Syzygyone: Moreover, given gold's relative scarcity compared to silver, it was of even greater value and eventually pushed silver out of the game.
miko: It's not any intrinsic properties of gold that pushed the silved out but the fact that some economically important countries have adopted it as money already.
Small correction - US and Great Britain wer actively involved in enforcing the gold standard on many countries - Lating America and others under Charles Conant. In fact US itself was pushed into gold standard from the silver one by british inerests.
GRUNHERZ: miko its nice to see how you understand the relationship between economic expansion, the resulting need for more currency...
Grun,
What is "economic expansion"? If you mean economic growth, it is not the same and even not related to monetary expansion.
Also, what do you mean by "more currency". If you mean more tokens/notes/coins, those can be produced in any denominations at will.
If gold was used as money and purchasing power of a smallest coin got too great, that coin could have been easily melted into several smaller ones. If silver was used as money and the purchasing power of largest usable silver coin was too small, we would leave a bag of them it in the bank and carry a paper bank note backed by silver instead. Basically, the issues are purely technical, not economic.
...the resulting need for more currency...
If you mean more money, the economic growth does not require increase in quantity of money. The same fixed amount of gold or any other commodity used as money or even the same fixed amount of "paper" money would have served all the needs of growing economy perfectly. The purchasing power of money grows or declines according to supply/demand like any other economic good. With fixed amount of money we would have a small drop in prices (not to confuse with deflation) every year reflecting increased productivity.
Money is unique in that it is a good that is not consumed in the process of production and increase in it's supply does not confer any social benefit.
the problem all those present when you try to idiotically match currency to gold...
I am not sure what you are talking about here. If gold (or another commodity) is money, what would be the meaning of phrase "match currency to gold"? Gold coins or bars or gold receipts would be currrency, counted in ounces or grams (dollars was originally a term for a specific quantity of gold).
The economic activity is an exchange of goods and labor for other goods. Money just acts as intermediary in that exchange and in some respects is acts as claim against goods. When you create money you do not create any goods but just claims against existing goods. The marginal purchasing power of money inevitably falls proportionately to the amount issued.
This way the holders of existing money are robbed of part of their value, since they now receive less goods for their money than they sold in order to get that money. Creation of money is pure and arbitrary redistribution. So commodity money - not necessarily gold but anything that the government cannot prioduce "out of the thin air" would prevent governments from expropriating value this way.
miko
