A note on value in the gold standard

by Shihang

It occurs to me that when gold is pegged to the coinage/notes of a country, the relationship works both ways:

$ (value of 1 denomination of said currency) = G (weight of gold (in grams?))

which essentially means that 1 gram of gold is worth a certain amount of $.

Obvious. But that means that there is no real reason to peg gold to the said currency except to make the determinant of the money supply the determinant of gold. The choice of gold itself can be largely random, and is probably dependent on the chemical qualities of gold itself. And as Alfred Marshall noted, why would you base your economy on an industry like mining?

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