For much of American history, gold and silver were directly linked with the country’s currency. Memories of the hyper-inflation associated with the circulation of fiat “Continental Dollars” during the Revolutionary War prompted a long-standing belief that “sound money” consisted of paper dollars linked with gold and coinage created from silver.
On August 15, 1971, President Richard Nixon, facing a variety of economic challenges, ended the U.S. government’s historic commitment to maintaining the dollar’s value in relationship to gold. At the time, a dollar was worth 1/35 of an ounce of gold. Nixon’s decision, among other things, gave the Federal Reserve near total control of the U.S. economy through its manipulation of the quantity and value of the paper dollar.
Several contemporary circumstances suggest that the de-coupling of the U.S. dollar with the gold standard has been problematic. For instance, the American government’s steadily growing budget deficit, currently exceeding $21 trillion dollars, has transformed the U.S. from being the world’s largest creditor nation into the world’s largest debtor nation.
The recently opened Texas Bullion Depository purports to remedy this unsettling economic situation. Besides providing individuals and businesses, both inside and outside of Texas, secure storage of gold and other precious metals, it ultimately will provide depositors with a bullion-backed debit card to make everyday purchases. Only time will tell if this renewed promotion of “sound money” will, indeed, have a wide-reaching effect.