Why is money not backed by gold anymore?

Wait a minute and try again. Gold has been used as the currency of choice throughout history because it is rare, difficult to obtain, malleable and does not corrode. Its first use known as minted coin was around 600 B, C, E. During the Great Depression, President Franklin D.

Roosevelt temporarily suspended the gold-backed system to allow the Federal Reserve to print more money to be circulated and thus alleviate shortages. It was a complex and controversial decision, and subsequent fiscal policy maneuvers essentially ended the gold standard in the United States. Because of domestic and international statutes, the dollar must be backed by something. Otherwise, continued printing of money would only weaken the value of the dollar rather than create more wealth.

The guarantee on which the value of the dollar is based is complex and difficult to understand. Once again, it is not based on commodities (gold, silver or even other less obvious commodities such as wheat or oil) but on stock exchanges, especially those sponsored by the government. Another way of understanding this is that the United States,. The government essentially promises that the dollar is worth what it says it is worth.

The currency, therefore, is a kind of government note indicating that they have the means to convert every dollar in circulation into real wealth in some way. If this seems risky and confusing to you, you are not alone; it is a less easy to understand and more complex way of establishing wealth. That said, it has worked domestically and internationally for many decades. The dollar worth noting is that it is the main reserve currency in the world.

A reserve currency is held in central banks or other monetary authorities (almost always owned by the government) in foreign countries. These reserve currencies help support other money. Thus, for example, the Japanese yen derives part of its value depending on how many U, S. Dollars that Japan has and vice versa.

It's a relatively simple way of understanding it, but essentially what it creates is a truly global and interdependent monetary system. It's also what allows the U.S. UU. The dollar can be easily converted to other currencies used around the world.

To give you another idea of why gold seems to be the standard for money, one can look at financial transactions. Gold is the only metal that central banks accept as payment of debts between government central banks. Gold has a pedigree that no other metal has. Therefore, lacking some form of gold or silver backing, fiat currency raises trust issues.

All fiat currencies (without metal backing) have ended up hyperinflated in the past. The United States dollar is not backed by gold or any other precious metal. This is not to say that gold is not without problems, but the finite supply of the metal makes it very attractive as a form of currency (not to mention its intrinsic value with respect to things like jewelry). Unlike commodity-based money, such as gold coins or paper banknotes redeemable for precious metals, fiat money is entirely backed by full faith and trust in the government that issued it.

When there is no electricity or fuel, if it ever happened, I would think that beans would be more valuable than gold. Instead of backing the dollar with gold or other precious metals held in reserve, its money was converted into a fiat currency, which is not directly backed by any physical product. He argues that hard money, such as that backed by gold or silver, would prevent inflation, but he adds, it would not exactly return to the gold standard, but it would legalize the constitution where gold and silver should and could be legal tender, which would prevent the Federal Government from spending and then turn that to the Federal Reserve and let the Federal Reserve print the money. It is an unfortunate fact of paper money that tends to be backed by nothing more than empty promises from politicians and the ability of central banks to manipulate prices through inflation.

In addition, it would limit the amount of cash that could be in circulation, and governments would have to be able to exchange currency for gold. Because fiat money is not tied to physical reserves, such as a national reserve of gold or silver, it risks losing value due to inflation or even losing value in the event of hyperinflation. The gold standard was a system agreed upon by many countries during that period, in which a currency was determined to have a certain value of gold. Then, at a later point, when banks want their money back and don't settle for refinancing the debt by exchanging the new securities for old ones with the Treasury, they will put the securities up for sale at a public auction, and the Fed will buy them right now (especially if there is deflation, like now).

The banks no longer have the securities and the money has been returned to them with government money. This is very different from a gold-backed currency, for example; it has an intrinsic value due to the demand for gold in jewelry and decoration, as well as in the manufacture of electronic devices, computers and aerospace vehicles. When Wellington contemplated the Battle of Waterloo, he had to make sure he had a supply of gold coins to pay his soldiers to fight Napoleon. .


Garland Pietrzak
Garland Pietrzak

Evil social media evangelist. Tea ninja. General coffee expert. Proud food specialist. General internet scholar.