![gold.jpg](https://steemitimages.com/DQmV5zS6RjPojRPJVzVZegoqanoR6EmUcKsNWpgWNy7a7Z2/gold.jpg)

The Gols Standard is a financial system which directly links a currency's value to the value of gold.

A nation on the gold standard can't increase the quantity of cash in circulation without also raising its gold reserves. Since the global gold supply grows only gradually, being on the gold standard will maintain government overspending and inflation in check. 

No nation now backs its currency with gold, but a lot have done it previously, including the U.S.; for fifty years,  starting at 1879, Americans could trade in $20.67 for an ounce of gold. The nation effectively abandoned the gold standard in 1933 and totally severed the connection between the dollar and gold in 1971. The U.S. Now has a fiat cash system, meaning the buck's value is not connected to any particular asset.

### **Why did the U.S. Abandon the gold standard?**

To help fighting the Great Depression.

Equipped with mounting unemployment and spiraling deflation from the early 30s, the U.S. Government discovered this system would do little to stimulate the market. To dissuade people from cashing in deposits and deplete the gold supply, the U.S., along with other governments, had to keep rates of interest high, but that made it too costly for individuals and businesses to borrow.

So, in 1933, President Franklin D. Roosevelt cut the buck's ties with gold, letting the authorities to pump money to the economics and lower interest rates.

Most economists now agree that 90 percent of the reason the U.S. got into the Great Depression was the break with gold (According to Liaquat Ahamed, writer of the book "Lords of Finance"). The U.S. Continued to allow foreign governments to exchange dollars for gold until 1971 when President Richard Nixon abruptly ended the practice to stop dollar flush foreigners in sapping U.S. Gold reserves.

### **The debate, today**

Why do we have the gold debate again? Libertarian Rep. Ron Paul made the return to sincere cash a key element of his presidential run, and that idea made Tea Party conservatives outraged over the Federal Reserve's monetary policies, because of the financial crisis.

They argue that the U.S. Debt now exceeds $16 trillion since the government became too cavalier about borrowing and printing cash. When the Fed prints money, golden standard advocates say it cheapens that the value of a dollar, promotes inflation, and efficiently steals money from the citizenry. 

The gold standard forces the U.S. To live in its means, said investment strategist Mark Luschini. Think about it as an individual with a bank card as opposed to a credit card. The bank card holder can only spend what she or he has in the bank.

What're the downsides? A fixed connection between the dollar and gold will make the Fed impotent to fight recessions or put the brakes on an overheating economy.

![separador.png](https://steemitimages.com/DQmQgjv2awSp18k2oUSoaDXFi8ApCyCu2KYZ5XxC2dZ2Uw2/separador.png)

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