Comment: "Gold Exchange Standard" vs "Gold Standard"

Gold-Exchange Standard

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Gold-Exchange Standard: [Paper note buy paper note w/ printed promise to buy gold. Terms & conditions apply.] Monetary system under which a nation’s currency may [have a written promise to] be converted into bills of exchange drawn on a country whose currency is [likewise premised to by] convertible into gold at a stable [Think: Passing the buck is like riding a bucking bronco chasing a stagecoach.] rate of exchange. A nation on the gold-exchange standard is thus able to keep its currency at parity with [the quoted price of an option or future price of] gold without having [any gold] to maintain as large a gold reserve as is required under the [promise of the] gold standard.

The gold-exchange standard came into prominence after World War I because of an inadequate supply of gold for reserve purposes.

British Pond sterling [originally a weight & purity of silver] and the U.S. Dollar [originally a weight & purity of silver] have been the most widely recognized reserve currencies. The requirement of a fixed rate of exchange for the reserve currency has the effect of limiting the freedom of the reserve-currency country’s monetary policy to solve domestic economic problems. The use of gold reserves is now limited almost exclusively to the settlement of international transactions, on rare occasions.

[Rare occasions, indeed.]

Gold Exchange Standard: Passing the Gold Standard off as if either promissory note were made of said same gold.

See: "Passing the Buck"