In article <
b7773fbb-a992-45ee-ab03-9087dc9ae81fn@googlegroups.com>,
John Savard <
jsavard@ecn.ab.ca> wrote:
Back when nearly every country in the world was minting gold coins, like in the
19th century, those countries also had paper money.
And paper money was what people usually used.
Due to the loss of gold from the coins due to handling, and the value of the gold tied up in them, it's understandable that the government preferred people
to usually use paper money.
Given that, why did they even mint gold coins at all?
One major reason gold coins persisted was that paper money evolved out
of things like checks, bills of credit, or receipts that were stand-ins
for the "real thing". The bulk of currency issues till World War I
were backed by gold reserves, & in many countries you could take your
note to a bank & legally demand the requisite gold money backing the
note (which, at that point, had to be retired).
This was seen as the only way to keep governments from simply printing
up paper money without any backing. And, even before WWI this happened
often enough (usually from carelessly-run private banks) that it was
always on peoples' minds.
(Gold backing also took the form of ingots, as most people never
demanded to redeem their notes, & it was a hassle to mint a bunch of
little coins that would never go anywhere. In the late 19th century
the US Treasury was requireed to keep about 70% of its gold reserves as
coin, the rest in ingots or bars; in the early 20th century they asked
to reverse the percentages, as so few people were actually demanding
the coins for their notes.)
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