This is a common talking point, but much of what you’ve said isn’t true. We did not have enough gold to cover every dollar the whole time under Bretton Woods, about 65% at the end of WW2, and it wasn’t out of the blue that Nixon withdrew from the agreement.
If we had tried to maintain that system, we would have either lost all our gold due to countries taking advantage of the price difference between the peg and gold markets worldwide, or we would have had to restrict dollar supply to the point we would no longer be the reserve currency of the world, neither of which were in our country’s interest.
What did I say that wasnt true? The us dollar maintained strength for 172 years from 1799 till 1971 untill nixon shock led to the age of austerity we now face where 60% of working people live paycheck to paycheck with no emergency savings. If you cut out generations x and w then the percentage is higher. A majority of millennials and gen z will never own homes or have retirement savings. Forcing them to work till they are too sick to do so and have to rely on measly social Security payments if the program hasnt been gutted or privatized in 30-60 years from now.
And lets say hypothetically that the usa never ended the gold standard. the idea that there isnt enough gold to cover the amount of currency circulating isn’t the issue. Unless something happens that destroys the trust in the us dollar there is no reason for people to demand their currency be exchanged for gold (or silver which is highly undervalued atm but ultimately not as valuable as a commodity in comparison to gold) the main factor that makes the gold standard not viable in modern times is billionaires hoarding wealth. When regular people were in control of the vast majority of the wealth share, in the times before the 1980’s the wealth held by regular working class people would recirculate into the economy. Whereas when multi millionaires and billionaires (people in the top 10-5% of the wealth distribution pyramid )hold wealth that wealth gets hoarded and hidden away and removed from the financial ecosystem which does not benefit markets or society as a whole. Before the 1980’s/1990’s the bottom 90% of people held 80% of the wealth but today that has reversed. The top 20% hold 73% of the wealth with the wealthier half holding 66% meanwhile the wealthiest 1% hold more wealth than the bottom half of our entire society.
There is no argument where ending the gold standard was a positive thing for americans. Since then we have seem hyper inflation. In the 40’s 50’s and 60’s one could buy a home for $5000. The median price was just under $8k and one cojld find a fixer upper for $2000-3000 but today the median price of a home is just under half a million dollars and even a dilapidated derelict crumbling structure in new england, thing anywhere within an hour or two of boston or new york is selling for $150,000 if you’re lucky. Buildable lots are going for $60-100k if you gk farther away from those metropolitan centers then you can find better deals on property but not by that much.
Fiat currencies are only worth anything because wealthy people have convinced us to believe them. But ultimately those currencies primarily derive their value from gold. In the case of the us dollar post 1971 the commodity backing a majority of the us dollar supply is petroleum and related petrochemicals which is a far inferior commodity to back currency. And the introduction of the us petro dollar didn’t change the fact that the us dollar’s value is still intrinsically tied to gold and all currencies are. If you look at the exchange rates between any two currencies at any point in us history you’ll see that the value in exchange always adds up to the price of gold so i fail to see where or when another country’s currency would ever be able to get one up on another countrys economy and take advantage of their currency value and the price of gold.
Also we are already slipping as far as being the reserve currency of the world with so many countries joining BRICS and more will definitely be joining in the next few years. Many are speculating that these countries will develop their own currency which could potentially be block chain based sometime before the end of the decade. Couple all this with the way events are unfolding in the middle east and it seems easy to see that a large global conflict is looming right around the corner.
How about something that destroys the value of gold? Like someone digging a hole in the right place or someone developing technology to do something efficiently that was previously too pricey (like extracting gold from sea water).
Do you think a large industry wouldn’t be devoted to doing those very things? If not, I point you to the crypto mining industry and the fact that 30 years ago, people were told it would be too expensive to extract oil from the Canadian tar sands.
Nothing will devalue gold. Gold is not merely valuable because it is rare but because of its properties and usefulness in technological and industrial applications.
