i promise to pay the bearer on demand the sum of...

Radiantsoul

We left the Gold Standard in 1931 so it is not really modern history, things seem to have moved along ok without it!
In the event of a collapse in confidence convertability could have been suspended and you are free to buy gold at any time.

Generali

ninky wrote: »

what would actually happen if you wandered into the bank of england with some bank notes and asked them to do this?

At one point in time you would have received gold in return for your note. Bank notes in the UK started off as being a receipt for gold held in the vaults of a bank (not necessarily the Bank of England) and the idea was retained as fewer and fewer banks were allowed to issue money. You could go to the Bank of England or one of its agents and get 113 grains of gold in exchange for a pound note.

These days the UK has a 'fiat' currency, that is a currency that exists because the Government decrees that it is the currency of the country. If you turn up to the Bank of England with a fiver and ask for the promise to be kept then you get a fiver in return.

As an aside, supposedly when Johnson Matthey Bankers went bust in the 1980s and it was bought by the British Government for £1 the Governor of the Bank of England told the Chancellor of the Exchequer as he tried to pay with a pound note that 'a promissory note isn't suitable in these circumstances' so the Chancellor paid with 2 50 pence coins instead.

ninky_2

Radiantsoul wrote: »

We left the Gold Standard in 1931 so it is not really modern history, things seem to have moved along ok without it!
In the event of a collapse in confidence convertability could have been suspended and you are free to buy gold at any time.

not that we ever had it. from the invention of promissory notes goldsmiths were lending out more notes than they had in gold. the legality of such practices has never been tested....

as for things being okay without it..... don't you think the use of debt to create money is a bit of a reason why economies are in a bit of a pickle?

Fiddlestick

Generali wrote: »

These days the UK has a 'fiat' currency, that is a currency that exists because the Government decrees that it is the currency of the country. If you turn up to the Bank of England with a fiver and ask for the promise to be kept then you get a fiver in return.

They will give you fiver in coins, yes.

ninky_2

Generali wrote: »

If you turn up to the Bank of England with a fiver and ask for the promise to be kept then you get a fiver in return.

As an aside, supposedly when Johnson Matthey Bankers went bust in the 1980s and it was bought by the British Government for £1 the Governor of the Bank of England told the Chancellor of the Exchequer as he tried to pay with a pound note that 'a promissory note isn't suitable in these circumstances' so the Chancellor paid with 2 50 pence coins instead.

:rotfl:are we all mad?

Radiantsoul

ninky wrote: »

as for things being okay without it..... don't you think the use of debt to create money is a bit of a reason why economies are in a bit of a pickle?

No.
The fact that every note in circulation does not have an arbitrary quantity of a precious metal locked away somewhere to secure its value does not bother me unduly.

I suppose that if it were the case I could take my money and leave the country. But the risk would be that as a society would over invest in gold and gold production.

ninky_2

Radiantsoul wrote: »

But the risk would be that as a society would over invest in gold and gold production.

is it possible we might on the other hand over invest in money?

Rainmaker_uk

ninky wrote: »

:rotfl:are we all mad?

We may well be or perhaps just blissfully ignorant? After all everyone was confident that the laws of economics would iron out any inconsistancies in the markets - however as we have recently learnt that did not go so well...

The only people who benefit from all of this is the government who can just make more money to pay for things - as we know this has consequences of its own...

The real winners are the people in the background - those who own the worlds assets (money generating assets and not liabilities) who do not really care who is in power as it makes little or no difference to the basic economics of money/assets and power.

Chris2685

Money is a lie.

Radiantsoul

ninky wrote: »

is it possible we might on the other hand over invest in money?

The cost of producing notes and coins is pretty minimal.

If you are saying we have overborrowed then yes, but a gold standard would not have prevented that.