It’s monetary system that directly links a currency value to that of gold. A nation on the gold standard can’t increase the sum of cash in circulation without also raising its gold reserves. Since the global gold supply grows only gradually, being on the gold standard would theoretically maintain government overspending and inflation under control. No nation presently backs its currency with gold, but many have in the past, including the United States. For fifty years commencing in the year 1879, Americans could trade-in $20.67 for an ounce of gold. The nation’s economic system left the gold standard in 1933 and completely severed the connection between the dollar and gold in 1971.
The U.S. Now has a fiat cash system, meaning the dollar value is not connected to any particular asset. Why did the U.S. Abandon the gold standard? Faced with increasing unemployment and spiraling deflation in the early 30s, the U.S. Authorities found it might do little to excite the economy. To discourage people from cashing in deposits and reduce the gold supply, the U.S. Along with other governments had to keep rates of interest high, but that made it also costly for individuals and businesses to borrow. President Franklin D. Roosevelt cut the dollar ties with gold, enabling the authorities to pump money into the economics and lower rates of interest.
The U.S. Continued to allow foreign authorities to change dollars for gold until 1971 when President Richard Nixon suddenly ended the exercise to quit dollar flush visitors from sapping U.S. Gold reserves. Ron Paul made a return to Honest cash a vital plank of his presidential run, and the idea took hold among Tea Party conservatives outraged over the Federal Reserve loose 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, gold standard supporters say, it demeans the value of a dollar, encourages inflation, and efficiently steals money from the citizenry. In a nod to these ideas, the Republican Party 2012 platform calls for the development of the fee to investigate setting a fixed value for the dollar. The gold standard forces the U.S. to live within its means said investment strategist Mark Luschini.