Gold standard

International system, used in the late 19th and early 20th centuries, that linked the amount of domestic currency in circulation (and the exchange rate) to a country’s gold reserves. Since these reserves grew slowly, so did the money supply and there was little long-term inflation. This protected the interests of creditors but it meant that any competitive adjustment in the economy involved painful deflation. As a result, the world abandoned the standard in the Great Depression of the 1930s.