Why did we abandon the gold standard?
In: Economics
For the US the gold standard was abandoned because France realised that the USA had printed too many dollars to fund the Vietnam war. This left france with a pile of dollars and an opportunity for profit. The French began to convert their US dollar reserves into gold and shipping it to France. This left the US in a horrible position if the french emptied fort knox the US Dollar would be proved worthless and the US could no longer import any goods. The french likely believed the US would devalue the Dollar against gold, or seize gold from US citizens again, but instead the US suspended gold convertibility to buy time while they worked to set up a new Fiat based international currency system and eventually the Eurodollar system took over. Later the Gold standard was officially abandoned.
dont go down the rabbit hole……i did a while back and basically my nutty thought process is below
it’ll get you wondering why i’m paying interest on a home loan that essentially has value to the bank only in the amount of interest they will accrue on the life expectancy of said home loan which i have to apply for to make sure I can pay it back aka good investment for the bank on a theoretical pie in the sky figure that intrinsically has value but the value can and will change as per the money markets based on another value that another country has set that at the end of the day they can magically make money appear to decrease the overall value even further. So im working hard every day to eventually own my own home and i can guarantee the bank will offer to hold on to my deed and use that as equity to give me the “opportunity” to now get an even bigger loan aka i’ve earnt the right to have a larger debt offered to me.
Also dont check out distribution of wealth curve and what really happens when they raise the minimum wage when inflation is going up
The people or families that basically “own the banks” are really the ones doing alright, everyone else are bottom feeders fighting for scraps.
Mining gold and putting it in a box takes effort.
Turns out, you can almost do the same thing without the gold
Another thing to add…based on the current value of gold, and the amount of U.S. currency out there, the U.S. would need 30,000 tons of gold to back that much currency.
A lot of good examples in the comments. My biggest concern is that this fiat standard doesn’t really account for human incompetency and greed. It is a reasonable system in times of desperation but it will be impossible to sustain it over centuries. $34T debt on US and increasing on an alarming rate. Impossible to sustain
In 1947 the US had 70% of the world’s gold. Nations where spending like crazy during the war. And the US was selling. Countries bought some of their gold back after. But still nations didn’t have gold. Or US dollars to buy it.
TL;DR, if all our currency had to be backed by gold, we’d (the US in this case) be super poor because our economy is worth a LOT more than the total amount of gold we have laying around.
We were going bankrupt with Vietnam. We needed the ability to print money without having to own the asset to back it cause we had no more. And now we are living through the final conclusion of this decision.
Because the value of currency should reflect the economics and governance of a country, not how much shiny metal people can dig up. Government needs to be able to adjust monetary policy according to the needs of the day.
Look what happened to Spain when the discovered the new world. They brought back so many galleons (over)loaded with gold and silver that they hyperinflated themselves and crashed their economy.
Other countries were able to manipulate the price of gold and make money off the United States. We were literally losing money and being made poorer by using the gold standard
>The U.S. mines a lot of gold, but we’re not the biggest producer, The bigger suppliers of gold would have more control over our monetary policy
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