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For a couple hundred years, our currency was tied largely to gold and silver.
At the end of WW II, countries all over the world started borrowing from the US to rebuild their shattered cities, because the US was relatively unscathed and economically stable.
However, the huge outflow of dollars quickly surpassed our ability to back it in gold. Not the first time this had happened, but…
By the late 1960s the problem was getting so severe that the US was in genuine terror that a foreign government could precipitate a run on gold and therefore cave the US economy.
So President Nixon signed legislation severing the dollar from ever again being tied to the gold standard. This is known as the Nixon Shock, largely because its effect was so wide-reaching that virtually all the worlds’ currencies also lost their connection to gold. You can look it up.
After that, gold became a pure commodity and its price has shot upward on speculative markets at a rate similar to that of oil. Indeed the fact that trading in gold has become so heavily speculative is among the core reasons why the US will likely never return to the gold standard.
There is no relationship between the price of gold and the value of the US dollar, and there hasn’t been since Nixon was president.
The total value of the US dollar (and many other global currencies) today is predicated on trust.
Fortunately, trust can be expressed a lot of different ways. For example, via an exchange rate, a credit card transaction, an encryption key, or a promise to repay a loan.
The problem is that the massive hoarding of dollars by the ultra rich (largely in the US, but also in countries like China, Saudi Arabia and the UK) threatens to destabilize the global economy by putting too much control over investments and monetary policy into the hands of a very few people.
The hoarding of wealth also homogenizes the global markets, forcing them to look more like their high-finance based US counterparts – which make their money off transaction volumes, mergers and acquisitions, hedge funds, tax avoidance and de-regulation strategies, and to a lesser extent, pure finance of large-scale corporate and public investments.
This homogenization makes the worlds’ federal banking systems less adaptable and puts pressure on secondary banks to reduce risk, and therefore fluidity, in the real world. Without access to cash, opportunities for organic growth evaporate, leaving middle and lower-income entrepreneurs unable to form new businesses or hire employees.
It may be that the only way around this problem is the formation of a new currency, but there is reason to believe that, too, would fall under the control of the ultra-rich.