The essential was that people had a right to own and trade gold
coins. They had the right to deposit them in a bank, if the bank
offered attractive terms (especially the payment of interest). Banks
had a right to take deposits, to buy assets, and to pay interest. Banks
had a right to issue paper notes that were claims against gold. Banks
had a right to lend their deposits (fractional reserves).
Despite some government interference, the Classical Gold Standard enabled a Golden Age of prosperity and full employment that is totally out of reach today (not to be confused with the rapid development of technology). This is not to say there were not business failures, bank failures and panics – what were later called depressions and now recessions. A free market does not attempt to guarantee that no one can ever lose money. It is merely an environment in which no one is forced to subsidize someone else’s risks or losses.
Unfortunately, by the early 20th Century, the tide had shifted.
Despite some government interference, the Classical Gold Standard enabled a Golden Age of prosperity and full employment that is totally out of reach today (not to be confused with the rapid development of technology). This is not to say there were not business failures, bank failures and panics – what were later called depressions and now recessions. A free market does not attempt to guarantee that no one can ever lose money. It is merely an environment in which no one is forced to subsidize someone else’s risks or losses.
Unfortunately, by the early 20th Century, the tide had shifted.