio is above 15.5. The [[United States dollar]] was also bimetallic ''de jure'' until 1900, worth either 24.0566&nbsp;g fine silver, or 1.60377&nbsp;g fine gold (ratio 15.0); the latter revised to 1.50463&nbsp;g fine gold (ratio 15.99) from 1837 to 1934. The silver dollar was generally the cheaper currency before 1837, while the gold dollar was cheaper between 1837 and 1873.

The nearly coincidental [[California gold rush]] of 1849 and the [[Australian gold rushes]] of 1851 significantly increased world gold supplies and the minting of gold francs and dollars as the gold–silver ratio went below 15.5, pushing France and the United States into the gold standard with Great Britain during the 1850s. The benefits of the gold standard were first felt by this larger bloc of countries, with Britain and France being the world's leading financial and industrial powers of the 19th century while the United States was an emerging power.

By the time the gold–silver ratio reverted to 15.5 in the 1860s, this bloc of gold-utilizing countries grew further and provided momentum to an international gold standard before the end of the 19th century:
* Portugal and several British colonies commenced with the gold standard in the 1850s and 1860s
* France was joined by Belgium, Switzerland and Italy in a larger [[Latin Monetary Union]] based on both the gold and silver [[French franc]]s.
* Several [[international monetary conferences]] in the last third of the 19th century began to consider the merits of an international gold standard, albeit with concerns on its impact on the price of silver should several countries make the switch.<ref>{{cite book |title=The History of Currency, 1252–1894 |author=William Arthur Shaw |edition=3rd |publisher=Putnam |year=1896 |pages=275–294 |url=https://books.google.com/books?id=GrJCAAAAIAAJ&pg=PA275}}</ref>