Questions About a Free Banking Gold Standard

By Gonzalo Schwarz
Discussion about the gold standard often has advocates and critics talking past one another. One of the reasons is that there are members of both groups who do not know or, during the heat of argument, do not acknowledge that there have been many varieties of the gold standard. A free banking gold standard differs in important respects from other varieties of the gold standard. Here are key questions about the details of a gold standard, and the answers as they apply to its free banking form.What is the legal foundation for payment in gold? Ordinary contract law. Government may establish a definition of a currency unit in terms of gold, but if so, under free banking the unit (say, the dollar) is merely a convenient name for the weight of gold, rather than saying that “a dollar is a dollar” no matter how much the gold content changes.Is gold the only legal form of payment? No; payment can occur in any commodity or currency that people wish to use. This contrasts with the practice in some countries under various other forms of the gold standard, in which certain payments were only legal if made in national currency.Who offers payment in gold? Anybody may do so. This means lenders and borrowers may agree to "gold clauses" in contracts. In many countries, governments have nullified such clauses after abandoning the gold standard or after moving to a more restrictive form of the gold standard where people have less freedom to own and pay in gold.What forms of money and credit are payable in gold? Any that the issuers of those forms wish to offer.Read More...image: Stuart Miles/

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