Why did the US get rid of the gold standard?

Answer 1

The gold standard broke down during the 1930s as countries engaged in competitive devaluations. The gold standard worked fairly well from the 1870s until the start of World War I. During the war the government financed military expenses by printing money resulting in inflation, and price levels were high everywhere by the end of the war. Then, in an effort to encourage exports and domestic employment, countries started regularly devaluing their currencies. People lost confidence in the system and started to demand gold for their currency putting pressure on countries' gold reserves, and forcing them to suspend gold convertibility and by World War II, the gold standard was over.

Answer 2

Nations on the gold standard back their currency by gold. Only so much currency can be printed if you have a limited supply of gold. During World War I, many nations abandoned the gold standard so they could print more money to pay for the war (inflation). After the War, most nations went back on the gold standard until the Great Depression. FDR was concerned about the drain on our gold out of the country. People would buy gold, horde gold, or purchase US dollars and take the money out of the country. To stop this "gold drain" and to allow the government to print more money, FDR, after his inauguration in April 1933, took the US off the full gold standard in favor of the "modified gold bullion standard." Basically, money now was backed only by the faith people had in the government and the economy. During a Depression, there are few dollars in circulation. One theory in solving the Depression was to get more money in circulation, thus causing a bit of inflation, by printing more money.

In 1944, STILL under FDR, the Bretton Woods accord (http://en.wikipedia.org/wiki/Bretton_Woods_system) restored the Gold Standard by pricing gold at $35/ounce. By 1948, 10 other countries had an exchange rate with the dollar established so they, in effect, were ALSO gold-backed, indirectly.

In 1971, President Richard Nixon ended the Gold Standard entirely, partially in response to Vietnam War spending. (http://en.wikipedia.org/wiki/Nixon_shock)

Answer 3

This is a fairly complex issue and involves international money trading and all sorts of rhubarb. But in very simple terms, all countries go off the gold standard sooner or later. The gold standard is linked to the amount of gold that a treasurey holds in it's vaults and (to a lesser extent) the country's gold producing capacity. However, gold producing capacity can increase if the gold standard is abandoned due to gold being worth more and therefore more viable to mine. A nation's currency is generally now based on things such as Gross Domestic Product and export/import ratios and all sorts of other rhubarb to the first load of rhubarb.

Answer 4

Nations that defined the value of their currency in terms of a given amount of gold were unable to meet the conversion demand and had to abandon the gold standard.