The Paris Currency System

Today there are about two hundred states. All of them are the subjects of the world economy. All states, in addition, are equal in rights to each other legally.

The first national currency market was formed in the 19th century after the end of the industrial revolution. Its basis was gold monometallism in the form of a gold coin standard. Legally, the first currency structure was formalized at the Paris Conference by an interstate agreement signed in 1867. According to him, gold was recognized as the only international form of money. In doing so, it fulfilled the immediate function of money. The monetary and monetary system (both world and national) were identical. The difference, however, was only that when entering the market, coins were accepted as payments in accordance with their weight.

The Paris currency system basically had several structural principles.

First of all, the base was the gold coin standard. Secondly, each currency had its own content. In accordance with it, their gold parities were determined. All currencies could be freely converted into gold. In doing so, it was used as generally accepted international money. Thirdly, the Paris currency system provided for a regime of exchange rates freely floating taking into account the demand and supply in the market within the gold points. If the market rate fell below parity, the debtors paid gold.

The Paris currency system invested in the gold standard the value of a certain spontaneous production regulator, a mechanism for managing foreign economic relations, payment balances, monetary circulation, international settlements. This standard showed its relative effectiveness before the First World War, when a lever operated to facilitate the equalization of the balance of payments and the monetary exchange rate.

The Paris currency system forced states with a scarce balance of payments to pursue a deflationary policy. At the same time, the countries restricted the circulation of money at low tide of gold. However, for example, in the UK, despite a stable, "chronic" deficit in the balance of payments, there was no net outflow. For almost a hundred years before the First World War, only the Austrian thaler and the US dollar were devalued. At the same time, the French franc, like the pound sterling, retained its gold content unchanged from 1815 to 1914. Applying in the international calculations the priority role of the pound sterling, the UK reimbursed the deficit of the balance of payments with the help of the national currency.

Characteristic is the fact that in the midst of the triumph of the gold standard, calculations of the international class were made mainly with the use of drafts. These bills of exchange were issued in national, mostly English, currency. At the same time, gold was used for a long time when paying a passive balance in the balance of international settlements. By the end of the 19th century, there was a tendency to reduce both the money supply and the official reserves of the gold share. Precious metals began to be replaced by exchangeable credit money. At the same time, the use of deflationary policy in regulating the exchange rate, lowering prices and increasing unemployment provoked social discontent.

Over time, the gold standard has ceased to correspond to the framework of growing economic ties and market economy conditions. The beginning of the First World War coincided with the crisis of the international system. At the same time, financing of military expenditures was carried out (together with loans, taxes, inflation) with the help of gold, which acted as international money.