The federal government decided that paper money was the ultimate solution. Not only would this help bring the official currency back into daily circulation, but it would also allow the cash-strapped federal government to issue money without buying expensive gold and silver. In order to print “fiat currency”, it is not mandatory to have the backing of gold. You can simply print currencies backed by government securities.
Fiat currencies are worth more than the paper securities that support them. Therefore, paper money loses its physical convertibility with gold; however, it retains financial convertibility with the backing of government securities. This way you can convert your money into government securities and vice versa. Many criticize the era of fiat currency because of the rampant increase in the money supply.
They circulated as currency in many countries before the introduction of paper money. Once paper money was introduced, coins maintained an explicit link to gold (paper can be exchanged for gold on demand). Document published by the Statistics Section of the Bank of England and entitled “Conditions under which the Bank of England buys bar gold”. The king can simply print more paper money by reducing the fixed amount of refundable gold in each coin.
Therefore, these documents are a valuable resource for researchers seeking an even deeper knowledge of the history of money and gold. This led to an era of convertible currencies, in which you can convert your paper currency at any time with the previously fixed amount of some other commodity, such as gold. But people wanted to use paper money only as a medium of exchange for other goods and services, and it wouldn't have mattered to lose gold if the king had been able to guarantee that paper money would not lose its status as a medium of exchange. The development of the printing press could have inspired the king to release paper money convertible into a previously fixed quantity of gold at any time and on demand.
If you continue to reduce the fixed amount of gold payable in paper money, you reach a point where real repayable gold is almost negligible. A revised draft of a “top secret” document covering the position of the British Government regarding the functioning of the London gold market in the event of a devaluation of the British pound. It would be interesting to see how money has continuously evolved over time, from the era of gold coins to the era of “fiat currency”. Unlike gold or silver coins, which could be valued by the amount of precious metals they contain, fiat money has no intrinsic value.
It covers the mid-17th century until the decision of the British Government to allow the free exchange of paper, money and gold, and presents documents, mainly from the United Kingdom, related to the establishment of the gold currency as the centerpiece of the British financial system. Then you wonder why you should care about keeping paper money that can be physically converted into gold. In his previous article, Márquez Comelab wrote about the first forms of money, such as cows, rice and shells, among many others, to the most durable and portable gold and silver coins.