Brooch - First gold smelting in Johannesburg, South Africa

 Dream on untill you're out of pocket with only a garage full of dollars !

this fait money you talk of is as old as China and never ever brought anyone in its history from the Byzantine era any financial stablility for any length of time.

After the 2nd world war America was richer than any other country. Then came Vietnam, and the money was squandered so much so that by 1972, as you mentioned in the main story, it "demonetized gold and silver". In real terms it debased the paper dollar.

There wasn't enough gold any more to cover the debt and it unilaterilly broke its promise to the americans and others to pay in kind its true value, 1 onze of gold for every 35 US dollar. And said why not treat the dollar, like butter or any other commodity, and  regulate its demand and supply by an index called M1. Subsequently M2 and M3 arrived, maybe a couple more indexes have been created through "funny" accounting practices I don't know about ?

The American government went to war on gold to support its fait dollar and recklessly said it would sell its massive gold stock, many European countries rapidly bought the gold to support their own fait currencies. America soon stopped selling its gold stock.

After some 30 years america has hugh debt and climbing and as history shows when the currency becomes threatened the military enters to support the currency, so pray americans win the war over the oil fields, or those with debt will face the rioters.

Everyone knows gold and butter require real value to produce - labour, materials and money- you know basic economic theory !   No fait money has ever lasted more than 60 years.

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Thanks in large part to the hype surrounding Ron Paul's candidacy within the Republican Party, the notion of a US return to the Gold Standard has enjoyed renewed popularity as of late. Mr Paul supports the dissolution of the United States Federal Reserve and a return to the Gold Standard. Others in his ideological camp would take the matter yet further, and some have gone so far as to suggest that the United States do away with paper currency altogether and return to the practice of using coins minted from actual precious metals as currency.

Like many of the solutions seized upon by hobbiest libertarians, these monetary policies are concise, simplistic, and - unfortunately - completely wrong. A return to the Gold Standard is not only profoundly inadvisable for the United States, but also impractical, unnecessary, and unrepresentative of the problems and solutions put forth by the dicitfuls of Dr. Paul. In an effort to inject some sanity into the debate, this article will address the first of three myths and misunderstandings upon which the Gold Standard movement is based.

Take a dollar bill out of your wallet or purse and look just to the right of George Washington's head. Printed in small black letters should be the phrase "This note is legal tender for all debts public and private." These words, and the guarantee of the United States Government, are the only things that give the US Dollar weight as a currency, either domestically or on the international currency markets. Some 30 years ago, in 1972, this was not the case. Under a system called Bretton Woods, the US Dollar was, for some time, pegged at $35/ounce of gold, meaning that one dollar was worth, by decree of the United States Federal Government, 1/35 of an ounce of gold. The Bretton Woods system was brought to an end in 1972 as the unequal market pressures forced a rapid movement of dollars (and thus liabilities for the sale of gold at $35/ounce) out of the United States. Since that time the United States has operated on a fiat currency, meaning that the dollar is no longer pegged to the price of gold nor guaranteed by it. Rather, dollars have value because the government of the United States says that they have value.

Such a notion is troubling to many as the notion of a government controlling anything, much less money, through an exercise in self restraint seems a joke at best and a recipe for financial disaster at worst. Critics of the fiat system question what motive such a government has that would compel it not to simply print money as it sees fit, thus inadvertently destroying overnight the value of its own currency. Gold or silver, by comparison, can not be simply produced, and thus acts as a natural check upon this assumed tendency to expand the money supply without consideration for the hyper-inflationary pressures such a move would have.

The problem with this argument is not one of its accuracy, but rather a matter of degree. A fiat system is more prone to governmental expansion of the money supply, but such expansion is neither unique to it nor a probable course of action for its economic governors. A gold based system is less prone to hyper-inflationary tendencies, but by no means immune from them and, as demonstrated under Bretton Woods, is less able to respond to rapid changes in the market. As such, the opposition between Gold Standard and Fiat is neither a binary one nor nearly so clear cut in its costs and benefits as laid out by critics of the existing system.

Gold's value comes primarily from its high demand and low supply. There are many uses and applications for gold in the modern world and a limited supply of it. Currencies pegged to or backed by gold will remain stable provided these two economic realities remain true. Such monetary systems are, however, at the mercy of the global gold market. History teaches that, should demand for gold drop significantly or if world-wide gold production suddenly increased, gold backed currencies would immediately and irrevocably collapse. This is exactly the fate suffered by the Spanish (and by extension European) economy during the early era of New World Colonialism. As Spanish galleons hauled tons of silver and gold across the Atlantic, the European precious metals markets went into hyper-inflation. Dutch traders, then profoundly concerned for the long term stability of the European continent, bought and buried gold and silver en masse in a desperate attempt to keep the entire European continent from slipping into a depression, but their economic sacrifice was neither large nor timely enough to save Spain herself, which suffered the brunt of the economic consequences of her wealth. Even Spain's gold standard could not save her economy from the massive influx of gold and silver brought about by her exploitation of the Americas. Indeed, Spain still suffers some of the consequences of that economic collapse today.

The risk of a Spanish style collapse can be mitigated by allowing a government to re-adjust the rate at which gold is pegged to a currency. A US gold standard would, by Constitutional mandate, incorporate such a safeguard as Article I, Section 8 clearly states: [Congress shall have the power] To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures. (Emphasis added) This safeguard and power, however, nullifies the initial advantages listed for a gold-standard system: namely the difficulty of devaluation and political stability.

In short, the constraints and limitations placed upon monetary governance by a gold standard system serve as little more than speed bumps should government seek to actively set about the devaluation of currency. In actuality, a gold standard offers only ineffectual protection for the money supply against incompetence and malice while profoundly limiting the ability of well informed and well meaning governments to enact substantive and beneficial monetary policy.

Far from ensuring a stable currency, a gold standard is a primitive relic serving only to hamper modern monetary regulation.