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Despite gold’s rising popularity, central reserves to continue using paper money

Posted on 25 September 2012

John Milton wrote, “Time will run back and fetch the age of gold.” In the 19th and early 20th centuries, gold played a key role in international monetary transactions. The gold standard was used to back currencies, values were determined by its fixed relationship to gold and the precious metal was used to settle international accounts.
Imbalances in international trade were settled by physical transfers of gold bullion. A country with a deficit would deplete its gold reserves and would, thus, reduce its money supply, reducing demand for imports and boosting exports through lower prices. It is through this mechanism that the trade deficit adjusted………………………………………..Full Article: Source


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