The concept of the gold standard is one of the most debated in modern economics, and it is also what companies like Karatbars use as its inspiration. In essence, the gold standard is a fiscal system where a country's fiat currency is backed by gold. Using the gold standard will mean that whatever set amount of money is permitted to be printed by a country’s central bank is converted into a fixed amount of gold. Further, the country printing the money also agrees to purchase and sell gold at a set price.

Not a single country globally is currently using the gold standard. The gold standard came to a halt in Great Britain in the year 1931. Two years later, in 1933, the U.S. followed suit; and it finally buried the remains of the system in 1973.

Fiat money became the order of the day; fiat currency is the term used for a country’s legal tender. This is a government “order” backed money. In Ghana, the accepted fiat currency is the Cedes, and in the UK, the legal tender is the British Pound.

Should the gold standard be reintroduced?

On the one hand, some brilliant investors have argued that in view of an unstable international fiscal structure revolving around the United States’ dollar, it is very important for central banks around the world to look into the prospects of backing their respective fiat currency with gold.

Operating a gold standard would bring price stability, and this would serve as a deterrent to governments and reduce their indiscriminate printing of paper money. This, in turn, would serve as a cushion against the current devaluation that most currencies around the world are faced with.

What makes the gold standard attractive is that, with it, there is no need for the control of the issuance of money to be tied to the whims and caprices of imperfect human beings that make up a government. The objective of reintroducing the gold standard would be to “de-politicize” money because it will then become liberated from the manipulations of the government.

The gold standard is the answer to currency devaluation

What is more, the physical quantity of gold that was already mined and is in circulation is limited, and the gruesome process of mining serves as a bar to the indiscriminate and impulsive issuance of gold.

A gold standard would help society avoid the evils of inflation by keeping the masses’ trust in the fact that the value of their local currencies will remain stable over time.

However, many gold proponents hold a different view. They believe that the gold standard would not stop the prices of goods and services from fluctuating; in fact, they have argued that no single country would be able to control the international gold price, and this means that it would likely be exposed to volatile exchange rates.
 

The possible dark side of the gold standard

Seeing as central banks are controlled by the government and that 90 percent of gold is currently privately held. A case of private holders selling their gold to central banks at a high price may surface.

What we would have is a situation where no single central bank will be able to control the international gold price. Moreover, no nation adopting this standard alone would derive huge benefits from doing so unless other major economies did too.

While reintroducing this standard encourages cross-border investments and trades, it also makes it extremely hard for governments to adjust to domestic economic disruptions. What is more, the gold standard could promote the rate of financial decadence to viral levels, meaning the flow of gold and the fixed exchange rate would impose the hardship of one country on all other countries involved in the system.

Karatbars International: a company that proposes a clever solution

Even though no government-issued banknote is currently backed by gold, there is a wide range of globally recognized currencies that are a close substitute to a gold-backed currency. A good example is CashGold, which was developed by Karatbars International and has its value tied to a specific gram of gold.

And while Karatbars is the leader in the market of small gold items and achieved more than $100 million of annual revenue, there are also other similar products out there. This clearly shows that people all over the world are interested in companies like Karatbars and supportive of their concepts.

Closing thoughts

Although the financial stability benefits of reintroducing the gold standard cannot be ignored, as even the United States President, Donald Trump, has canvassed for a return to the same, the disadvantages that this system poses to governments is not one to be easily overlooked.

With the current financial reality, central banks all over the world would rather watch paint dry than kick start another financial revolution and embrace the discipline that comes with reintroducing the gold standard.