Gold parity
Gold parity was the exchange ratio of a currency unit to a certain amount of gold in grams or troy ounces, determined by state sovereignty or international agreements .
history
The naturalist Isaac Newton had been head of the Royal Mint since 1699 and first laid the foundations for a gold parity to the pound sterling in September 1717 at 3.17.10 ½ pounds (3.89 pounds decimal) per troy ounce of gold, the reciprocal value of the then existing official gold price. It remained - apart from the coalition wars from 1797 to 1821 - until September 1931 with an interruption from 1914. In 1792 gold parity followed in the still young USA by setting the silver / gold ratio of 15: 1. In 1834 Congress moved this to 16: 1, not by increasing the silver parity of the dollar, but by reducing its gold parity. The Bank of England made a legal obligation from 1821 to redeem banknotes for gold coins .
Since December 1871 there was the gold mark in the German Empire , which corresponded to a third of the old Reichstaler or 1/1392 of a pound of fine gold . The banking law of March 1875 set the gold parity at 1 pound of fine gold = 1,392 marks in banknotes. At that time, one kilogram of fine gold was equivalent to 2,784 marks, so that the troy ounce was worth 86 marks. Since at the same time a French coin law stipulated the fine gold content of the franc , the exchange rate to the mark could be determined using the cross parity at 80.84 marks = 100 francs.
The first, in the context of the International Monetary Fund (IMF) for the DM fixed gold parity there was in January 1953 0.211588 grams of fine gold for 1 DM, in March 1963, she changed with appreciation of the DM 0.222168 g, a renewed appreciation in October 1969 it was 0.242806 g. From December 1971 the gold parity was officially abolished; a central rate could also be set in a temporary regulation. Germany made use of this without leaving the previous gold parity. The last gold parity for the DM was lifted in April 1978. It was not until February 1973 that those member countries of the IMF that had not agreed a gold parity with the IMF were not set in special drawing rights .
species
A distinction is made between a real and a fictitious gold parity . A real gold parity only existed in states with a gold standard. It is a gold currency if the gold is either legal tender (gold currency in circulation) or if money can be exchanged for gold at any time through a legally stipulated exchange ratio. If gold acts as the sole reserve medium, it is a real gold parity. The pound sterling and the US dollar were the only currencies in the world to have this true gold parity . Such an obligation to redeem gold existed in England from 1717 and in the USA from 1879, where this obligation to exchange had to be withdrawn in August 1971 due to persistent American balance of payments problems. In July 1944, the IMF created a fictitious gold parity in which each member state had to express the parity of its currency in gold (gold parity) or in US dollars (dollar parity) (gold-foreign exchange standard). The fictitious gold parity is therefore not associated with an obligation to redeem gold, but rather reflects the ideal gold value of a currency unit.
functionality
Gold parity was maintained by the central bank's obligation to buy and redeem gold. With a balanced balance of payments, the gold parity theoretically corresponded to the current exchange rate , i.e. the actual exchange ratio of two currencies. As with currency parity, gold parity had a fluctuation zone ( range ) within which the rate was allowed to fluctuate. The upper limit of the fluctuation zone was called the upper gold (export) point , the lower correspondingly lower gold (import) point . If one of the gold points was achieved, the affected state received gold payments from abroad for the lower gold point and had to make gold payments abroad for the upper gold point. As a result, gold movements tended to lead to a balanced balance of payments. The result was that “revaluation countries” with a high export share tended to have increasing gold stocks and vice versa. In “devaluation countries” with a structurally unbalanced balance of payments, the gold stocks steadily decreased until they were largely used up. That was the reason why this exchange obligation in the USA was ended in August 1971 because of persistent balance of payments problems.
After the collapse of the IMF exchange rate system through the suspension of the official gold price in August 1975 and the abolition of parities in April 1978, the gold parity lost its validity.
Individual evidence
- ↑ Massimo Amato / Luca Fantacci, The End of Finance , 2012, o. P.
- ↑ Sumati Varma, International Business , 2012, o. P.
- ↑ Lutz Köllner, From the Prussian State Bank to the European Monetary System , 1981, p. 3
- ↑ Nathan Lewis, Gold: The Currency of the Future , 2007, p. 158
- ^ Rolf Caspers, Balance of Payments and Exchange Rates , 2002, p. 159
- ^ Deutsche Bundesbank, Monthly Report March 1973 , Statistical Part IX, p. 10
- ↑ Helmut Lipfert , Introduction to Monetary Policy , 1973, p. 101
- ↑ Wolfgang Grill, Gabler Bank-Lexikon , 11th edition 1995, p. 773
- ^ Karl Theisinger, Die Bank: Textbook and Reference Book of Banking and Savings Banks , 1952, p. 410