The Origin of Gold and Silver Currency

Metals have long since been favored as money over such commodities as cattle, shells, or salt because metals are durable, portable, and easily divisible and stored. Gold has proven to be a more important player in the international monetary system, long favored over silver because it is tarnish resistant, more plentiful and packs more value into smaller coins.

King Croesus of ancient Lydia ordered the first coins forged around 550 BC. These were rudimentary lumps, a naturally occurring mixture of 63% gold and 27% silver known as ―electrum‖. They were weighed and stamped with pictures to indicate different denominations. This standardized unit of value helped Croesus amass an impressive hoard of wealth.

Not to be outdone, as Lydia was ―inventing coins, China was moving from their system of recognizable miniatures of common items traded, to the first form of paper money history identifies. In the place where U.S. bills say ―In God we trust China's pronounced ―all counterfeiters will be decapitated‖!

Egyptians were known to use a set weight of gold bars as a medium of exchange starting in 3000 BC. Around the same time, Mesopotamia used the ―shekel‖ to define both mass (of barley etc.) and currency (gold, bronze, silver) during exchanges. For over 2500 years, gold has proven itself as the
ultimate currency. In fact, it was the chosen currency to be circulated in almost every country before the introduction of paper money in 1862.

Following Queen Anne's proclamation of 1704, the British West Indies was one of the first regions to adopt a gold standard. In fact, the late 19th Century saw many of the world‘s major currencies fixed to gold at a set price per ounce, under the 'Gold Standard'.

The Gold Standard persisted in different forms for about one hundred years. Even after paper money was introduced, the gold standard was not abolished, currencies still maintained that the paper is exchangeable for gold on demand. Also, many nations still harbor substantial gold reserves to this day. Congress passed the Mint and Coinage Act in 1792. It authorized the federal government's use of the Bank of the United States to hold its reserves, as well as establish a fixed ratio of gold to the U.S. dollar. Legal tender included gold and silver coins, as well as the Spanish Real. At that time, the market price of gold was about 15 times that of silver. Silver coins were taken out of circulation and
exported to finance the American Revolutionary War.

In 1806, President  Jefferson suspendedthe minting of silver coins altogether. Passage of the Independent Treasury Act of 1848 placed the U.S. on a strict hard-money standard. Transactions with the American government now required gold or silver coins. Uncle Sam's accounts became permanently separated from the banking system. However, the fixed exchange rate between gold and silver at the mint continued to overvalue gold. In 1853, the U.S. reduced the silver weight of coins in an attempt to keep them in circulation.

Soon after, all American banks suspended payments in silver. In 1862 paper money was made legal tender. It was a fiat money (currency that agovernment has declared to be legal tender, yet isnot backed by a physical commodity) These notes came to be called "greenbacks".

On August 15, 1971, the world began being operated on a 100% fiat currency reserve and faith based monetary system. This was the date when former U.S. President Richard Nixon cut the last ties between gold and the U.S. Federal Reservenote (mistakenly called U.S. dollars to this day).

Source of Information : Ask About Gold By Michael Ruge