Anniversary: U.S. now off gold standard for 82 years
By Dian Vujovich
Every now and again there’s talk about nothing much backing our currency ever since Congress took us off the gold standard in 1933. And every now and again there are those who think we ought to go back to having the gold standard support our monetary system. Trouble is, today that’s not really possible.
June 5 is the official date the U.S. canned gold as the precious metal backing our greenbacks, according to History.com. Gold had been the standard used since 1879 although there was an embargo bump in that road during World War 1. Then in 1933, during the Great Depression, President Roosevelt put the kibosh on banks paying out and/or exporting it and demanded everyone turn their gold coins and certificates over to the feds.
Back then, the feds set the price for an ounce of gold at $20.67 and in 1934 increased it to $35 per ounce. The glittery stuff remained at that per ounce level until 1971 when President Nixon gave up on the fixed value of this precious metal and it was good-bye to the gold standard that had backed our dollar for nearly 100 years.
You might say “ We’ve come a long way, baby” regarding that per ounce price—spot gold closed today, June 5, 2015, at $1,171.94 per ounce—but there’s more to establishing a gold standard for our monetary system than this precious metal’s per ounce price. For openers, quantity and the fact that we don’t have enough gold to cover a return to the gold standard.
From a USA TODAY piece written by John Waggoner in 2012, when our GDP was around $15 trillion and gold was about $1600 an ounce, is this: “Even if the U.S. had the entire world supply of gold, the gold standard would run into practical problems. In the gold standard, the amount of currency issued is tied to the government’s gold holdings. The price of gold would have to soar to accommodate U.S. trade in goods and services.”
How much gold does our government hold?
According to the World Gold Council, the U.S. Federal Reserve holds 6,700 tons of gold in 530,000 gold bars. That’s a bit more than half of the 12,000 tons of monetary gold that the fed held at its peak n 1973.
Do the math and you’ll find that with America’s GDP well over $17 trillion and spot gold closing today under $1200 an ounce, its price would have to soar, or America would need to unearth some mega huge goldmine, for a return to the gold standard to be possible.
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