What is Paper Gold?

Paper gold is generally known as a class of paper certificates that guarantee a conversion of their value into actual gold. These kinds of gold certificates are often used on foreign exchanges instead of actual gold to make financial transactions easier. A more specific definition of paper gold involves the International Monetary Fund or IMF.

The International Monetary Fund is a 20th century creation that provides for specific financial operations between nation-states. The IMF is a major vehicle for allowing lending to countries that must than pay off their debts to the IMF over time. A number controversies have followed the IMF since its inception, and now, debates over the use of paper gold and other currency standards are coming to a head.

In recent times, the dollar has been used as a global currency. The status of the dollar is currently generating some interest and debate, since other alternative methods would also allow for a standard currency between nations. One option is paper gold, where the certificates that represent gold could be used as a world currency. Another option is called special drawing rights, or SDRs, which have been used in prior IMF transactions.

Looking at the ways that nations currently evaluate the IMF and world currency standards requires a detailed knowledge of each nation’s history and foreign policy. According to experts, the trade relationship between China and the U.S. has helped to prop up continued use of the dollar as a global currency, but some other finance professionals feel that this may be changing. Those who want to understand the ways that other nations contribute to conversations over currency standards should look at each country’s past record of advocating for its own best interests.

Regardless of whether paper gold becomes a global currency standard, gold certificates will continue to be in use as a commonly considered way to make assets more concrete, when holding them in a certain national currency seems to be a weak position. Financial professionals generally regard gold as a more stable form of currency than a specific national currency. The argument is that gold has intrinsic value as a heavy metal, where the currencies of the world’s nations are simply paper.