Why do we not use gold anymore?

There are other practical reasons, besides transport, why no major country will adopt gold as a medium of exchange. The functional reason why central banks do not opt for the gold standard is that gold is a poor circulating currency, since it is not very durable and is easy to counterfeit. A total or 100% reserve gold standard exists when the monetary authority has enough gold to convert all the circulating representative money into gold at the promised exchange rate. Keynes predicted that the attempt by European countries to return to the gold standard after the First World War would trigger a recession.

Most of continental Europe made the conscious decision to adopt the gold standard and, at the same time, to allow the mass of inherited (and previously depreciated) silver coins to remain of unlimited legal tender and convertible at face value into a new gold coin. The benefits of the gold standard were first seen by this largest bloc of countries, since Great Britain and France were the world's leading financial and industrial powers in the 19th century, while the United States was an emerging power. The current system may not be perfect, he says, but what people forget is that “the gold standard never works. When the gold-silver ratio returned to 15.5 in the 1860s, this bloc of countries that used gold continued to grow and gave impetus to an international gold standard before the end of the 19th century.

The supply of gold is very elastic (responsive) to prices, but it has a delivery time of three to five years to start up the new production. Starting in the second half of the 19th century, Great Britain introduced its gold standard in Australia, New Zealand and the British West Indies in the form of circulating gold sovereigns, as well as banknotes convertible into both sovereigns or Bank of England notes. The net import of gold meant that foreign demand for U.S. currency to purchase goods, services and investments exceeded the corresponding US demands for foreign currencies.

France's measures to maintain the French franc at 4.5 g of fine silver or 0.29032 g of fine gold stabilized the relations between world gold and silver prices close to the French ratio of 15.5 in the first three quarters of the 19th century, offering to mint the cheapest metal in unlimited quantities: 20-franc gold coins when the ratio was lower than 15.5 and 5-franc silver coins when the ratio was lower than 15.5.It exceeded 15.5.His commitment to the gold standard was called into question by the enormous number of silver coins that are still preserved, the most numerous of which were the French 5-franc coins, the German Vereinsthalers of 3 marks, the Dutch florins and the US Morgan dollars. It was intended to be a temporary measure, with the price of gold per dollar and the official exchange rate remaining constant. The classic international gold standard began in 1873, after the German Empire decided to move from the silver taler of North Germany and the gulden of southern Germany to the German gold frame, reflecting the sentiment of the monetary conferences of the 1860s and using the 5 billion gold francs (worth 4,050 million marks or 1451 metric tons) as compensation required of France end of the Franco-Prussian war. Under the old standard, a country with an overvalued currency would lose gold and experience deflation until the currency was properly valued again.

Simmons, in the United States, adherence to the gold standard prevented the Federal Reserve from expanding the money supply to stimulate the economy, finance insolvent banks, and finance government deficits that could prepare the conditions for expansion.