What would happen if the world went back to the gold standard and actually backed their currencies with something of value? First, let’s examine how the gold standard came to be and how it came to be overthrown. Then we’ll discuss the why and how of a new gold standard.
Inflation is defined as the increase in the money supply in an economy. It derives from the Latin word inflate, meaning, “to blow up.” When the money supply grows faster than the amount of goods and services in an economy, prices usually increase.
Originally, banknotes were nothing else than receipts for gold or silver that were stored safely in a bank vault. Carrying heavy coins was not very practical and quite unsafe, as street robbers could easily assault you.