Ever wondered what happened to the “Gold Standard”?
A very short condensed history:
In the beginning –The Gold Standard Act of 1900 (31 Stat. 45) was the culmination of an epic political battle over monetary policy in the United States. But it also reflected an age-old debate over whether gold or silver should control monetary measurements. The act set the value of gold at $20.67 per troy ounce(troy weight is based on a pound of twelve ounces).
At the conclusion of World War II, the United States and Great Britain created the International Monetary Fund (IMF). That body set a “value” of $35 per ounce for gold. Other countries participating in the IMF were required to maintain their currencies at a specified parity against the dollar, thereby tying much of the world to a dollar standard that was in turn tied to a gold standard.
That system, however, fell apart after debilitating inflation in the 1960s caused a run — as countries began exchanging dollars for gold from the U.S. Treasury when world gold prices exceeded the $35.00 value set under the IMF agreement—on U.S. gold stocks. President Richard Nixon announced on August 15, 1971, that the United States would no longer exchange dollars for gold under the IMF standard.
The beginning of print your own money, anything goes, began.
Within two years, currency exchange rates were allowed to float against each other. These floating currency rates are set by market forces rather than the artificial parity rates set by the IMF, and change constantly in foreign exchange transactions conducted through banks and currency dealers.
In 1975 the IMF eliminated gold as the basis for international monetary standards, and two years later, the prohibition against gold clauses was repealed, allowing private sales of gold.
Ever wondered what happened to the value of the dollar?