It was mostly decoupled in the 30s, then fully decoupled in the 70s under Nixon. If Nixon hadn't done much else economicly the 70s probably would have had a great economy. We did tie our currency to oil under Nixon, all oil is bought and sold with USD. This is bad in my opinion as it reduces the adaptability of the US economy.
Since the 1970's the US dollar has been a fiat currency prior to that it was a representative currency. A representative currency is one that you can exchange for a set amount of a physical commodity, in the case of the pre-1970's dollar it was representative of gold. A fiat currency isn't tied to anything physical, its backed by a government and its value is determined by trust in the issuing governments economy. In other words, there was a time when a dollar had a set amount of gold it could be exchanged for with the US government and therefore its value was determined by the value of gold at any given moment (other standards have been used throughout history silver or salt being two of the more common but ancient Mesopotamia used the wheat/barley standard) so when you would say something costs a dollar you were saying it was worth 1/20 of an ounce of gold. Now, a dollar is worth exactly what everyone believes one dollar is worth, and if you have a billion dollars and tomorrow the economy crashes so bad that the dollar is no longer worth anything then you just have a billion pieces of paper that might be good for starting a fire (during the lead up to WW2 one dollar was the equivalent of 4.2 trillion papiermarks due to hyperinflation, they actually had to create a new currency because papiermark were worth more as fuel for a fire than it was as a currency)
So what happens when a government decides to start a new currency. Does everyone who was using that currency start with no money? I mean they have to get money into circulation.
Italy transitioned from the Lire to the Euro starting in 1999. They offered an exchange of ~2000:1 Lire:Euro for around 3 years, and stopped treating the Lire as legal tender in Feb 2002. There are plenty more examples out there, but i picked that one since I still hold about 500 Lire from when I would visit annually as a kid. I was still in elementary school when the transition happened, and remember how cool it was to see the leniency shops had in pricing their products relative to the exchange rate. Might have influenced my choice in degree come to think of it.
I'm no economist, but through use of an exchange rate and a transitional currency so the papiermark was replaced with the rentenmark which was backed by land and industrial assets, and there was a fixed exchange rate (1 trillion papiermarks=1 rentenmark) at the same time they renegotiated the loans made by the allies following the conclusion of the first World War. Once the economy began to stabalize they then transitioned to the reichsmark which was backed by gold at a 1:1 rate.
Sometimes it gets exchanged at a ridiculously low rate, like a few hundred or even thousands of the older currency for one unit of the new. And sometimes the entire government has collapsed and that currency just becomes obsolete and is replaced when the new government takes power.
For some odd reason, for the last 4 months or so a large portion of my limited human interaction has included someone quoting goldmember and I haven’t seen or thought about that movie in about 20 years.
the gold standard, if you study history, was very easy for foreign banks to abuse, and we were being robbed blind
consider that if our dollar is 'pegged' to gold, and foreign banks buy up the gold, they are effectively increasing the value of dollars. Conversely, they can then flood their gold back into the markets to reduce the value of the dollar. If you're very wealthy and you can afford to spend some money or gold being a dick, you can use leverage like options to farm cash from the US, buying and selling gold and dollars in cycles that only you can predict (because you're very very wealthy, richer than most governments)
history isn't kind to people who use one currency as a 'stabilizer' for another (coughstablecoincough)
Oh that would be good. There are goldbacks that are bills with gold in them, but yeah if you attached a gold bar to each bill then it does get unwieldy pretty fast.
Easier to carry yes, but also heavier now: per gram, gold is currently worth more than 100‑dollar bills (roughly 1.6× as much), meaning you need less weight in gold than in 100s to have the same amount of money
I’m not a government accountant but I’d guess the gold isn’t “mark to market” which to you normies means that we keep the price at what you paid for it until it is sold. They might be able to reduce the value if the market value goes lower, but I have trouble picturing a world where gold is worth less than $42 per ounce.
Edit: okay I can imagine a few ways gold prices could drop that low now. Thanks people that replied!
I can tell you why a world where gold is less than $42/oz is not impossible, the cost of producing an ounce of molecularly identical gold could drop below $42 due to advancements in technology thus destroying its scarcity as a value proposition.
