Gold, Managerial Economics

Gold

Although currently no country uses gold as its national currency, gold has a long history of use as commodity money and has almost universal acceptability.  Gold is still regarded as money in international transactions and is an international reserve currency i.e. countries can hold their foreign exchange reserves in terms of gold and it is acceptable in international payments and is convertible.

The great advantage of gold as an international currency is the confidence people have in its ability to maintain its exchange value.  This stems mainly from the knowledge that world supplies of gold cannot easily and quickly be augmented.

Nevertheless, it is clearly wasteful to employ vast resources of men and capital to produce gold merely in order to store it away in central banks.  Besides, it is scarce i.e. not each country has it.

Posted Date: 11/30/2012 5:25:44 AM | Location : United States







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