Gold and Silver as Money
Gold and silver served as money for thousands of years before modern currencies existed. Their properties—durability, divisibility, portability, and scarcity—made them useful for trade and value storage.
Many currencies throughout history were backed by or convertible to precious metals. This connection persisted until relatively recently in monetary history.
"Gold is money. Everything else is credit."
— Attributed to J.P. Morgan (1912 testimony to Congress)
The End of Gold Convertibility (1971)
On August 15, 1971, President Nixon suspended the convertibility of US dollars into gold at the official rate. This ended the Bretton Woods system that had governed international monetary policy since 1944.
Since then, the US dollar and other currencies have been "fiat" money—backed by government decree rather than physical assets. The dollar's purchasing power has declined significantly over this period.
Currency Debasement in History
Governments throughout history have reduced the precious metal content of their coins or increased the money supply to fund expenditures. Examples include:
- •Roman Denarius: Silver content reduced from 95% to under 5% over three centuries
- •French Assignat (1790s): Revolutionary paper currency that lost most of its value
- •German Papiermark (1920s): Hyperinflation required wheelbarrows of currency for basic purchases
Historical Parallels Have Limits
While historical examples are instructive, they don't predict future outcomes. Modern economies differ significantly from historical empires.
Different Context
Modern central banking, global trade, and financial systems have no direct historical parallel.
Uncertain Timeline
Currency trends unfold over decades or centuries. Timing based on history is unreliable.
Gold Price Since 1971
Gold was $35/oz under the Bretton Woods system. After convertibility ended, the price rose significantly over subsequent decades—though not in a straight line.
Important context: Gold peaked at $850 in 1980 and didn't sustainably exceed that level until 2008—a 28-year period where gold underperformed many other assets.
Want to Discuss Monetary History?
We can discuss how historical context might inform your thinking—without pretending history tells us exactly what will happen next.