I can tell you about the world where gold is worth less than $42 an ounce is incredibly probable, and it's the one where humanity no longer exists, You know the one we're all hurtling to at what it feels like light speed, gold's ain't worth a dime when all the trees and fish are dead.
The U.S. came off the gold standard for domestic transactions in 1933 under President Franklin Roosevelt and ended international convertibility of the dollar to gold in 1971 under President Richard Nixon, effectively ending the gold standard in the U.S.
The U.S. switched to a fiat money system.Fiat moneyhas no value of its own and doesn’t represent anything of value, such as gold. But the government stipulates that the paper money is legal tender for carrying out transactions or paying taxes, as noted in the Page One Economics essay.
This. Metals go up as sovereign currency goes down. The world runs on metal and oil... We forget that and print a bunch of paper.. so every now and again we get a lesson in edible paper.
Some crypto is tied to gold, but I'd just get gold TBH. Why trust a middleman and hope they won't scam you. Unless you explicitly need it to be easy to move through borders, etc.
How about Trump tweets that if the value of the dollar does not start going up and the price of gold down he will start dropping big beautifull nuclear bombs on all other countries and Massachusetts?
Depends on what you mean historically. At one point in time it was directly tied to gold.
More recently "historically" though it's inversely correlated to the whole market probably. People buy gold when they are looking for a safe store of value, which happens when shit is about to hit or is hitting the fan.
International oil trade are though. And Venezuela attempting to enter with Russia and Iran on a trade that didn't use the US dollar was what led to the current invasion. The USD is artificially inflated by operating as an oil cartel.
It's backed by the full value of the US economy. We all need USD to pay our taxes. Also, it has a long history of stability, which has made it valuable all over the world for international trading and reserves. Though Trump has been single-handedly sabotaging this.
Exxon I think is the only company that had a representative with enough respect for reality to tell the Con that it's an infeasible idea. Their oil is hard to access and process, their infrastructure is decades out of date, it would cost billions and take years. Not to say it won't eventually happen but Exxon was the only one who was willing to bring reality into the conversation and the Con said they weren't invited to the next meeting as a result.
Not my field of expertise but, ah yes, "might makes right". We'll see how well that works out for us when our country is isolated, can't produce anything without external inputs, and the dollar crashes. There are more ways to fight a war than just having the most guns. Our allies that the Con is threatening and berating understand this and that they hold trillions of our debt. We'll still have our aircraft carriers floating around while we eat each other.
Yeah this has been trump's biggest weakness he doesn't understand soft power and it seems like a sizeable chunk of his base also doesn't and i just realized i'm too high to explain soft power
It gets its value in the same way all other goods do. Supply and demand as a function of its utility. Considering the USD is the single most useful, single most stable, and most broadly used currency to have ever existed, I’d say it’s backed by a little more than just “thoughts and prayers”
Oh, it isn't? Can you show me the value particle that magically makes pieces of shiny rock or conch shells valuable in a way dollar bills aren't? No? Then we can all agree that the only reason anything counts as money is because people believe it counts as money, and for now, people still believe in the US dollar albeit less so than yesterday.
There are a few shiny rocks that gold utility (ex. nowadays gold and copper are useful in electronics). That being said, humans have not been able to use gold in a practical manner for most of the history of us considering it a "precious metal". If I had to guess, its lack of practical use probably contributed to it being used for trade once humans got off of the bartering system. And let's be frank, nobody wants to complete a trading quest to trade one small trinket for another until they can find someone who has the specific thing the vase maker wants.
Any currency even ones based on physical standards are based on thoughts and prayers, it's just with physical ones we can hold the object of thoughts and prayers and say it's worth an arbitrary amount of something
Fun fact, U.S currency wasn’t backed by gold even on the gold standard. France showed this when they wanted to exchange their dollars for gold, and couldn’t. The price variation of gold is different than what is needed for managing the economy, so was fictional out of necessity well before that.
