Why the value of money is determined by the gold?

 Why the value of money is determined by the gold? – Painted metal coins or paper , which we believe money is really just symbols . But they represent something real . Money confirmed deposits of precious metal present in the state, which produces money. Standard for measuring the value of money , common in the civilized world , are gold and silver. They are quite rare and retain their value , but their reserves are sufficient to meet the needs of the market.

In other words , paper money and coins issued by the government as money , were accepted as having value because it backed up the amount of gold and silver, available in the treasury .

In 1821, Britain passed monometallism ( ie using a single metal ) as the basis of its monetary system. Gold was adopted as the official currency . By 1914, gold has become the unit of measurement of almost all currencies in the world . Having a standard measure of value, the country could easily trade with each other . United States dollars , the Franks of France , the German mark had set value in gold.

In 1933, most countries abandoned the gold standard. But many currencies, including U.S. currency , is still defined a set price of gold. Gold is very important in international trade. Government buys and sells gold bullion . Part of the gold used to pay international debts , the other part is stored . Stored gold is called gold reserves .

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