Citation:

Paul F. Gentle. "A Famous Commodity Money: Gold Standard in the United States" International Research Journal of Economics and Management Studies, Vol. 3, No. 5, pp. 80-82, 2024.

Abstract:

This article examines the special nature of gold and how gold was at one time used as the standard for American money. Eventually, the United States dropped the gold standard and adopted fiat currency. Gold is valuable due to its scarcity, luster, and metallic nature, and when 100 percent gold, it is absent of rust or tarnish. There was a way the US came off the gold standard. This was done in 1971 when President Nixon and his associates decided not to let American currency be converted into gold. Nixon pursued this line of action since gold was being drained from the US at too great a magnitude. In 1973, the United States abandoned the gold standard altogether. There are there requirements for something to be money. There is something that must be a medium of exchange; it must hold its value, and it must be divisiatble by a unit of account. This was true for gold, and now it is true for fiat money, as well. Gold can meet the requirements for being money; however, it is difficult to extract any valuable gold. The money supply has to be flexible enough to allow commerce to happen. Economists are expected to know some facts about gold, as it is a famous, valuable commodity and has been a monetary standard at different times and places. Gold is a valuable commodity of precious metal. Two other precious metals are silver and platinum (Fernando, 2022; Broomberg, 2023). While silver and gold have been used as money but, platinum is so rare that it is usually not used for money (Bloomberg, 2023). There are three requirements for something to be money. It serves as a medium of exchange and holds value, and there must be a unit of account for that money (Mishkin, 2019; Broomberg, 2023). Gold is lustrous and has metallic qualities, is relatively scarce and there are difficulties in extracting gold. All of these traits serve to make gold valuable (Broomberg, 2023). Gold is often seen as a hedge against inflation (Hayes, 2023). If something is 100 percent gold, it will not tarnish or rust. However, if something is only partially gold, the other ingredients of the material may tarnish or rust (AZRUST, 2023). The next section of these articles explains the currency system of the United States. The two sections after that concern the Gold Standard. The last section is a summary and conclusion.

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Keywords:

Gold Standard for American dollars; Federal Reserve Bank; Fiat Currency; Breton Woods Agreement; Removal of Gold Standard.