THE GOLD STANDARD
Posted June, 2005
The formation of the Gold Standard in Costa Rica.
That was declared by a variety of circumstances, the most important among them
perhaps was the instability of the value of silver on the international market
and that, in some countries of Europe, gold had been very successfully adopted
as a base of their monetary system. All of which made Costa Rica try to
introduce the gold standard system, in 1896.
In that same year the new monetary system called the "Colon" was established in Costa Rica. It would be the base of our monetary system and it would consist of 778 milligrams of gold at 900 mils of pureness.
Under this new system and with the difficult idea of unifying the circulating medium with one of a national identity, the Government agreed with the Bank of Costa Rica that it would have the exclusive issuing power of banknotes, so that the Bank could waive all privileges as the sole issuer. Of course the Bank would continue with the mangement of all governmental revenues including the deposits in gold that the Government should deposit in the coffers of the Bank in order to be able to issue new certificates or banknotes in Colones backed by gold. It was established that ¢ 4,000,000 (four million Colones of gold) would be sufficient to initiate that new system.
When the Government would deposit the gold coins that backed the gold standard certificates, the Bank of Costa Rica would retire its own banknotes by an amount of 90% of the deposit.
We must remember that the "Gold Standard" and the new currency law as well as the contract with the bank were different projects. The Congress approved them and made them the law of the Rupublic in year 1896. With the contract the Bank attined some advantages such as the power to exchange its banknotes on par with the new gold certificates.
The Bank possessed a great quantity of silver that backed its previous issues and because of that it allowed the circulation of silver coins that the Bank had in its coffers. These silver coins at the same time had a lesser value with respect to the gold coins which were now the base of the new moneary system.
The gold certificates would enter circulation at the moment that the Government would deposit the equivalent in gold coins. This took some time, and the first ones appeared in June of 1897 and the last ones in November 1899. The values of these certificates were from ¢ 5 for Series "A", ¢ 10 for "B", ¢ 25 for "C", ¢ 50 for "D", and ¢ 100 for Series "E." In total, only ¢ 2,500,000 gold colones were issued; they were paid in the Bank of Costa Rica at the moment of their introducation.
Source: Jose A. Carranza, Billetes de Costa Rica
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