What Happened To Using Silver & Gold In Circulatio

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Originally posted by nos

"Gold, with few exceptions, became illegal to own." That doesn't sound very American or Constitutional at all...I am quite surprised that even though it may have been necessary that it passed that you'd think it only would have been for contemporary US gold coins of the time.

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One other part in this interesting thread. So far all has been basically covered and quite well I might add. In 1933 when Roosevelt was considering the gold move, gold was sitting at more than $20 per ounce. Literally Americans could walk into any bank and redeem their gold certificates for gold. This would be an easy way to bankrupt a nation. As noted earlier, many notes were shipped to Europe to pay for the efforts of rebuilding. The government could not possibly pay out more than bringing in.
Now was it constitutional? No. The founding fathers knew that currency would have to be backed by precious metal. In the colonies all currency that did not contain gold or silver were banned. However, in 1792 when the government was formed, it did allow copper to be named in connection with our currency.
Over the years, (note 1853) our silver coins were reduced in weight to make up the difference in price. Can you imagine what $20 worth of gold would look like today? At 400+ an ounce, a $20 gold coin would be smaller than the 3 cent silver of old.
The longest continued market of gold last nearly 100 years. In 1837 the U.S. set the mark at $20.67 per ounce. That meant that a double eagle $20.00 gold coin contained $19.99 worth of gold.
With the gold ban of 1933 only numismatic gold could be owned. This was very strict in terms. When the law was passed, an ounce of gold was worth $35. So it did not take a brain surgeon to figure out the exchange rate.
While Roosevelt in the strictest terms created and passed an unconstitutional law, it was needed to save a failing nation.

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Originally posted by nos

What they should have done as you all know I'm sure is only release as many notes as they had gold or silver to back them up with. I actually did notice in my book a few years ago that the weight was slightly lowered. I didn't really investigate why exactly but now I know.

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Hi Nos,
Think about this one a minute. No bank carries enough money in their vault to pay all of their accounts should all of their depositors walk in the door and ask for their money. and we should all be glad- if they did there would be no money to lend for home mortgages, auto and small business loans, etc, and they could therefore pay no interest. We all rely on our trust that the bank, or the FDIC which backs the bank, will give us our money if need be. This system works really well- prior to the FDIC there were recurrent "runs" on banks where depositors would get anxious, line up demanding their money, the bank would fail, and all would be out of luck.
Gold backed bills were the same. The US only had so many ounces of gold in their vaults. Our economy is many, many times larger in real purchasing power than in 1933. If all of our transactions were based only on the relatively few ounces of gold in the US (roughly 1 oz per citizen) that gold would be increasing in value exponentially. To buy a hamburger you'd have to give someone 1/10,000 of an oz of gold (or so)
BTW, an interesting way to compare the buying power of various currencies is to look at how much a big mac costs in local currency.
http://www.economist.com/markets/bi...y_id=3503641
Don

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No bank carries enough money in their vault to pay all of their accounts should all of their depositors walk in the door and ask for their money. and we should all be glad- if they did there would be no money to lend for home mortgages, auto and small business loans, etc, and they could therefore pay no interest.

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If I understand you correctly, the Banks now have all our money and that is the reason they aren't paying any interest on my savings account. Even though the Feds have raised prime rates 6 times in the last 6 months, the banks are still sitting their rates as is they were going out of business. Or am I mistaken?

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Originally posted by OldDan

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No bank carries enough money in their vault to pay all of their accounts should all of their depositors walk in the door and ask for their money. and we should all be glad- if they did there would be no money to lend for home mortgages, auto and small business loans, etc, and they could therefore pay no interest.

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If I understand you correctly, the Banks now have all our money and that is the reason they aren't paying any interest on my savings account. Even though the Feds have raised prime rates 6 times in the last 6 months, the banks are still sitting their rates as is they were going out of business. Or am I mistaken?

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I think the reason they haven't raised their interest rates is the same reason the credit card companies didn't lower them when the fed was dropping rates. And as we know, its why dogs lick themselves in embarssing places