Gold and How It Lost Its Standards

Gold

Since the beginning of its discovery, gold has always been used as a source of monetary representation. With its remarkably stunning presence, shiny appearance and durable feel, gold truly puts the “precious” in precious metal. Despite all of this, during the last century or so, something has changed in the way the world values gold, causing it to somehow lose its standards.

Gold is not just a shiny piece of metal that looks nice if transformed into a watch or necklace. It is actually a mineral that is essential to all forms of life and even the earth itself. Gold has extremely potent properties that make it an important part of earth’s ecosystems as well as the overall health of human beings. Basically, gold benefits more than just our pockets and bank accounts.

When the Founding Fathers established the United States with the Declaration of Independence in 1776 and later drafted the Constitution in 1787, they declared in Article 1 Section 10 that, “No state shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” This system worked well for this newly formed country for a long time, but somewhere along the way, gold had lost its reputable standards as the universal currency it once was.

In 1913, the Federal Reserve Act was passed by Congress, allowing the Federal Reserve to operate as a central banking system for the entire nation. A central bank is an institution that produces the currency of an entire nation, loans it to the government’s economy at interest, then uses inflation to regulate the value of the currency being issued.

Since this newly founded central banking system was able to now print this new form of currency at their own will, inflation became a powerful tool for them to use against the economy. Inflation creates a problem in any financial system because it constantly changes the value of the currency. This creates a chain reaction that affects every member of the economy that relies on that currency to purchase goods and pay debts. This ultimately guarantees debt that, after building over time, can only be paid off with a loan from the central bank, which in turn creates a vicious circle of never-ending debt.

Throughout the years there have been political figures who have been fighting the Fed, trying to win back gold as our primary source of currency. These noble figures have been passing the torch of justice forward to the next brave soldier. In 1913 it was Senator Charles Lindberg Sr. who held the torch. In 1915 to 1933 it was Congressmen Louis T. McFadden. In 1929 to 1976 it was Congressman Wright Patman and from 1976 to the present day it remains Ron Paul who possesses this torch.

Former Congressman Ron Paul based most of his political career around trying to educate the public on understanding the concepts and flaws of the governments monetary system, since the establishment of the Federal Reserve. Paul has written several papers and books about America’s damaged monetary system and how he, as well as others, believes that the dollar will eventually inflate to the point of collapsing. Paul has also petitioned to audit and even end the Federal Reserve banking system. Although now retired from politics, Paul still continues to fight the Fed by educating the public.

This raises one possible conclusion that may be the reason why the government decided to change the monetary system from gold to paper bills—government cannot reproduce gold the way they do with the reprinting of paper money, thus rendering them incapable of monopolizing the monetary system. Although gold has lost its standards as a form of currency, gold is and always will remain precious to those who value its properties and fight to reinstate it as America’s primary source of currency.

By Robert Masucci

Sources:

The U.S. Constitution

The Federal Reserve Act

YouTube – Ron Paul

The Washington Post

The Madison Institute

The Mises Institute

Photo by Mark Herpel – License

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