Quote:
Originally Posted by grizy
This just, is, not, true.
Please explain your reason(s) for saying this.
I am not an expert on money or economics nor a historian, but I think it's safe to say that going back say 2000 years ago (to the time of the Roman Empire) silver & gold were the fundamental form of currency & store of wealth. Sure, there were (and still are) other forms / stores of wealth (i.e., spices, salt, cattle, camels, stocks, etc.) but the one thing that was universally accepted as money was gold & silver. Yes, if one goes back far enough in certain times/cultures other things were accepted as money (rare shells, etc.) but I don't think anyone here is talking about what money was 10,000 years ago among some tribe on some island somewhere.
Initially, U.S. currency was backed by gold & silver--U.S. Constitution, Article 1, section 10:
"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts"
So when the govt began issuing paper money it was backed by real gold and silver.
In 1913, the Federal Reserve System was created by Congress--a private company, owned by member banks, and controlled by the bankers. The bank notes were redeemable for gold/silver.
The U.S. mint made silver coins through '64, then reduced the silver content to 50%, and then finally in 1970 silver coins ceased. In 1971, the govt ceased allowing foreign banks to redeem US dollars for gold.
This was when the gold standard ceased.
Today the U.S. dollar is the world's reserve currency. Why is this? One reason is because of the PetroDollar system. In 1973 (right after U.S. went off gold standard) Nixon got Saudi Arabia to agree to only accept U.S. dollars for oil. By 1975 all of the members of OPEC agreed to sell their oil only in US dollars. Every nation in the world started saving US dollars so as to be able to buy oil. With such high demand for dollars the currency strengthened. On top of that, many oil-exporting nations like Saudi Arabia spent their US dollar surpluses on Treasury securities, which further strengthened the dollar and provided a wealthy pool of lenders to support US government spending.
This is changing, and when inevitably the U.S. dollar is no longer the world's reserve currency, then everything is going to change, fast.
Last edited by Pride of Cucamonga; 06-08-2013 at 03:10 PM.