In the Prewar Years, People Would Plunk Down a $20 Gold Coin on the Shopkeeper’s Counter; It Rang; Hence, “Sound” Money

Gold was the coin of the realm in those prewar years. People would pull a $20 gold coin from their pocket and plunk it down on the shopkeeper’s counter. So struck, the coin rang; hence, “sound” money. Or, more likely, a shopper would produce a paper bill from his or her wallet, paper being more portable than coin. There were national bank notes, silver certificates, Treasury certificates and—once the Fed was up and running—Federal Reserve notes, not to mention checks drawn on a bank account. Paper dollars they were to the touch, but each was ultimately exchangeable, at the option of the holder, into gold. Gold coins themselves accounted for 16 percent of the 1913 supply of circulating American money.

—James Grant, The Forgotten Depression 1921: The Crash That Cured Itself (New York: Simon and Schuster, 2014), e-book.