While older Americans still remember a time when silver coins circulated in everyday use, almost no one alive today remembers when gold circulated as money. Gold formed the backbone of the classical gold standard for a century, and its monetary role goes back even further. But its role in the monetary system diminished throughout the 20th century until it has all but disappeared today.
The current era of fiat monetary regimes is a historical anomaly, really the only period in world history in which gold or silver haven’t anchored the monetary system. And just as previous experiments with paper or fiat money throughout history ended in failure, many people expect this current experiment to end the same way.
That would mean that something would have to replace the current monetary order, and many people expect that gold would reassert itself as the monetary asset of choice. But what would such a monetary order look like?
Gold as Money in History
While the classical gold standard may have been done away with during World War I as governments around the world sought to fund their war efforts, that wasn’t the last hurrah for gold. Gold exchange standards were tried during the interwar era, and even the post-World War II Bretton Woods system was a gold exchange standard of sorts.
It wasn’t until 1971 that President Nixon severed the last official tie between the dollar and gold, with disastrous results. Since then, the dollar has lost 87% of its purchasing power, while gold has increased in value by over 5,000%.
The most recent bout of high inflation worldwide has highlighted the dangers of fiat money once again, and has led both individuals and governments to try to figure out how to tackle inflation. One way of doing that would be to return to some sort of gold-based or gold-backed monetary system. And while foreign countries’ attempts to back their currencies with gold have gotten a fair amount of press, there are efforts taking place in that direction here as well.
Gold as Money in the Future
China and Russia get all the attention right now when it comes to discussion of a gold-backed monetary order, and for good reason. They’re among the world’s top gold producers, and both countries have also become major buyers of gold in recent years.
Neither the yuan nor the ruble are used in many international transactions, but there have been persistent rumors over the years that Russia and/or China may be planning some sort of gold-backed international currency to enable international trade without relying either on the US dollar or on the US financial system.
While there certainly could be something afoot in those countries, there are efforts closer to home that could end up bearing fruit too, namely in Texas.
Texas is in a unique position as it formed its own state-run bullion depository in 2015. And now the Texas legislature has discussed a bill that would introduce a gold-backed digital currency.
This effort at a gold-backed digital currency is driven in part by a fear of central bank digital currencies, a fear that is by no means unwarranted. Numerous Americans want to have no part in a digital currency that could allow the government to know the details of every single one of their financial transactions.
While no firm steps have been taken yet, a gold-backed digital currency at the state level could be just what’s needed to help bring back gold to the US monetary system. That could help stifle the adoption of a central bank digital currency as well as give consumers an alternative to the US dollar.
The Timeline for Gold
If all of this still seems speculative, that’s understandable. We’re still in the infancy of a movement to return to sound money. Remember, even though the gold standard was done away with in the midst of World War I, it still took over a half century for gold’s last link to the dollar to be severed.
Expect it to take at least as long for efforts to return to gold-backed currency to succeed. We’ve seen the first baby steps being taken over the past several years, as the 2008 financial crisis and now high inflation have helped spur desire for monetary alternatives.
But while gold’s return may not come about in your lifetime, it can’t be completely ruled out. And there’s a good chance that your children and grandchildren could grow up in a world in which gold-backed currency once again takes center stage.
If gold were to once again take its place underpinning the world monetary system, those owning gold could benefit greatly from the potential surge in demand for gold. Already central banks are adding to their gold stocks at a rate that hasn’t been seen in nearly 75 years. And private citizens have pushed gold demand to record or near record levels in recent years, as they position themselves to protect their wealth ahead of a potential recession.
Many have taken advantage of gold IRAs to protect their existing tax-advantaged retirement accounts, while others have made direct cash purchases of gold coins or bars. No matter which way you prefer to buy gold, now could be the time to start protecting your wealth with gold.
Gold has protected wealth through good times and bad, with particularly phenomenal performance during the stagflation of the 1970s and in the aftermath of the 2008 financial crisis. There’s a good chance that gold could perform well during the next recession as well, and if gold ends up anchoring the international monetary system in the future, gold owners could see the value of their gold holdings increase significantly.
If you want to start buying gold before it takes off, talk to the experts at Goldco today. With thousands of satisfied customers and over $2 billion in precious metals placements, Goldco goes the extra mile to ensure that our customers benefit from their gold purchases.
We’ve helped thousands of people benefit from gold over the years, and we want to help you too. Call Goldco today to learn more about gold can help you secure your financial future.
Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.
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