Fiat Currency Vs. Gold Standard To understand the difference between Fiat Currency and Gold Standard you must first know what each of these terms mean. Fiat currency is a common typre of currency whose value is based on the issuing authority’s guarantee to pay the stated amount on demand, and not on any intrinsic worth or extrinsic backing. The Gold Standard is a monetary system in which a country’s government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. Gold has been used as a currency of choice throughout history. In fact, the earliest known use was in 643 in lydia, present day Turkey. As well as the gold, silver was also used for monetary currency. For example, during the Middle Ages, the Byzantine Empire used gold coins what are known as Bezant. This currency was used throughout Europe and the Mediterranean until the Byzantine Empire’s economic influence started to decline and most of Europe tended to see silver as the currency of choice instead of gold. The United States also used the Gold Standard 1900 to 1933 after Bimetallism fell through, with the passage of the Gold Standard Act, which provided that: “...the dollar consisting of twenty-five and eight-tenths grains (1.67 grams) of gold nine-tenths fine, as established by section thirty five hundred and eleven of the Revised Statues of the United States, shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity if value with this standard...” Thus the United States moved to a gold Standard, making both gold and silver the legal-tender coinage of the United States, and guaranteed the dollar as convertible to 1.5 g (23.22 grains) of gold. The gold standard was suspended twice during World War I, once fully and then for foreign exchange. At the onset of the war. the United States corporations had large debts payable to European entities, who began liquidating their debts in gold. With debts looming to europe, the dollar to BRitish pound exchange rate reached as high as $6.75, far above the (gold) parity of $48665. This caused large gold outflows until July 31, 1914 when the New York Stock exchange closed and the gold standard was temporarily suspended. In order to defend the exchange value of the dollar, the United States Treasury Department authorized state and nationally-charted banks to issue emergency currency under the Aldrich-Veerland Act, and newly-created Federal Reserve organized fund to assure debts to foreign creditors. These efforts were largely successful, and the Aldrich-Veerland notes were retiled starting in November and the gold standard was restored when the New York Stock Exchange re-opened in December 1914. As the United States remained neutral in war, it remained the only country to maintain its gold standard, doing so without restriction on import or export of gold from 1915 to 1917. During the participation of the United States as a belligerent, President Wilson banned gold export, thereby suspending the gold standard for foreign exchange. After the war, European countries slowly returned to their gold standards, through in somewhat altered form. A gold-standard 1928 one dollar bill. It is identified as a “United States Note” rather than a Federal Reserve note and by the words “Will Pay to the Bearer on Demand,” which do not appear on today’s currency. This clause became obsolete in 1933, people began to hoard gold coins as distrust for banks led to distrust for paper money, worsening deflation and depleting gold reserves. In early 1933, in order to fight severe deflation Congress and President Roosevelt implemented a series of Acts of Congress and Executive Orders which suspended the gold standard except for foreign exchange, revoked gold as universal legal tender for debts, an banned private ownership of significant amounts of gold coin.