People dig in the right place and find gold all the time but the amount of gold to offset the amount that already exists and reduce its value by any significant amount would have to be astronomical. Unless a meteor that contains ten times the amount of gold that we have dug out of the earth crashes into the ocean we wont se any significant reduction in gold value.
As far as sea water gold extraction now you sound like that dude that got laughed out of shark tank for wanting to nuke the ocean and manufacture artificial hurricanes to extract gold from seawater. Lulz
The value of gold fluctuates but in a limited capacity and the biggest driver of that fluctuation is the overprinting of currency. Even during the gold rush the price of gold held constant.
Gold has always been valued because of its properties and the applications it has in industry, chemistry and technological innovation
Forget gold to dollar for a moment, but think gold to groceries. In 1985 an ounce of gold would be good for maybe 5 typical trips to the grocery store. Today it’d be about 12-15.
The concept of objective, absolute value is generally flawed, but especially gold is pretty distant from even a vague attempt at it.
In 1985 gold was $400 Im pretty sure people were not spending $90 at a trip to the grocery store in 1985. More like 30-50 also when did the us begin heavily subsidizing the dairy and corn industry? How much of the food supply today is just repackaged processed corn? At least a quarter if not a third of the whole grocery store.
Gold is the best example of absolute value, its not perfect for but its better than any other commodity. An ounce of gold at any time in history gets you a months rent in a 2 bedroom apartment in a decent part of town.
Now compare that graph to a graph of the circulating us money supply.
Your reading comprehension isnt too good is it?
Also if we found a large amount of gold the price would go down, but by all accounts the price of gold has increased 7500% in the last 53 years
You see that first spike right at 1980, what happened from 1979 to 1981? The us mint ramped up money printing and by 1981 the usa had printed its first one trillion dollars into circulation and now we print one trillion every 3-4 months. Thanks for proving my point with data though.
This is a common talking point, but much of what you’ve said isn’t true. We did not have enough gold to cover every dollar the whole time under Bretton Woods, about 65% at the end of WW2, and it wasn’t out of the blue that Nixon withdrew from the agreement.
If we had tried to maintain that system, we would have either lost all our gold due to countries taking advantage of the price difference between the peg and gold markets worldwide, or we would have had to restrict dollar supply to the point we would no longer be the reserve currency of the world, neither of which were in our country’s interest.
https://en.m.wikipedia.org/wiki/Bretton_Woods_system#Late_application
What did I say that wasnt true? The us dollar maintained strength for 172 years from 1799 till 1971 untill nixon shock led to the age of austerity we now face where 60% of working people live paycheck to paycheck with no emergency savings. If you cut out generations x and w then the percentage is higher. A majority of millennials and gen z will never own homes or have retirement savings. Forcing them to work till they are too sick to do so and have to rely on measly social Security payments if the program hasnt been gutted or privatized in 30-60 years from now.
And lets say hypothetically that the usa never ended the gold standard. the idea that there isnt enough gold to cover the amount of currency circulating isn’t the issue. Unless something happens that destroys the trust in the us dollar there is no reason for people to demand their currency be exchanged for gold (or silver which is highly undervalued atm but ultimately not as valuable as a commodity in comparison to gold) the main factor that makes the gold standard not viable in modern times is billionaires hoarding wealth. When regular people were in control of the vast majority of the wealth share, in the times before the 1980’s the wealth held by regular working class people would recirculate into the economy. Whereas when multi millionaires and billionaires (people in the top 10-5% of the wealth distribution pyramid )hold wealth that wealth gets hoarded and hidden away and removed from the financial ecosystem which does not benefit markets or society as a whole. Before the 1980’s/1990’s the bottom 90% of people held 80% of the wealth but today that has reversed. The top 20% hold 73% of the wealth with the wealthier half holding 66% meanwhile the wealthiest 1% hold more wealth than the bottom half of our entire society.
