A Brief History of the Gold Standard
June 16, 2011
Congress established a mint in 1792 and defined the dollar in terms of a specific weight in both gold and silver. This put the new republic on a bimetallic standard, common at the time, says Robert McTeer, a distinguished fellow with the National Center for Policy Analysis.
- Initially, the official ratio of gold to silver at the mint overvalued gold relative to silver, so silver became the de facto standard.
- In 1834, the dollar was devalued in terms of gold -- from $19.39 per troy ounce to $20.67, shifting the United States to a de facto gold standard.
- The official gold price remained $20.67 until President Franklin Roosevelt devalued the dollar to $35 an ounce a century later.
Following World War II the western nations set up a modified gold standard at a meeting in Bretton Woods, New Hampshire. Other countries pegged their currencies to the dollar and the United States converted dollars to gold for foreign central banks and governments. In the early postwar years, the world was hungry for dollars and there were few demands to redeem dollars for gold.
- By the 1960s, however, the world dollar shortage was over and official U.S. gold reserves declined as dollars were redeemed.
- On a couple of occasions, Congress reduced the gold reserve requirement on outstanding Federal Reserve notes.
- In 1971 President Nixon took the dollar off the gold standard and announced that the United States would no longer redeem dollars for gold, removing the last vestiges of the gold standard.
The dollar was officially a fiat currency, says McTeer.
Source: Robert McTeer, "A Brief History of the Gold Standard," National Center for Policy Analysis, June 16, 2011.
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