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Going Off (on) Gold
The US went off the gold standard on this day in 1933. Here is an okay explanation as to why.
The United States went off the gold standard on this day, June 5, 1933. This was a big deal but not talked about much in history classes. But since this is Okay History, we are excited to bring you an uneven explanation that will probably confuse you.
Perhaps it would be better served as a podcast where we could mumble our words to the point of incomprehension. At least at that point, we could pat ourselves on the back for a job well…done.
Whatever. We take risks here - so written out mediocre explanation it is! You’ve gotten this far, why not read on?
Gold: The Standard
Okay, the gold standard was how we backed currency. You held paper currency; its value was backed in gold. Pretty simple.
In the US, this was the way it was beginning in 1879, when we switched over from the silver standard because at some point, France was all about the silver. We liked France cause they helped us gain independence. Imagine picking which material dug out from the earth you would use to agree upon a fixed value. I wish weeds were the standard. My house would be Fort Knox.
The year 1933 should catch your attention. Yes, the New York Giants beat the Washington Senators in the World Series that year 4-1, and games 4 & 5 went extra innings. Also, King Kong was a box office smash. But neither is what I was talking about.
FDR to the Rescue
1933 is the first full year of the FDR administration, which captured the White House the year before from a guy who is not highly rated on a random presidential ranking system. The Great Depression, which was not, in fact, "great,” had devastated the economy. In return, everyone hoarded gold. It’s hard to make people pay in gold instead of paper when everyone else has gold locked away in their house.
Congress jumped in and ended the practice of making people pay in gold. FDR turned around and ordered everyone to turn in their gold to the government. The whole idea was to inflate the money - therefore making it more valuable. The government paid people around $20 per ounce of gold and then, in 1934, declared that an ounce was now worth $35 per.
Since math is basically magic, the Federal Reserve could continue to inflate the money, which is a good thing. We stayed on this gravy train for the next 40 years.
No More Gold to Kickaround
In 1971, President Richard Nixon decided that we wouldn't back any paper money with gold. Three years later, President Ford said it was okay to own gold.
From 1933 to 1974, US citizens couldn't own gold over a particular value. Since 1974, gold continues to be a reliable asset, especially in uncertain times, like, say, during a pandemic.
If you have ever seen signs suggesting someone will purchase your gold, well, now you know the entire motivation of me going down this rabbit hole. Because I never understood it. You. Are. Welcome.
Do you own gold? Do you understand how the government took gold, declared the value, and then – BAM – money is worth more? If so, care to explain it better in the comments?