Silver Standard

What Is the Silver Standard?

The silver standard is a monetary system where the value of a country's national currency is backed by silver. It is comparable in nature to its well known partner, the gold standard.

The normal method for carrying out a silver standard is to permit units of national currency to be changed over into units of silver at a fixed exchange rate. Notwithstanding silver and gold, countries have additionally incorporated supposed bimetallic standards, which permit conversion into both of the two precious metals.

Grasping the Silver Standard

The purpose of the silver standard is to guarantee the purchasing power of a national currency is kept up with. For defenders of the silver standard, permitting currency-holders to exchange their currency for physical silver fills in as an offset against the propensity of governments to corrupt the value of their currency by printing money.

All things considered, since silver is finite and must be physically mined and printed, governments under a silver standard are limited in their ability to make new currency since they must guarantee that all new currency is backed by a proper amount of silver.

The utilization of the silver standard has been far and wide since the beginning of time, albeit the practice become pointedly undesirable during the twentieth century. In the United States, the national currency worked on a bimetallic basis for the initial 40 years of the country's presence. During this period, silver coins were viewed as the leaned toward currency, while gold coins were rarely utilized.

This changed, in any case, in 1834, when the United States Congress adjusted the price of silver-to-gold ratio from 15:1 to 16:1. This adjustment prompted a rise of silver [exports](/send out), making silver coins generally vanish from the United States. In response to this shortage, gold turned into the principal form of currency.

One more critical achievement happened in 1862, when the government issued fiat money with no convertibility to silver, gold, or some other metal. In spite of the fact that fiat money is the standard in the present monetary system, this was an extreme move at that point, and it was met with vocal resistance. In 1879, Congress answered this analysis by freezing the amount of fiat money in circulation, capping it at $347 million.

Eventually, be that as it may, the United States would come to embrace the system of fiat currency completely. In 1971, Nixon answered the developing instability of the then-overarching Bretton Woods monetary system by at last and completely cutting off the convertibility of the U.S. dollar (USD) to precious metals. This trend was reverberated by a developing number of different countries, to such an extent that today there is definitely not a single country in the world that operates on either a silver standard or a gold standard.

Real World Example of the Silver Standard

The silver standard is trusted to trace all the way back to old Greece, where silver was the main metal utilized as a measure of currency. After the fall of the Roman Empire, the adoption of the silver standard was far and wide and remembered its utilization for China, India, Bohemia, Great Britain, and the United States.

Eventually, nonetheless, all countries would come to take on the fiat currency system. In the United States, the gold standard was abandoned by Richard Nixon in 1971, while the silver standard authoritatively reached a conclusion when China and Hong Kong abandoned it in 1935.

Features

• The silver standard is a monetary system where the national currency is backed by physical silver.
• While the silver standard has a long history all through the world, there could be presently not any countries using it today.
• It includes currency holders having the option to exchange their national currency for set amounts of silver.