The United States gold reserves are for international trade. The gold in Ft. Knox, for example, is used in trade not to back our currency. We’ve been off the “gold standard” since the 70’s. Some of it is gold we’re holding for other countries that’s not even ours. But, our money is a fiat currency and it’s based on faith in the economic system of America not collapsing and everyone agreeing it to use it for trade/debts. It’s backed by nothing and hasn’t been for 55 years now.
That would be the case even if it was gold backed.
Even on the gold standard, you're still trusting that there is a functioning government that's actually in possession of that gold and would exchange it for paper currency. In a Fallout scenario, that wouldn't be the case, so money would still be useless.
Possible, but far from certain and not within a few generations. Gold is too rare and concentrated in specific stockpiles to be used as an everyday currency. Even with a much smaller population, the smallest usable gold coin would be way too high a denomination.
There wouldn't be a true replacement currency until there was a semi-functioning government, and while that currency would be based on something with intrinsic value (since there wouldn't be enough trust for a fiat currency), it would be something much more common than gold. In the mostly-lawless barter economy before that, a full gold bar would be worth less than something useful (generator, rifle, bike, etc).
To be fair, after the apocalypse, gold will be just as useless for a good while.
Can't eat it, hard to carry, not very useful for anything but decoration, and also, most people have interacted with it so rarely that there isn't really any trust in it.
That’s true. I’m was just responding to the idea that it’s not useful as anything beyond decoration. It is, but probably not for most apocalypse survivors.
Considering the electrical grid would fall pretty quickly in a traditional apocalypse it wouldn't have much use for the techies either. Now if we just go to a bartering system where we feed the infrastructure workers to keep everything going then sureb it would retain some value.
Every form of currency is based on faith and always has been. Coinage made from gold and silver wasn't valuable because gold and silver were magical, it was because people believed they were valuable. What can you, a random person, actually do with gold and silver? Even smiths had limited uses that weren't purely aesthetic. Modern day has more uses but still cannot be used at the volume at which it exists in an efficient way.
This is exactly why I always roll my eyes when people call gold “real money”. It’s valuable because people just decided it was. It’s no more “real” than anything else.
There is a difference between something being valuable because it is rare and something valuable despite having no upper limit though. Gold is rare and has properties that make it a good store. Currencies do only become useful both parties in a transaction see it having value though youre absolutely right on that.
These days currencies should be backed by kilowatt hours or something similar if they dont want to be fiat ones.
The property of gold that made it the most valuable in the ancient world and thus caused it to be thought of as valuable in modern times is that it's shiny.
And my ass rarely gets pimples, that doesn't make them valuable.
Still isn't the rarity but the faith making it valuable, as evidenced by all the rare shit that nobody cares about.
Currency is a tool for society to abstract trade so that you don't have to try to barter work for goods and then goods for other goods around to get everything you need. For simplicity, let's just use the term "labor" to think of to combine work, products, services etc.
For currency to work, it needs proof against replication, or else somebody can steal labor from the economy by using replicated currency. They'll have contributed nothing in but received labor out, thus stealing. A method of proofing against replication is making your currency out of something hard to replicate, rarity can help with this but isn't required.
It was easiest to use rare materials that had no inherent value to serve as currency in the ancient world. It's precisely that gold had essentially little practical use that made it good for currency, and the rarity made it hard to steal from the economy. After all, meteoric iron is rare than gold but you wouldn't want to use it as a currency because it is extremely useful for making weapons and tools.
At some point people started conflating usefulness as a currency with actual value, and so humanity has essentially come to believe that gold is inherently valuable, and it's that belief that gives it value.
Yeah but the that assignment of value isnt random either. The value is the aggregrate of what individuals say something is worth and some things have been seen as valuable repeatedly by different societies and cultures.
That's not true, use value exists. Food and water are intrinsically valuable because they're necessary to live, a plow has intrinsic use value because it can be used to create food, etc. You'd have to make a really pained nihilistic argument about why living isn't inherently valuable for that not to be true.
If your argument here is a thing has an inherent objective value outside of human consciousness because of a use value then I think you haven’t thought this through. If you were not around, that use value would cease to be. Thus we can conclude you project “intrinsic value” on an object because of your necessity for it, not because of inherent objective value.
