Comments on: Wut's it mean 4 a currency 2 be backed by gold? http://www.myylt.com/2008/03/29/wuts-it-mean-4-a-currency-2-be-backed-by-gold/ Discussion of Forex Trading and Currency Trading Sat, 19 May 2012 11:18:44 +0000 http://wordpress.org/?v=2.3.3 By: Jeff http://www.myylt.com/2008/03/29/wuts-it-mean-4-a-currency-2-be-backed-by-gold/#comment-1604 Jeff Tue, 30 Nov 1999 00:00:00 +0000 http://www.myylt.com/2008/03/29/wuts-it-mean-4-a-currency-2-be-backed-by-gold/#comment-1604 Backed by gold = the government sets the exchange rate. One ounce of gold is worth $400, regardless of market fluctuations, and the government will sell you as much American gold as you want, if you have the dollars. When the US started becoming a debtor nation (trade deficits), it had to export dollars in order to import stuff. There was a fear in the early 70's that all of Fort Knox would get emptied, which would cause a gold-backed dollar to become worthless. So President Nixon abandoned the gold standard and said American dollars are worth whatever you can buy with them. It did not cause the value to go down, because people still had faith that a dollar was solid currentcy. But it allowed our politicians to get lazy, and begin to believe they could print and spend as much as they needed to buy votes to keep themselves in office. Backed by gold = the government sets the exchange rate. One ounce of gold is worth $400, regardless of market fluctuations, and the government will sell you as much American gold as you want, if you have the dollars.

When the US started becoming a debtor nation (trade deficits), it had to export dollars in order to import stuff. There was a fear in the early 70's that all of Fort Knox would get emptied, which would cause a gold-backed dollar to become worthless.

So President Nixon abandoned the gold standard and said American dollars are worth whatever you can buy with them.

It did not cause the value to go down, because people still had faith that a dollar was solid currentcy. But it allowed our politicians to get lazy, and begin to believe they could print and spend as much as they needed to buy votes to keep themselves in office.

]]> By: Scott K http://www.myylt.com/2008/03/29/wuts-it-mean-4-a-currency-2-be-backed-by-gold/#comment-1605 Scott K Tue, 30 Nov 1999 00:00:00 +0000 http://www.myylt.com/2008/03/29/wuts-it-mean-4-a-currency-2-be-backed-by-gold/#comment-1605 A currency backed by gold, means that each currency unit is worth X amount of gold which the government holds in reserve for all of its currency. The abandonment set off a correcting action, floating the dollar to it's relative strength vs other currencies; i.e., the dollar became a marketable security and thus subject to the laws of supply and demand. A currency backed by gold, means that each currency unit is worth X amount of gold which the government holds in reserve for all of its currency. The abandonment set off a correcting action, floating the dollar to it's relative strength vs other currencies; i.e., the dollar became a marketable security and thus subject to the laws of supply and demand.

]]>