ABSTRACT
The Government creates new currency to meet its needs, but when notes are converted into gold, and the gold is exported, the amount of currency is diminished. The use of the gold would be equally effective in avoiding inflation if it were placed directly at the Government's disposal and turned into foreign credits, without the formality of issuing redundant paper money to be redeemed by it. The gold standard can only act as a preventive of inflation by giving the authorities of the country an inducement to avoid inflationary methods. The preference of most countries for gold is at the present time an indisputable fact, and stability of the rates of exchange on gold standard countries necessitates a gold standard. The gold bullion standard was the invention of Ricardo, and was adopted in the Act of 1819 for the Resumption of Cash Payments.
