Gold Standard

The Gold Standard — The Investors Protection Against Government Spending

The Gold Standard is a monetary system that links a paper currency’s value to a set amount of physical gold. Nations that adhered to The Gold Standard could not increase the supply of their paper money in circulation without increasing their stored gold reserves to the same amount. The gold standard forced governments to live within their means and restrained them from printing fiat money, and thus devaluing the nation’s currency and causing inflation.

Fiat Money

Fiat money is currency that has no intrinsic value and is not backed by a physical asset of value like gold. The Latin definition for the word “fiat” which means “by the authority and degree of the government.” Fiat currency only has value because a government says so. Today, no country backs its currency with gold, as most modern currencies like the Dollar and Euro are fiat currencies.

The First US Paper Money — The Greenback

Before the Civil War, only private banks printed paper currency. By 1861, the U.S. issued its first paper money as “Legal Tender” to help finance the Civil War. The term “greenbacks” came about as the backs of the paper money were printed in green ink. The value of greenbacks rose and declined drastically during the Civil War until 1878 when the greenback became on par with, and were freely convertible into gold. This was called The Gold Standard; a monetary system where paper money (fiat paper money) is valued by and backed with a set amount of physical gold. The Pikes Peak and California Gold Rush of the previous decades provided large amounts of physical gold to make this happen, and new Federal mints in Carson City, Nevada and San Francisco were opened.

The International Gold Standard

The international gold standard emerged in 1871 following its adoption by Germany. By 1900, most of Europe and America were using the Gold Standard that established gold as the only way to redeem paper currency. A nation on The Gold Standard could go to a bank and exchange their paper money into a certain amount of physical gold. For over 100 years until the Great Depression, gold traded for $20.67 per ounce, so an ounce of gold was worth $20 bucks. For many years, The Gold Standard guaranteed your paper currency at a stable and guaranteed value.

The Great Depression

During WWI, the Gold Standard was threatened as European nations printed excessive amounts of paper currency to fund the war effort, resulting in extreme hyperinflation. The 1929 stock market crash demolished the world financial markets and the gold standard. Citizens frantically looked to exchange their paper money for the stability of gold and gold hoarding became prevalent. Bankruptcies and unemployment skyrocketed and the Great Depression began.

FDR Makes Gold Ownership Illegal

In 1933, the new President, Franklin D. Roosevelt abandoned the US Gold Standard, declaring a nationwide bank moratorium to prevent a run on the fragile banks that no longer held gold reserves. This act also forbade banks to pay gold to their depositors. The unjust Gold Reserve Act of 1934 passed by FDR outlawed the private possession of most forms of gold and required citizens to sell all their gold back to the government for the low price of $20.67 an ounce, or face prison.

The Bretton Woods Agreement

During WWII, the Europeans purchased large amounts of weapons and supplies from America, and so much of this was paid in gold that by 1944, the US owned most of the world’s gold reserves. At this time, the International Monetary Fund (IMF) was created by 44 countries to peg their currencies to the US dollar, under the “Bretton Woods Agreement”, where any foreign central bank could exchange their currency for gold from the US Treasury. The result was the US dollar becoming the world’s reserve currency. Many nations began the buying of US Treasury debt and the US economy prospered until the US entered the Vietnam War to help France.

1971 — The Dollar and Gold are Officially Un-Pegged

To support the Vietnam War, the US began deficit spending and flooded the market with dollars. When France became uneasy with the value of the dollar and asked to be paid in gold, mother nations followed. As US gold reserves declined, President Nixon prevented foreign governments to exchange dollars for gold and severed all remaining links between the dollar and gold in 1971. At this point, all the world ‘s currencies became fiat currencies that are valued by supply and demand.

Back Your Savings with Physical Gold

It has been estimated that putting the US back on the Gold Standard would raise gold prices to over $10,000 per ounce, due to the large amount of US paper dollars in circulation. With inflation on the rise and unbridled monetary easing (the printing of money) by the Fed, many are looking to gold as the eternal safe haven for prudent investors. Back your wealth with physical gold with a FIDIS Gold Standard Account.

The FIDIS Gold Standard

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The New Gold Standard

The gold standard is a monetary system backed by the value of physical gold. The cash in your wallet is “fiat money” or government-issued currency that is not backed by a physical commodity of inherent value, such as gold. Fiat paper money is only valuable because the government forces us to use it. Most modern paper currencies like the dollar and the Euro are fiat currencies.

“We have gold because we cannot trust governments” — President Herbert Hoover

When your wealth is backed by physical gold, you are not susceptible to inflation — the erosion of the spending power of your paper money. Over the years, prudent investors have looked to gold as a hedge against inflation and fiat currency. The FIDIS Gold Standard Account allows you to secure your wealth by placing yourself on the gold standard, where your every deposit is backed by physical gold.

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