There is no argument where ending the gold standard was a positive thing for americans. Since then we have seem hyper inflation. In the 40’s 50’s and 60’s one could buy a home for $5000. The median price was just under $8k and one cojld find a fixer upper for $2000-3000 but today the median price of a home is just under half a million dollars and even a dilapidated derelict crumbling structure in new england, thing anywhere within an hour or two of boston or new york is selling for $150,000 if you’re lucky. Buildable lots are going for $60-100k if you gk farther away from those metropolitan centers then you can find better deals on property but not by that much.
Fiat currencies are only worth anything because wealthy people have convinced us to believe them. But ultimately those currencies primarily derive their value from gold. In the case of the us dollar post 1971 the commodity backing a majority of the us dollar supply is petroleum and related petrochemicals which is a far inferior commodity to back currency. And the introduction of the us petro dollar didn’t change the fact that the us dollar’s value is still intrinsically tied to gold and all currencies are. If you look at the exchange rates between any two currencies at any point in us history you’ll see that the value in exchange always adds up to the price of gold so i fail to see where or when another country’s currency would ever be able to get one up on another countrys economy and take advantage of their currency value and the price of gold.
Also we are already slipping as far as being the reserve currency of the world with so many countries joining BRICS and more will definitely be joining in the next few years. Many are speculating that these countries will develop their own currency which could potentially be block chain based sometime before the end of the decade. Couple all this with the way events are unfolding in the middle east and it seems easy to see that a large global conflict is looming right around the corner.
How about something that destroys the value of gold? Like someone digging a hole in the right place or someone developing technology to do something efficiently that was previously too pricey (like extracting gold from sea water).
Do you think a large industry wouldn’t be devoted to doing those very things? If not, I point you to the crypto mining industry and the fact that 30 years ago, people were told it would be too expensive to extract oil from the Canadian tar sands.
Nothing will devalue gold. Gold is not merely valuable because it is rare but because of its properties and usefulness in technological and industrial applications.
People dig in the right place and find gold all the time but the amount of gold to offset the amount that already exists and reduce its value by any significant amount would have to be astronomical. Unless a meteor that contains ten times the amount of gold that we have dug out of the earth crashes into the ocean we wont se any significant reduction in gold value.
As far as sea water gold extraction now you sound like that dude that got laughed out of shark tank for wanting to nuke the ocean and manufacture artificial hurricanes to extract gold from seawater. Lulz
While gold has intrinsic usage, the value is driven more largely by speculation.
Sorry, are you saying the value of gold doesn’t fluctuate? Since when?
The value of gold fluctuates but in a limited capacity and the biggest driver of that fluctuation is the overprinting of currency. Even during the gold rush the price of gold held constant.
Gold has always been valued because of its properties and the applications it has in industry, chemistry and technological innovation
Forget gold to dollar for a moment, but think gold to groceries. In 1985 an ounce of gold would be good for maybe 5 typical trips to the grocery store. Today it’d be about 12-15.
The concept of objective, absolute value is generally flawed, but especially gold is pretty distant from even a vague attempt at it.
In 1985 gold was $400 Im pretty sure people were not spending $90 at a trip to the grocery store in 1985. More like 30-50 also when did the us begin heavily subsidizing the dairy and corn industry? How much of the food supply today is just repackaged processed corn? At least a quarter if not a third of the whole grocery store.
Gold is the best example of absolute value, its not perfect for but its better than any other commodity. An ounce of gold at any time in history gets you a months rent in a 2 bedroom apartment in a decent part of town.
Sure doesn’t look limited to me.
https://tradingeconomics.com/commodity/gold
Now compare that graph to a graph of the circulating us money supply.
Your reading comprehension isnt too good is it?
Also if we found a large amount of gold the price would go down, but by all accounts the price of gold has increased 7500% in the last 53 years
You see that first spike right at 1980, what happened from 1979 to 1981? The us mint ramped up money printing and by 1981 the usa had printed its first one trillion dollars into circulation and now we print one trillion every 3-4 months. Thanks for proving my point with data though.
Insulting me doesn’t change the fact that you claimed it is limited when it clearly isn’t.
See? Not limited.