Aug. 15 marked the 50th anniversary of President Nixon terminating the Bretton Woods agreement. A global monetary management system that was initially established in 1944, intending to stabilize exchange rates, the agreement assigned the U.S. dollar as the world reserve currency backed by a fixed-price gold standard. By the early 1970s the fiscal pressures of having the money supply restricted became too taxing for the U.S. government. The expenditures of the Vietnam War and other programs made a gold standard far too constraining. Utilizing taxation to fund such costly programs would have been tantamount to political suicide. In 1971, Nixon squashed the Bretton Woods agreement, divorcing the dollar from gold, therefore allowing for the U.S. money supply to expand with few limitations. Outside of a few supply management rules implemented by the Federal Reserve, these rules have done nothing to reverse the collective depreciation of the dollar over the past five decades.
Some estimates suggest that the dollar’s value has decreased by an astonishingly high 570.9% since the end of Bretton Woods. The purchasing power of the dollar can only continue to be eroded by inflation, therefore only serving to reduce the incentive for everyday people to accumulate savings when faced with the plummeting value of our currency. The gold standard is not perfect. It would be more conducive to responsible monetary policy. A gold-backed currency operates as a buttress against pork-barrel spending. Overall, a gold-based dollar is a better store of value than the monetized debt that is fiat currency.
