The choice of the word
“unadulterated” is not accidental. There were many different kinds of
gold standard, including what we now call the Classical Gold Standard, the Gold
Bullion Standard, and the Gold Exchange Standard. Each contained flaws;
each was adulterated.
For example, in the
Coinage Act of 1792, the government forced the price of one thing to be
fixed in terms of another thing. The mechanism was in Section
11:
“And be it further enacted, That ”the proportional value of gold to silver in all coins which shall by law be current as money within the United States, shall be as fifteen to one…”
Of course, people
respond to such distortions. When the government fixes the price of
something too low, then people will hoard or export it. If the price is
fixed too high, then they will flood the market with it.
According to Craig K.
Elwell, in his 2011 Congressional Research Service Report:
“Because world markets valued them [gold and silver] at a 15½ to 1 ratio, much of the gold left the country and silver was the de facto standard.”
Subsequently, the government
changed direction. Elwell notes:
“In 1834, the gold content of the dollar was reduced to make the ratio 16 to 1. As a result, silver left the country and gold became the de facto standard.”