a medium of exchange for goods and services that is backed by gold. Those paper notes are official IOUs that you were supposed to turn into the bank in exchange for gold.
The reason why gold was the standard is because it cannot be replicated or deteriorate. It was to replace inconventient trading, like trading crates of corn for a cow when the crates of corn would eventually go bad. There would be a well known of agreement on how much gold would be needed to trade for the cow or get a blowjob.
At some point in the 20 century, the gold standard was taken away and just backed by debt and paper money became the issue. There were laws also put in place to stop people from reclaiming the gold that the banks were supposed to owe and there were laws put in place that only the private banks can issue more money and profit from interest rates. go figure.
oh and why we used paper money as IOUs for gold was because to stop theives. IF someone had a vault, they would store peoples gold and issue a IOU note to that person and keep a record of how much gold they had. eventually that vault owner began to issue loans with interest since people didnt know how much gold was really in the vault and could make up a number.
>>1058517 Well no. The idea was the original goldsmiths realised that there was always a certain amount of gold in his vault and only a fraction of it was actually withdrawn, so he realised he could make use of the gold sitting around - which to me seems very illegal - but hey, this is what is now called fractional reserve banking and we all just go along with it!
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