In the Beginning, The Gold Standard
The monetary system the United States utilized for countless years was entirely based on precious metals. In 1787, the Constitution of the United States declared that gold and silver were the official currency of the U.S. United States coins were struck in gold and silver. Within the rich and decadent history of the U.S, the country also initially had gold to back all of the paper money printed. The entire system is called the “gold standard.” From 1879 to 1933, the U.S. backed all of its paper money with gold. The only break in the gold standard came during World War 1 where there was an embargo on gold exports. Most agree that the U.S. should have continued backing all of their fiat currency with gold. Many believe its function must be restored if we want to truly preserve the integrity of U.S. currency and how the society operates as a result.
The Integration of the Bimetallic System
The very beginning of the United States financial system integrated the bimetallic system. The idea is that gold and silver are considered legal tender. There is no limit to the amount of gold or silver. This bimetallic system used the weights of silver and gold to determine the value of any monetary unit, such as the U.S. Dollar. Of course the heavier the physical metal and the purity of the , the precious metal are taken into account when valuing it as well. In 1792, Alexander Hamilton proposed a fixed rate of 15:1. The world’s market typically hovers around 15 to 1 but in some places the existence of gold is low, so they fully look to silver as the bearer of that specific ratio.
It was later, during the time of the Civil War that the gold standard saw changes when precious metal resources had become low and they decided to issue paper money in place of it. The system was called the “Fiat Paper System”. It took awhile for the country to grow used to using paper money, but the ease of use means it has enabled the people.
Hand in Your Gold
Britain decided to drop their gold standard in 1931 and with the problems the U.S. was facing at the time, the President decided to take action. June 5, 1933, President FDR enacting steps that would lead to the end of the gold standard. Congress took action saying that their creditors no longer had the right to be paid in gold. The public had begun to hoard gold because of the Great Depression. Since the people were hoarding all of the gold, the gold standard was unable to be maintained. In March of 1933, Roosevelt wouldn’t allow the banks to give out gold or export gold anywhere.
FDR believed that by storing up gold in the Federal Reserve, he could force inflation. This is based on the Keynesian Economic theory. On April 5, 1933, FDR made it mandatory that any U.S. citizen in possession of gold had to turn in their gold and take fiat currency instead. It was basically illegal for U.S. citizens to own any gold. If the gold was worth less than $100, citizens could keep it. FDR was trying to save the U.S. economy. Gold coins, gold bullion, and gold certificates were turned into the Federal Reserve by May 1, 1933 and citizens were given just over $20 an ounce. $770 million in gold coins and gold certificates were collected. Congress then repealed clauses requiring payment in gold to creditors.
In 1934, gold went up to $35 per ounce. This made the total assets in the Federal Reserve worth almost 70% more than they initially took in. Inflation was occurring and the plan had worked. The price of gold stayed at $35 an ounce for thirty-seven years.
Abandoning the Gold Standard
On August 15, 1971 President Nixon declared that the U.S. was completely vacating the gold standard. This meant that the U.S. was no longer valuing gold at the fixed rate of $35 per ounce. Then, President Gerald Ford signed the law saying that U.S. citizens could own gold if they wanted to.
It’s easy to see why a government would want to base their monetary system on a precious metal like gold. The various benefits and the longevity factor of precious metals has been around for so long and their value is not hurt by the economic state or the time period. The economic benefits of precious metals are undeniable and honestly timeless for that matter. It is not only Congress who initially felt the overall favor of what it precious metals could do for the U.S. financial system but the public stood by it as well.
Calling for the Return of the Gold Standard
Many groups in the U.S. have called for the return of the gold standard. There’s no denying its value and that it makes a country’s monetary system strong. Since the U.S. Constitution declared that U.S. money be gold or silver, some Americans believe it’s actually illegal that we are using fiat currency at all. Article I, Section 10 states that “[No State shall] make any Thing but gold and silver Coin a Tender in Payment of Debts;” Now some people will argue about what that means all day and night. The truth is that U.S. currency has never been as strong as it was since the gold standard. This fact cannot be denied.
To purchase your own gold or silver currency, contact Capital Gold Group at 1(800)510-9595, or visit them online at startwithgold.com.