<p>My (possibly incorrect) understanding is that, under a true gold standard, there literally needs to be gold, and that paper money couldn't be issued if there wasn't the physical gold stored up somewhere that backed it.</p>
<p>Finding gold would increase the money supply, this occurred during the California Gold Rush.</p>
<p>Regarding how literal the gold standard was, it was <em>supposed</em> to be literal, but also at the end of Bretton Woods the US was deviating from it, and Bretton Woods ended up breaking down.</p>

CC BY-SA 4.0
2021-11-22T12:45:02.910Z
2021-11-22T12:45:02.910Z
Michael Gmeiner
<p>The Rise and Fall of the Gold Standard in the United States by George Selgin</p>
<p><a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa729_web.pdf" rel="nofollow noreferrer">https://www.cato.org/sites/cato.org/files/pubs/pdf/pa729_web.pdf</a></p>
<blockquote>
<p>In a genuine gold standard, the basic
monetary unit is a specific weight of gold alloy of some specific purity, or its equivalent
in fine gold, and prices are expressed in the
unit or in some fractional units based upon
it. Assuming that coinage is a government
monopoly, the government offers to convert
gold bullion into “full-bodied” gold coins,
representing either the standard unit itself
or multiples or fractions thereof, in unlimited amounts. This policy of providing for the
unlimited minting of gold bullion is known
as “free” coinage. Money is created through
public demand to convert bullion to coin.</p>
</blockquote>
<blockquote>
<p>The emergence of redeemable substitutes for gold coin, backed only by fractional gold reserves and consisting either of circulating notes or transferable deposit credits, appears to have been both an inevitable occurrence as well as one that, despite setting the stage for occasional crises, has also contributed greatly to economic prosperity.</p>
</blockquote>
<p>In general, if there is no government restriction or regulation of the freedom to form credit/debt contracts, then banks or even non-bank firms can issue paper notes or deposit liabilities in any ratio to the supply of gold coins. This credit expansion would drive the economy during the prosperous economic boom periods. Conversion of liabilities to gold would be suspended during economic bust periods. A run to withdraw gold from the gold windows of banks or other financial firms would be resolved via systemic debt default and the temporary closing of the gold window of an affected bank or firm.</p>

CC BY-SA 4.0
2022-01-08T02:10:25.737Z
2022-01-08T02:10:25.737Z
SystemTheory
<p>This is a really complex question, and the answers are more likely to appear on a spectrum of possible policymaking rather than a black or white answer. To really oversimplify: the supply of gold and the supply of money are theoretically supposed to (generally) share a direct relationship. For example, if more gold is purchased by the governing monetary authority, then the supply of money should correspondingly increase in order to maintain relatively stable and predictible prices. This was not always tied directly to &quot;printing&quot; money, however, much of it had to do with how a country's monetary authority related their lending and bond policy to the price of gold.</p>

CC BY-SA 4.0
2021-12-22T16:24:04.453Z
2021-12-22T16:24:04.453Z
chutch
<p>Under The Gold Standard, did the United States Mint actually track the amount of paper money in circulation against gold stores? And if there was an amount of paper money equal to the gold stores, did they stop printing paper money?</p>
<p>And what if someone suddenly found a bunch of gold in a mine in Wyoming somewhere? Would the Mint fire up the money presses to keep things in balance? Was there some reporting mechanism in place when people discovered gold? Or did it only work on gold that the United States government owned?</p>
<p>My larger point: how literal was The Gold Standard? The theory is that paper money is pegged to an actual backing of gold, but how did that actually work in practice?</p>

CC BY-SA 4.0
2022-01-07T21:36:15.660Z
In the heyday of the gold standard it was maintained by banks being willing to exchange their notes for gold at the official rate. You could bring gold to a bank and get notes or bring notes to a bank and get gold. Read https://www.econlib.org/library/Enc/GoldStandard.html for more info.
James Wattam
<gold-standard>
Under The Gold Standard, was a country's money supply literally restricted by physical gold stores?
Deane
# Under The Gold Standard, was a country's money supply literally restricted by physical gold stores?

(Asked by: username_0 on 2021-11-22)

Under The Gold Standard, did the United States Mint actually track the amount of paper money in circulation against gold stores? And if there was an amount of paper money equal to the gold stores, did they stop printing paper money?

And what if someone suddenly found a bunch of gold in a mine in Wyoming somewhere? Would the Mint fire up the money presses to keep things in balance? Was there some reporting mechanism in place when people discovered gold? Or did it only work on gold that the United States government owned?

My larger point: how literal was The Gold Standard? The theory is that paper money is pegged to an actual backing of gold, but how did that actually work in practice?

**Tags:** gold-standard
> **Comments:**
> **username_1**: In the heyday of the gold standard it was maintained by banks being willing to exchange their notes for gold at the official rate. You could bring gold to a bank and get notes or bring notes to a bank and get gold. Read https://www.econlib.org/library/Enc/GoldStandard.html for more info.  

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## 3 answers

### Answer by username_2 on 2021-11-22. Score: 3

My (possibly incorrect) understanding is that, under a true gold standard, there literally needs to be gold, and that paper money couldn't be issued if there wasn't the physical gold stored up somewhere that backed it.

Finding gold would increase the money supply, this occurred during the California Gold Rush.

Regarding how literal the gold standard was, it was *supposed* to be literal, but also at the end of Bretton Woods the US was deviating from it, and Bretton Woods ended up breaking down.


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### Answer by username_3 on 2022-01-08. Score: 2

The Rise and Fall of the Gold Standard in the United States by George Selgin

<https://www.cato.org/sites/cato.org/files/pubs/pdf/pa729_web.pdf>

> In a genuine gold standard, the basic
> monetary unit is a specific weight of gold alloy of some specific purity, or its equivalent
> in fine gold, and prices are expressed in the
> unit or in some fractional units based upon
> it. Assuming that coinage is a government
> monopoly, the government offers to convert
> gold bullion into “full-bodied” gold coins,
> representing either the standard unit itself
> or multiples or fractions thereof, in unlimited amounts. This policy of providing for the
> unlimited minting of gold bullion is known
> as “free” coinage. Money is created through
> public demand to convert bullion to coin.

> The emergence of redeemable substitutes for gold coin, backed only by fractional gold reserves and consisting either of circulating notes or transferable deposit credits, appears to have been both an inevitable occurrence as well as one that, despite setting the stage for occasional crises, has also contributed greatly to economic prosperity.

In general, if there is no government restriction or regulation of the freedom to form credit/debt contracts, then banks or even non-bank firms can issue paper notes or deposit liabilities in any ratio to the supply of gold coins. This credit expansion would drive the economy during the prosperous economic boom periods. Conversion of liabilities to gold would be suspended during economic bust periods. A run to withdraw gold from the gold windows of banks or other financial firms would be resolved via systemic debt default and the temporary closing of the gold window of an affected bank or firm.


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### Answer by username_4 on 2021-12-22. Score: 0

This is a really complex question, and the answers are more likely to appear on a spectrum of possible policymaking rather than a black or white answer. To really oversimplify: the supply of gold and the supply of money are theoretically supposed to (generally) share a direct relationship. For example, if more gold is purchased by the governing monetary authority, then the supply of money should correspondingly increase in order to maintain relatively stable and predictible prices. This was not always tied directly to "printing" money, however, much of it had to do with how a country's monetary authority related their lending and bond policy to the price of gold.


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