Gold has had a significant impact on the U.S economy. Since the beginning of World War I, gold has been the sole international standard of exchange. Golds impact on the economy waxes and wanes, depending on how safe other investments are. Gold has been considered a luxury good since it is durable, homogeneous, divisible, portable and has significant advantages over all other media of exchange.

Before gold was used as a coin, its value was recognized even in the first Egyptian Dynasty. Its beauty, luster and malleability made it perfect for many uses. it has been used in the early times as a standard of exchange together with silver and copper. But not all goods can be paid by gold, it would be difficult to execute and would limit the extent of the society's division of labor and specialization. Thus, it is a logical reason to create banknotes and deposits that can act as a substitute but convertible to gold.

The gold standard is a system where a country's currency value is directly linked into gold. With this system, a country agrees to convert the currency of their money into a fixed amount of gold. But this system is not currently used by any government, Britain stopped using this system in 1931 followed by the U.S government in 1933 due to the percent of unemployment and deflation in the early 1930's.

Gold Standard Antagonism

A hysterical rival against the gold standard is an issue that unites statists of all persuasions. There are two kinds of gold standard antagonism: the Not Arbitrary, and the More Free than Controlled.

In a gold standard (Not Arbitrary), its rare case is when depositors wanted to withdraw all their gold at the same time, the bank only keeps a certain percentage of the depositor's total balance as reserves. Thus, the bank can loan out more than the number of gold deposits. But the amount of loans which a depositor can afford is not arbitrary.

However the More Free than Controlled system is a fully free system and is consistent with gold. It is a system where bank notes are made to convert the country's currency of paper money and is directly linked to gold. The government remains in a gold standard which means gold is still used as a bank reserve and individuals are still free to own gold.