Published on May 6, 2013
Before 1974, U.S. dollars were
backed by gold. This meant that the federal government could not print
more money than it could redeem for gold. While this constrained the
federal government, it also provided citizens with a relatively stable
purchasing power for goods and services. Today's paper currency has no
intrinsic value. It is not based on the value of gold or anything else.
Under a gold standard, inflation was really limited. With floating
value, or fiat, currency, however, some countries have seen inflation
reach extremely high levels—sometimes enough to lead to economic
collapse. Gold standards have historically provided more stable
currencies with lower inflation than fiat currency. Should the United
States return to a gold standard?
