US DOLLAR NO LONGER BACKED BY GOLD
Richmond Fed States Dollar No Longer Backed by Gold
According to the Federal Reserve Bank of Richmond, the U.S. dollar is no longer backed by gold. The Richmond Fed’s FAQ on gold and silver (links at the bottom) states in relevant part:
[W]hen the United States stopped selling gold to foreign official holders of dollars at the rate of $35 an ounce in 1971, it brought the gold exchange standard to an end. In 1973, the United States officially ended its adherence to the gold standard.
But wait, there’s more. The Richmond Fed’s FAQ on gold and silver also states:
H.J. Res. 192, approved by President Roosevelt on June 5, 1933, provided that obligations payable in gold or specific coin or currency are contrary to public policy, and that those obligations could be discharged dollar for dollar in legal tender. After that resolution was adopted, currency of the United States could not be converted into gold by United States citizens…
U.S. Treasury Confirms Dollar Receives No Backing By Anything, Then Takes Down Webpage
According to a 2009 article on the financial website, Seeking Alpha, the official position of the U.S. Treasury was that the U.S. dollar was also backed by nothing, specifically:Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything[sic] This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are “backed” by all the goods and services in the economy.
“Federal Reserve notes” are U.S. dollars. It says so right on the face of any dollar bill. The above statement was taken from the U.S. Treasury’s own website, but don’t bother looking for it there. The page that contains the above quote has been taken down. But thanks to the Internet Archive’s Way Back Machine website, you can still pull it up from 2009 (links at the bottom).
What Does This Mean?
So what does all of this mean? It means that when the U.S. dollar was backed by gold (a.k.a. “the gold standard”), there was a limit to how many dollars the government could print into existence because those dollars were, by law, redeemable in an equivalent amount of gold. The ratio specifically was $35.00 per troy ounce of gold. So for every $35.00 the government printed into existence, the federal government had to be able to produce one ounce of gold to back it up. That meant there was a limit to how many dollars the federal government could print into existence.
Every time the government increases the number of dollars in circulation, like it did in the aftermath of the 2008 economic crisis, it devalues the dollars you have in your bank account.
But now, as the Treasury website used to say, the U.S. dollar is backed by nothing. So now the federal government, via the Federal Reserve, can and does legally print money at will. More importantly, there’s no longer any limit to how many dollars the Fed can print into existence. If you remember basic supply and demand from your high school economics class, then you should understand that every time the government increases the number of dollars in circulation, like it did in the aftermath of the 2008 economic crisis, it devalues the dollars you have in your bank account.
So Why Does the Government Still Borrow? Why Does the Government Still Tax?
If the government can print dollars at will, then those holding dollars are at the mercy of that will. But since the government can legally, and does legally, create dollars out of thin air as it (meaning the Federal Reserve) sees fit, then why does it need to ever borrow money? More importantly, since the government can and does create dollars out of thin air as it sees fit, why does it still need to tax your income to raise revenue?
To put it another way, if the federal government authorized you (and just you, nobody else) to print legal tender dollars on your printer at home, would you ever need to borrow or ask anybody for money again? Wouldn’t you just print up what you needed instead of indebting yourself or taking money from others? Do you see the scam they’re running on you? Do you dare ask why?
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Resources Links:
- Richmond Federal Reserve FAQ on Gold and Silver
- U.S. Treasury FAQ on Currency and Legal Tender Status via The Way Back Machine
- U.S. Treasury FAQ on Currency and Legal Tender Status as of this posting (404 Not Found)
- What Really Backs the U.S. Dollar? at Seeking Alpha
- Video: President Nixon announces the end of the convertibility of the U.S. dollar to gold
