It is the duty of every concerned citizen to be informed. This includes basic economics. As the recession creeps into its second year and the number of unemployed Americans is in double digits, learning some economic essentials is a must. A good place to begin, is with the idea of the Gold Standard, which President Nixon discarded on August 15, 1971.
Before we go back in time and understand the history involved, let's get the concept of the gold standard down. It is defined as, "A commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." Basically, the gold standard was embraced in an effort create an even playing field across all national economies.
The United States has, in its past, used a combination of both silver and gold. Bimetallicism, as its known, was sanctioned in the early 1900's thanks to the Standard Act. Now it's important to keep in mind whenever there is a recession (or depression), central banks hate having such a shiny standard. What they like doing in such dire times is print more money, thus giving the immediate illusion that markets are holding fast and steady. They don't like having to worry about a standard to uphold because that standard hampers the printing presses.
Governments, and the central banks that rule their economic policies, are fond of printing more money. When one powerful economy, like that of the United States, begins to print more money, so too, in most cases, do the banks of foreign nations. This had and still has -- a tremendous affect on the Forex (or Foreign Currency) markets. To keep parity with the dollar, they must print more or less money.
The gold standard has not been used to peg any major currency since 1971. As a result, every major currency is a fiat currency, that is, it has no intrinsic value and is only as valuable as it is accepted for services rendered or goods created. The hidden danger involved is in the inflation that arbitrary printing causes. It has been estimated that the buying power of a 1971 dollar is now roughly eight cents to the dollar. Without a peg to the dollar, the Fed can print as much as it wants, thereby causing a massive tide of inflation that has the potential to flood our everyday lives. - 31987
Before we go back in time and understand the history involved, let's get the concept of the gold standard down. It is defined as, "A commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." Basically, the gold standard was embraced in an effort create an even playing field across all national economies.
The United States has, in its past, used a combination of both silver and gold. Bimetallicism, as its known, was sanctioned in the early 1900's thanks to the Standard Act. Now it's important to keep in mind whenever there is a recession (or depression), central banks hate having such a shiny standard. What they like doing in such dire times is print more money, thus giving the immediate illusion that markets are holding fast and steady. They don't like having to worry about a standard to uphold because that standard hampers the printing presses.
Governments, and the central banks that rule their economic policies, are fond of printing more money. When one powerful economy, like that of the United States, begins to print more money, so too, in most cases, do the banks of foreign nations. This had and still has -- a tremendous affect on the Forex (or Foreign Currency) markets. To keep parity with the dollar, they must print more or less money.
The gold standard has not been used to peg any major currency since 1971. As a result, every major currency is a fiat currency, that is, it has no intrinsic value and is only as valuable as it is accepted for services rendered or goods created. The hidden danger involved is in the inflation that arbitrary printing causes. It has been estimated that the buying power of a 1971 dollar is now roughly eight cents to the dollar. Without a peg to the dollar, the Fed can print as much as it wants, thereby causing a massive tide of inflation that has the potential to flood our everyday lives. - 31987
About the Author:
Learn how world currencies can be bought and sold with an accredited Forex course. As the dollar begins to lose its value, it is imperative investors look to foreign currencies to offset potential losses.
