ABSTRACT
Gold has long played a crucial role in the monetary systems of most nations. Traditionally, gold has served as the highest form of commodity money. It was prized for its properties of durability, divisibility, portability and storability. It also served for over 150 years as the base for the monetary systems of major countries (Bordo and Schwartz, 1993). Modern monetary systems evolved in the nineteenth century from pure specie standards to mixed (bank money and fi at) fi duciary and specie standards in order to economize on the scarce resources tied up in the precious metals of a commodity standard. Crucial to this development was adherence by monetary authorities and commercial bankers to convertibility of their fi duciary monetary liabilities to a fi xed weight of gold (or other specie coins) defi ned as the unit of account. Adherence to gold convertibility by a number of countries in turn created a fi xed exchange rate international monetary system under which members would settle payments imbalances with gold or gold claims.
