Fiat currency has much more flexibility in supply than a gold standard system. Since a gold standard system relies on the value of gold, it relies on the supply of gold. Since gold is a fixed resource (there is only a certain amount of gold on Earth), this doesn't allow for much flexibility. GBP was backed up by goods and services (fiat money). Since GBP was pegged to USD, UK has to produce goods and services worth x GBP (where x GBP was equal to 100 USD) to change it for 100 USD. Vice versa US has only to print banknote to acquire predefined sum of GBP. As gold standard was broken it cost only few cents to create such sum of paper. The gold standard has been the principal legal tender for centuries. However, almost all countries in the world have now adopted fiat currencies. More power in the hands of the government to control the money will help stabilize economies. Thus, it's better to adopt the fiat currency method. The opposite of a fiat currency is called a representative currency. A representative currency is backed by a commodity like gold, silver, or oil. The U.S. Dollar was partially a representative currency until President Nixon ended the gold standard in August 1971, but before 1933 was a total representative currency. Since being removed from the Fiat Currency vs. Gold Standard - Side-By-Side Comparison Have you ever considered why people often make Fiat currency vs. gold standard side-by-side comparisons? What are their differences and similarities, and why should every passionate Forex trader learn it well? The Evolution From the Gold Standard to Fiat Currency is a Significant Shift in History The evolution from the gold standard to fiat currency is a significant event in the history of the world. The once-stable gold-backed currencies were replaced by the flexibility offered by fiat money which empowered central banks with greater control. 0yqLFP2.

fiat currency vs gold standard