A Brief And (Messy) History Of Modern Gold Standards

A consistently international gold standard proper dates from around the 1870s until 1914. The U.S. adopted de facto a gold standard with specie (metal coin in mass circulation) payment on greenbacks in 1879, and became de jure with the Gold Standard Act of 1900.

The features of this old gold standard, both European and American, were as follows: a) that a national monetary unit was now defined in terms of a given quantity of gold; b) that the central bank or Treasury would stand by ready to buy and sell gold at the resulting fixed price in the terms of the national currency; c) that gold was freely coined and gold coins formed a significant part of the circulating medium (and thus implying fixed exchange rates). It was not a flawless system, of course, and it did not ensure price stability. Variations were due mostly to fluctuations in gold production and gold-rush boom-cycles that took place after the Civil war.