Countries that were in the bimetallic standard, often lost money due to the law of Gresham, in which poorly (abundant) money expels good (little) money. The opposite happens today in a monetary system that is not backed by gold, where the strong currency ejects the weak currency. So it is important that you understand the concept. Given that the terms of trade between the two metals was fixed officially, only abundant metal was used as money, taking out of circulation the more scarce metal. This is also the reason that when gold mine newly discovered in California and Australia entered the market in the 1850s, the value of gold fell. California was full of gold just after the 1849, however did not us Casa de Moneda.UU.
to mint coins. Nor were there enough currency circulating in California, so private currency houses came to offer their own currencies. Then, these private houses were accused circulating coinage degraded (deficient) made by the mixture of a metal base to reduce the amount of gold in the coin. This shot the price of France gold coins, which were guaranteed by the French Mint and lowered the value of U.S. gold coins.UU. The federal Government intervened to provide regulations and Government sanctions and the guarantee of purity. Coin Coinage Act of 1864 was passed, which prohibited private currency houses to produce their own coins for circulation as legal currency.
What does this for you as an operator of Forex? Today, the value of the currency is not based on gold or silver. It is based on the strength of the country which supports it. For this reason, you must be insistent to ignore scams that argue that small countries that emit a new currency are good speculation. A great example is Iraq. The Iraqi Central Bank has insurmountable problems. However, many people have removed millions of people buy new dinars notes Iraqis. NEVER buy directly coins directly by speculation. Stay focused on the larger commercial pairs: EUR/USD, USD/JPY, GBP/USD, USD/CAD, AUD/USD and USD/CHF. Gresham’s law applies anywhere that a currency loses disapproval, because of the scandal, the civil war, financial collapse, and so on. Traders and businessmen fleeing the currency to make transactions with a stable currency.