On June 5, 1933, the United States abandoned the gold standard, a monetary system in which the currency is backed by gold, when Congress enacted a joint resolution that annulled the right of creditors to demand payment in gold. This year marks the 50th anniversary of the end of the gold standard in the U.S. UU. In August 1971, President Richard Nixon formally disassociated the United States, thus ending the era of Investment in Gold.Dollar derived from gold, meaning that the greenback was no longer convertible into ingots.
Overnight, the dollar became a free-floating currency, which can only be measured by comparing it to other currencies in the world. However, there were still restrictions on private ownership of gold coins, ingots and the like. It wouldn't be until President Gerald Ford signed a bill in December 1974 that Americans could freely buy and exchange ingots, for the first time in more than 40 years. The downside is that, in the years since the end of the gold standard, there has been a significant and increasing lack of discipline when it comes to public spending.
Before 1971, there was a natural limit to the amount of money that could be printed. The new issues were dependent on the amount of gold deposited in the nation's coffers. To give you an idea of how drastically times have changed, the federal debt in 1960 was just over half the size of the economy. The possibility of converting Bitcoin into a reserve currency has been discussed.
Like gold, its supply is limited and has the potential to grow. But for the time being, cryptocurrencies are too volatile. The rise of modern monetary theory (MMT) All of this points to the rapid adoption of modern monetary theory (MMT). As Ray Dalio, the billionaire founder of Bridgewater, the world's largest hedge fund, has said several times: “Cash is garbage.
Our favorite ways to expose yourself to gold So where does Dalio invest his money instead? A look at Bridgewater's third quarter presentations reveals important positions in physical gold and gold mining companies. At 11.6%, the SPDR Gold Trust, backed by gold, is the fund's second most important position. The fifth largest position, at 3.4%, is iShares Gold Trust. The gold producers in Dalio's portfolio include Newmont, Yamana Gold and Freeport-McMoran.
In addition to the securities already mentioned, we also like to expose ourselves to gold and precious metal miners through royalty companies. Our two favorite companies that follow the royalty and streaming model, Franco-Nevada and Wheaton Precious Metals, have an impressive track record of surpassing ingot and gold miners over several periods of time, in both bull and bear markets. Next, you can see that Franco significantly outperformed gold and senior producers during periods when asset prices rose and fell. Wheaton also performed well for several periods.
During periods of one, three, five and ten years, Wheaton crushed not only gold and silver, but also miners and the popular VanEck Vectors Gold Miners ETF. Both companies are due to submit their report in early March, which I look forward to. Some have called for a return to the gold standard. What does the phrase actually mean and how would it affect the economy? To help combat the Great Depression.
Faced with the increase in unemployment and the spiral of deflation in the early 1930s, the United States. The government discovered that there was little it could do to stimulate the economy. To dissuade people from collecting deposits and exhausting the supply of gold, U.S. And other governments had to keep interest rates high, but that made it too expensive for individuals and companies to borrow.
So in 1933, President Franklin D. Roosevelt cut off the dollar's relationship with gold, allowing the government to inject money into the economy and reduce interest rates. Coming out of the Great Depression meant a break with gold, said Liaquat Ahamed, author of the book Lords of Finance. It continued to allow foreign governments to exchange dollars for gold until 1971, when President Richard Nixon abruptly ended the practice to prevent foreigners, hounded by the dollar, from undermining the United States.
The use of gold as money began around 600 BC. C. in Asia Minor and has been widely accepted ever since, along with several other products used as money, the ones that lose the least value over time becoming the accepted form. A country that follows the gold standard cannot increase the amount of money in circulation without also increasing its gold reserves.
In 1806, President Jefferson suspended the minting of gold coins and exportable silver dollars to divert the limited resources of the United States Mint to fractional currencies that remained in circulation. With the resumption of convertibility on June 30, 1879, the government repaid its debts in gold, accepted greenbacks for customs and redeemed them in gold on demand. He described this form as the predominant form of the international gold standard before World War I, that it was generally impossible to implement a gold standard before the 19th century due to the absence of recently developed tools (such as central banking institutions, banknotes and symbolic coins) and that a gold exchange pattern was even superior to the British gold standard with gold in circulation. The Coinage Act of 1792 authorized the Mint to produce copper, silver and gold coins for circulation.
Most of continental Europe made the conscious decision to adopt the gold standard and, at the same time, to allow the mass of inherited (and previously depreciated) silver coins to remain unrestricted in legal tender and convertible at face value for the new gold currency. It wasn't until 1925, when Britain returned to the gold standard along with Australia and South Africa, that the gold standard was officially ended. Since that date, the Bank has kept it at a constant value in terms of gold, since the Bank regularly supplies gold when needed for export and, at the same time, has used its authority to restrict as much as possible the use of gold in the country. There is a full gold standard or with a 100% reserve when the monetary authority has enough gold to convert all the circulating representative money into gold at the promised exchange rate.
So where does Dalio put his money instead? A look at Bridgewater's third quarter presentations reveals important positions in physical gold and gold mining companies. Therefore, Great Britain was subject de jure to a bimetallic pattern, and gold was the cheapest and most reliable currency compared to cut silver (full-weight silver coins did not circulate and were destined for Europe, where 21 shillings were worth more than a guinea in gold). Therefore, the classic gold standard of the late 19th century was not simply a superficial change from circulating silver to circulating gold. Silver and gold were in the form of foreign coins or in ingots that were melted and refined by the Mint to obtain the fineness suitable for minting (see Changes in the composition of coins).
In the last years of the greenback period (1862-1887), gold production increased, while gold exports declined. In 1717, the value of guinea gold (7,6885 g of fine gold) was set at 21 shillings, resulting in a gold-silver ratio 15.2 above the proportion prevailing in continental Europe. . .