You remember the Gold Standard. Investopedia defines it like this: “The gold standard is a monetary system where a country’s currency or paper money has a value directly linked to gold.” The gold standard was popular as early as 1871 up until 1931 in Britain and 1933 in the US (especially in the early years of the 10-year Great Depression).
While no government is currently relying on the gold standard today and hasn’t since 1971, it is possible we may have a President that will place our country back on this monetary system.
In its day, countries using the gold standard converted their paper money into certain amounts of gold. A fixed price was set for buying and selling gold. Fiat money later replaced the gold standard as the accepted form of payment.
Investopedia defines the fiat system as “…government-issued currency that is not backed by a physical commodity, such as gold or silver.” This has been a reliable paper system for many years; however, this monetary system has its disadvantages.
Fiat money allows government-based central banks more control of the economy in the amount of currency that is printed. When too much money is printed, the result is hyperinflation. It is money truly regulated by the government.
When people lose faith in our nation’s monetary system, money fails to hold value. The difference with gold is that it retains intrinsic value for many applications, from jewelry to electronics and high-tech devices.
Gold’s Impact on Currencies
Gold has a continuing impact on the value of global currencies. In earlier periods in history, gold was used to back fiat currencies. Even today, it is often used as a hedge against inflation.
Gold prices also affect countries involve in gold import and export. Exporters of gold may experience an increase in currency values as gold prices increase. A trade surplus may result or on the other hand; the opposite scenario may result in a trade deficit.
Even the purchase of gold can devalue the currency used to make the purchase, largely because of supply and demand. As well, gold prices may mistakenly be used to measure the value of a currency.
With the impact gold has on world currencies, it is today a valuable substitute for paper currencies in hedging against inflation. Few other tangible worldwide assets have prevailed. Silver is a viable alternative, but today, the value of gold is higher and more popular among investors and central banks.
How the Gold Standard Would Benefit the Country
There is plenty of buzzes nationally and internationally about modifying our monetary system, and much of that discussion revolves around gold.
US politicians are discussing the benefits in bringing back the gold standard, according to Investing News. While there are certainly pros and cons, there is government support for this type of monetary system. The gold standard return in the US would cause prices to skyrocket to as much as $10k per ounce.
The return of the Gold Standard in America could show many positive benefits given the state of the country. With a climbing, national debt, tension for fair-trading, and increasing threats to our safety, the gold standard has the potential to ease some of these concerns. The gold standard could:
- Shrink the trade deficit with other countries
- Help maintain price stability (as shown in prior years when the gold standard was in place)
- Build reserve assets in an attractive, tangible product
- Build solidity for alternative gold-backed IRAs
- Value currency directly with gold for self-regulating, stable economic results
If the US could hold gold in reserve to match outstanding debt, it would improve credit rapport between countries. The printing of paper money could be managed in terms of inflation. Government spending and debt could be minimized.
The Right Time for The Gold Standard
America, as the 2nd largest country for gold mining, is in the perfect position to bring back the gold standard. It was accomplished and successful for centuries in most advanced nations until President Roosevelt made gold coins and bars illegal to private owners.
Nixon disallowed foreign government gold for dollar exchange in 1971 primarily because of the rapid depletion of US gold reserves and the Emergency Banking Act of 1933.
Gold ownership is legal again! Private investors, as well as central banks, have the option of using gold to hedge against inflation and uncertainties! Not only that, history reveals that holding a percentage of gold as part of your financial portfolio is a responsible choice for lowering volatility.
In our current fiat system, the US dollar fluctuates without gold against worldwide country currencies. Imagine the possibilities if the gold standard was returned! This is the perfect market for diversifying. If the gold standard were to become a sustainable monetary system once again, now would be the exact time to invest in gold while supplies and prices are manageable.
Consider an investment in gold to prepare for the exact time when the President could renew the Gold Standard as an active monetary system. Whether or not it happens, it’s time to be prepared for the unexpected.
The opportunity to acquire precious metals in an individual retirement account (IRA) is in front of you. Don’t miss it. Contact Reagan Gold Group today and make your investment while gold prices are still reasonable. If you wait, it might be too late.