Hard money

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During the 19th century, when most of the world was on a gold standard, prices typically fell by a small amount each year except in times of war when governments used inflated money to finance their military.
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In the year 1900 most goods in the United States were cheaper than they had been in the year 1800. In the 25 years following 1872 the cost of milk, rice, mutton, butter, tea and many other commodities had dropped about 50%. Contrast this gold-standard period with the era of government-controlled money: in 1997 a US dollar was worth only 14 cents (14%) of a 1947 dollar. Some people have argued that the supply of gold is inadequate to serve as a medium of exchange in the modern world. But market conditions cause supply to match demand at a clearing price for any commodity, including money. The price of gold would rise to meet the demand and/or other commodity-monies would enter the market to fulfill the demand for money.
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The Democratic Party of Thomas Jefferson stood as the defender of hard money for most of the 19th century. The Second Bank of the United States was a weak attempt at a central bank (it lacked a monopoly on banknotes), but its central banking powers were nullified by Democratic President Andrew Jackson in the 1830s. Hard-money Democrats were able to restore the gold standard in the United States in 1879. But the National Banking Acts enacted during the Civil War had destroyed the issuance of bank notes by state chartered banks and monopolized the issuance of bank notes for a few federally-chartered national banks. In 1913 (with strong backing from the Rockefeller & Morgan banking interests) the Federal Reserve Act brought a central banking system to the United States.
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In August 1971 US President Richard Nixon imposed wage & price controls while suspending gold convertibility so as "to defend the dollar against speculators". Legalization of gold ownership for American citizens was probably less motivated by a libertarian spirit, than by a desire to see the market increase the value of government gold reserves. Many Keynesians believed that the demonetization of gold had finally been completed. US Federal Reserve Notes replaced the words "Payable to the Bearer on Demand" with "In God We Trust".
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China has had a long history of autocratic empires and emperors, so it is not surprising that money was backed by threats of violence rather than by commodity-value. Tokens made of brass or copper had square holes in the middle so they could be strung together. Printing, ink & papermaking originated in China. The world's first paper money was issued during the Tang Dynasty, reaching its peak during the Ming Dynasty. Kublai Khan issued a paper currency in 1273 backed by severe threats against any who refused to accept the bills as payment. The government confiscated gold & silver, giving paper money as replacement. Nonetheless, the abuses of fiat money finally led to it being abandoned at the end of the 14th century. Paper money was not readopted in China until the 20th century.

Monetary Systems and Managed Economies