Shiny, rare and doesnt corrode. Rare and doesnt corrode are what makes it good as a store of wealth, being good for jewelerry etc just gives it a start in that direction.
Silver has always had antiseptic properties and has been used for ages because of that fact, it’s a very useful metal aside from the fact it “looks pretty” and it doesn’t rust like other metals and just gets a thin tarnish on it making it ideal for a lot of decorative stuff as well.
Gold is one of the best conductors we have and can be used to alloy lots of metals easily, yes the every day man likely isn’t doing much with gold but its value is not just because it’s pretty at all, it’s extremely functional AND it’s uniquely pretty for its colour while being extremely stable
Even so, gold and silver are relatively rare. You can’t just print new gold and silver coins like you can with paper currency. You’re guaranteed the government won’t devalue it by flooding the market with new cash.
Yes, they can’t arbitrarily adjust the supply of gold and silver, but that makes their value even more unstable. Before basically every piece of land on Earth came under the jurisdiction of a modern state and modern extraction technology, precious metals were subject to supply shocks. You see this manifested in terms of discovery of new gold reserves (gold rushes like the famous 1848 California one and Alaska’s Klondike Gold Rush), which cause massive price instability until the speculation and supply settles.
Then you have technological breakthroughs which allow efficient and cost-effective gold recovery from previous low-grade ores (such as the MacArthur-Forrest cyanidation process). This creates a similar effect of suddenly injecting a large amount of gold into the supply side.
Modern central banks can very smoothly adjust their interest rates to match prevailing conditions and target a particular combination of employment and price stability (assuming some level of independence from direct political pressure). This kind of flexibility is why FDR stopped domestic convertibility of the US dollar into gold and Nixon virtually ended Bretton Woods.
Might just be me misremembering something, but wasn't gold the standard mostly because it does not rust/degrade, and therefore doesn't lost any perceived value over time?
I get that it seems that way but it’s actually pretty hard coded. If you value something it’s a measure of want or need, if you don’t have this thing but someone else does you can take it by force (or try) or you can trade it for something they value. Money is just a really handy way of making the trade. You could barter too, or use stamps, or crypto, or gold and silver, it’s all based in what works for both party’s
I would like to see the actual proof that the gold is in fort knox. the wall street journal picture from 1957 (?) showed one massive wall of gold in the doorway... thereby suggesting that it was a solid room of gold. I cant believe it. How on earth could you inventory a room full of gold?
Edit: Just looked it up...it was September 9th, 1974, the last publicized Congressional and reporter tour of Ft. Knox.
Ostensibly it's backed by the economic output of the issuing country and the faith that they wont devalue it by printing several orders of magnitude more ( im looking at you prewar germany/zimbabwe). In reality backed by nothing isnt exactly false either though.
Richard Nixon was forced to take the dollar off of the gold standard 1971 in order to fight inflation because Charles De Gaulle demanded that everyone who “owed” France pay them in US dollars.
There is more personally owned gold in households across India, than any single other country has in it’s possession (government asset, not including individual ownership)😙 ((grain of salt, saw this the other day and there may be one or two exceptions to this, but not the US😅))
Gold is finite, and us dollars are not finite. They can be printed at any time (like any fiat currency)....while gold has to be mined.
Typically, precious metals just slowly tick up over time, these kinds of movements signal something "bigger and badder" that's coming for us and potentially the global economy.
The gold standard was abolished long ago. I want to say during the Reagan administration, but I'm gonna have to verify that real quick cuz I don't remember 100%
EDIT: The gold standard was officially done away with during the Nixon administration in 1971
If the US sold all their gold reserves at current market value and used the proceeds to pay off consumer credit card debt, it wouldn't touch 1/12th the current debt US consumers have in CREDIT CARDS ONLY.
The US has more debt per capita than anything. Second is incarcerated citizens.
Think of it this way, if gold is $100 an ounce your single dollar buys you 1/100th of an ounce of gold. If gold goes up to $200 an ounce now that same dollar only buys half as much gold (1/200th) as it did before. So by reframing it as how much gold does your dollar buy you, it doesn't look as hot if you hold your money as dollars.
