Why We Don’t Carry Gold as Currency Anymore

With the crazy rate of inflation in the United States many people have started asking, “Why don’t we carry gold as currency anymore?” The answer to this question can be complex, but should be understood by anyone interested in returning to gold, or just investing in gold. Here is the evolution of currency in the United States from literal coinage to the dollar bills you see today.

US Currency

Image via Wikipedia

Pre-1933

Pre-1933 Currency

Image via Wikipedia

People still carried gold coins in their pockets and purses in 1933. Any United States currency, such as the dollar, could easily be converted into gold coins at the bank. Silver coins were available, too. People enjoyed the freedom to convert currency because it lent stability to the system. Gold and the dollar were both quite stable at this time.

Post-1933

Post-1933 Currency

Image via Cunningham Bullion Report

In an attempt to hold the value of the United States dollar at 1/35 an ounce of gold, the government confiscated gold owned by citizens and devalued the dollar by 41%. The treasury believed this would provide long term stability.

Until the mid 1960s, the government was largely successful with this endeavor, except in times of war and national disaster.

1965-1979

1965-1979 Gold

Image via Cold Fusion Guy

The United States government was determined to buy back all dollars in circulation in foreign countries, but too much gold was required. Many people say that the government simply gave up after the six-year period of struggle.

In 1971 the gold window was closed when President Nixon declared the United States would no longer pay D-2 dollars for dollar claims. Only Federal Reserve Notes were printed from this point onward, and the promise to pay based on these notes was removed from the currency. At this point United States currency was no longer directly linked to gold while in Europe, gold prices soared.

1980-1999

1980-1999 Currency

Image via MotherJones.com

The dollar hit rock-bottom in 1980 and took 20 years to recover prestige. At this point many people began to buy and hide gold, believing in its stability over that of legal tender.

2000-2012

USD Gold

Image via PriceInGold.com

Once again falling in value, the United States dollar landed at just 21 mg of gold in 2012 from its recovered height of 123 mg of gold in 1999. In just one century currency in the United States has fallen 80%, losing 98% of its purchasing power. An example of this is that former ‘penny candy’ now costs approximately 50 cents.

In 2012 the dollar continues to be weak against other international currencies. Many people are again investing in gold and avoiding large sums of cash, which can be devalued quickly.

Investing in gold is a sound choice for those who understand the history of American currency. With a weak dollar in the United States and the value of gold maintaining prestige, the choice is simple. However, those who have faith in the Federal Reserve still save money strictly in cash, and year-over-year they can see a loss in their savings.

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