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What was the gold standard? When currencies were tied to gold

By SendPay Business · · 2 min read

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Under the gold standard, a country's money was tied to a fixed amount of gold. Because each currency was worth a set amount of gold, exchange rates between countries on the standard were fixed too.

How it worked

  • The government set a price for its currency in gold.
  • In principle, notes could be swapped for gold at that price.
  • Because each currency had a gold value, exchange rates between them stayed fixed.
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Why countries left

The money supply could only grow as fast as gold reserves, which made it hard to respond to recessions. The UK left the gold standard in 1931 during the Great Depression, and many other countries left in the same decade.

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What replaced it

After the Second World War, the Bretton Woods system tied many currencies to the US dollar, which was in turn convertible to gold for other governments. In 1971 the US ended that link, and major currencies moved to floating exchange rates. Today's money is fiat money, backed by trust in governments and central banks rather than gold.

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Where SendPay fits

SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.

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How it works

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SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.

Questions people ask

How does a currency peg work?

See where a pegged currency sits in its band.

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What is a currency board?

A strict system tying a currency to another at a fixed rate.

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What is the forex market?

The global market where currencies are bought and sold.

Forex market →
What is hyperinflation?

Prices rising extremely fast as a currency loses value.

Hyperinflation →

Read next

Spotted a mistake or something out of date? and we'll fix it. How our guides are made

This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.