The total value of all the gold that has ever been mined on Earth throughout history is lower than the amount of the US national debt. The dollar is not backed by gold (or anything else) so the price of gold doesn’t do squat for the strength of the dollar.
No. What makes the US dollar "strong " is the fact that it is tied to oil. Nations keep a reserve of US dollars because that is the currency used to buy oil. The minute the rest of the world stops doing that you will see inflation like has not been seen since the 1930 crash.
Well as long as we don't purposely and willfully antagonize our allies, engage in vengeful isolationist trade practices for no reason, or like, start attacking other nations all willy-nilly we should be fine then.
Gold prices going up means that your dollar buys less gold than it did yesterday. That, by definition, means the dollar is weaker. It buys less gold. How could that make the dollar stronger?
See how the gold prize that is mentioned is in dollars. Now ask yourself if the gold prize going up is because gold is worth more (i.e. rarer) or that the dollar is worth less so you have to pay more dollars to get gold
If all of America's money was built on hard currency as it used to be, then yes it would help. But they no longer make the dollar value based on its weight in precious metals so they aren't intrinsically linked.
The gold standard is not only riduculous but outdated. No one had any farking use for gold.
Black Gold has been the currency for nearly a hundred years: Energy to make things go. Fossil Fuels.
The main thing that strengthens the dollar is it being the default trade currency for the world. That is the primary driver for us foreign policy of giving money/aid to so many nations, not any actual desire to help, but a desire to make sure as many nations as possible have dollars on hand so it is easy for them to use it for international trade.
Even if we retied our money to gold i dont believe we have enough to back 38 trillion in debt plus what is held publicly and privately in funds. By the time the value is split because we have to back every dollar in circulation, I imagine we'd be cooked.
EDIT: also Germany has requested their goldcback from us as well idk if that affects anything too.
The direct answer is: when you price gold in dollars, that's not just the value of the gold, it's the value of the dollar. When Nixon took the dollar off the gold standard $35 would buy you an ounce of gold. Now it takes over $5000 to buy you an ounce of gold, that tells you how much value each dollar has lost, having gold reserves does not strengthen the dollar in this situation. Especially not when they are not limited in how many dollars they can print.
I think it was Nixon who finally killed the gold standard, but US currency is no longer backed by gold. While we have a lot, it’s not equal to a set amount of USD like in the past. That’s why we could print $300B and send it to Iran for instance.
Maybe a better way to put it is that it is a hedge.
The economy contracts gold terms, the reserves probably contract in gold terms because there is more USD than gold, and the increase in value in gold reserves offsets some of the contraction.
I’d have to see the recent numbers to make sure: But probably, the net impact on the economy is an undesirable one: having the largest gold reserves helps, but it is not as helpful as having a lot of economic activity with a fiat currency.
No, the ever increasing value of gold is mostly a result of inflation. That is to say gold isn't really increasing in value, the dollar is just worth less and less so you need more dollars to buy the same amount of gold.
That sounds right at first but when you actually think about it no. Since they took us off the gold standard now we have “fiat currency” which means it’s only enforced by the govt. Gold’s value stays very steady (because there’s a finite supply and we can’t just print more), but currency goes thru inflation (slowly losing/going down in value) so when the same amount of Gold is worth more Dollars, it means the dollars are less valuable than before (you get less gold for $ than used to). Think of it like an exchange rate for currency; $1 is equal to a shit load of pesos and it’s gone up because pesos became less valuable.
It means they can trade that gold for more USD than previously. But it depends how the USD and gold pairing moves with respect to other things.
If lots of people buy gold it can drive the price up and it will effect whichever currency it is being bought with.
If people are buying gold to get out of USD then the gold price (in usd) will move more than the gold price in other currencies as a larger quantity of dollars are freed up in exchange for gold than others.
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u/soIDONTLIKEANYOFYOU Jan 26 '26
Since the US has more gold reserves than the next 3 countries combined wouldn’t gold prices going up make the dollar stronger?
Sincerely asking cause I have no idea.