Dictionary of Banking Terms: standard of value
standard of value
one of the properties of money, a test of moneyness. A stable national economy depends on an accepted, uniform medium of exchange allowing suppliers and users of funds to set a fair value (price) on money loaned from one party to another, or on goods sold in open, competitive markets. Gold is the ultimate standard, although today most Western currencies no longer are backed by gold, i.e., exchangeable for gold coins or bullion equal to the face value of paper currency. The United States abandoned the gold standard domestically with the Gold Reserve Act of 1934, and internationally in 1971 when it signed the smithsonian agreement, which initiated floating exchange rates between the major Western countries.
