The Crisis Of The Gold Standard System

In principle, the disappearance of the gold standard put the US economy at an advantage: by not having to support the printing of dollars with gold, they could start the machine and produce bills for just pennies, while the rest of the economies had to produce goods to be able to get hold of those dollars.

The problem is that inflation began to affect the dollar. It is estimated that since the year 2000 alone, the currency has lost almost a third of its purchasing power. And since 1913 (the year the Federal Reserve was created), the US currency has lost almost 96% of its purchasing power.

According to those most critical of the system, even if the inflation target set by the Federal Reserve at 2% is met, in each generation that passes, the dollar loses half of its value.

For this reason, many economists and advisors to successive United States presidents have proposed abandoning the ‘dollar standard’ and returning to the gold standard with a modernized and international method, although none has decided to take the plunge.

Attempts To Reissue The Gold Standard

This return to the gold standard has been proposed on several occasions in the United States. Perhaps the closest moment was during the Ronald Reagan presidency, when Jack Kemp, presidential adviser and several times conservative candidate for the Presidency of the United States, promoted the so-called Gold Standard Act of 1984, a bill that laid the groundwork for the United States to return to the gold standard.

Gold Standard Act

The bill contemplated the establishment of an equivalence between the dollar and gold of 900 thousandths of purity, which would become the standard and unit of value in the United States, with which all money or coins minted in the country would maintain parity.

Any citizen was also authorized to exchange money, US coins, or Treasury bills for coins or gold bullion at any branch of the Federal Reserve.

However, Congress rejected the possibility of reinstating the gold standard in a session held on June 29, 1984.

Bill HR 5404

Recently there has been a new attempt to reissue this system by the Republican congressman for West Virginia, Alex X. Mooney, defender of the use of precious metals as legal tender in the country.

“The American economy needs a stable dollar, fixed exchange rates, and a flow of money controlled by the market, not the government. The gold standard leaves control of the flow of money in the hands of the market instead of the Federal Reserve. Restoring the prosperity of the American middle class requires changes in monetary policy, authorized in the Constitution.

President Donald Trump himself, during the electoral campaign, was in favor of returning the dollar to be backed by gold, although he acknowledged that:

“It would be something very complicated, but wonderful because we would once again have a reference on which to base our currency.”

The debate is still open, and there are more and more who are betting on controlling the defects of the international monetary system with a link of currencies to gold that would guarantee its value. After all, gold and silver have been, for many years, the exclusive means of payment that Humanity had.