On January 1, 1975, U.S. citizens can once again own gold, with the Gold Price Per Gram being a key factor in its value. Gold has been considered precious throughout history, but it was not used as money until around 550 BC. C.At first, people carried gold or silver coins with them.
If they find gold, they could have their government make tradable currencies with it. Due to its value and its usefulness as a currency, the evolution of the value of gold dates back to 30 BC. In the 1960s, European and Japanese exports became more competitive with those of the United States. UU.
The share of world production declined, as did the need for dollars, making the conversion of those dollars into gold more desirable. The balance of payments, combined with military spending and foreign aid, resulted in a large supply of dollars around the world. Meanwhile, the supply of gold had increased only marginally. Over time, there were more dollars in foreign hands than gold in the United States.
The country was vulnerable to the fall of gold and there was a loss of confidence in the U.S. The government's ability to meet its obligations, which threatens both the dollar's position as a reserve currency and the general Bretton Woods system. A lot of efforts were made to adjust the U.S. Balance of payments and to maintain the Bretton Woods system, both nationally and internationally.
They were intended to be “quick fixes” until the balance of payments could be readjusted, but they showed that they were postponing the inevitable. The Treasury Exchange Stabilization Fund (ESF), with the Federal Reserve Bank of New York as its agent, began to intervene in the foreign exchange market for the first time since World War II. The ESF buys and sells currencies to stabilize exchange market conditions. Although the interventions were successful for a time, the Treasury's lack of resources limited its ability to organize a comprehensive defense of the dollar.
From 1962 until the closure of the United States,. Golden Window: In August 1971, the Federal Reserve relied on “currency swaps” as a key mechanism to temporarily defend the U.S. The Federal Reserve structured reciprocal exchange agreements, or swap lines, providing foreign central banks with a hedge for unwanted dollar reserves and limiting the conversion of dollars into gold. These efforts by the global financial community proved to be temporary solutions to a larger structural problem in the Bretton Woods system.
The structural problem, which has been called the “Triffin dilemma”, occurs when a country issues a global reserve currency (in this case, the United States) due to its global importance as a medium of exchange. However, the stability of that currency is called into question when the country persistently registers current account deficits to meet that offer. As current account deficits accumulate, the reserve currency becomes less desirable and its position as a reserve currency is threatened. While the United States was in the midst of Triffin's dilemma, it was also facing a growing problem of inflation in its country.
The period known as the Great Inflation had begun, and policy makers implemented anti-inflationary policies, but they were short-lived and ineffective. At first, both the Nixon administration and the Federal Reserve believed in a gradual approach, slowly reducing inflation with a minimal increase in unemployment. They would tolerate an unemployment rate of up to 4.5 percent, but by the end of the recession of 1969-70 the unemployment rate had risen to 6 percent and inflation, measured by the consumer price index, was 5.4 percent. When Arthur Burns became Chairman of the Board of Governors in 1970, he faced both slow growth and inflation or stagflation.
Burns believed that tightening monetary policy and the associated increase in unemployment would not be effective against the inflation that was taking place at the time, because it was due to forces outside the control of the Federal Reserve, such as unions, food and energy shortages and the control of oil prices by OPEC. In addition, many government and Federal Reserve economists, including Burns, shared the view that inflation cannot be reduced with an acceptable unemployment rate. According to economist Allan Meltzer, Andrew Brimmer, a member of the Fed Board from 1966 to 1974, noted at the time that employment was the main objective and combating inflation was the second priority. The Federal Open Market Committee implemented an expansionary monetary policy.
With inflation rising and gold looming, the Nixon administration coordinated a plan to take bold action. From August 13 to 15, 1971, Nixon and fifteen advisors, including Federal Reserve Chairman Arthur Burns, Treasury Secretary John Connally, and Undersecretary for International Monetary Affairs Paul Volcker (later Chairman of the Federal Reserve), met at the Camp David presidential retreat and created a new economic plan. On the night of August 15, 1971, Nixon addressed the nation about a new economic policy aimed not only at correcting the balance of payments, but also at preventing inflation and reducing the unemployment rate. The first order was to close the golden window.
Foreign governments could no longer exchange their dollars for gold; in fact, the international monetary system became a trust system. A few months later, the Smithsonian agreement tried to keep exchange rates fixed, but the Bretton Woods system ended soon after. The second order consisted of freezing wages and prices for 90 days to control inflation. This was the first time that the government enacted wage and price controls outside wartime.
It was an attempt to reduce inflation without raising the unemployment rate or slowing down the economy. In addition, a 10 percent import surcharge was established to ensure that U.S. products were not at a disadvantage due to exchange rates. President of Burns.
Inflation is declining, so cash-like investments don't have to offer such high interest rates, and fewer and fewer people are opting for gold as a stable value reserve. The United States had a responsibility to keep the price of gold fixed in dollars and had to adjust the supply of dollars to maintain confidence in the future convertibility of gold. The next revaluation occurred in the period from 211 to 217 AD, during the reign of Marcus Aurelius Antoninus (Caracalla), who reduced the value to 50 coins per pound of gold, reducing the value of each coin and making gold worth more. At that time, the remaining seven members of the London Gold Pool (Great Britain, West Germany, Switzerland, the Netherlands, Belgium, Italy and the United States) agreed to formulate a two-tier system.
Interactive chart with historical data on the real (inflation-adjusted) prices of gold per ounce up to 1915. When it comes to gold, supply is affected by trade trends and by mining companies that obtain more gold than they can put on the market. The following chart shows the price of gold since 1968, with some notable events in the gold market. Emperor Augustus, who reigned in ancient Rome from 31 BC. C.
In 14 AD, he set the price of gold between 40 and 42 coins per pound. Since the United States held about three-quarters of the world's official gold reserves, the system seemed safe. Fixed gold prices represent the compound prices reached by several commercial banks and brokerage firms in the OTC gold bullion markets. The British pound fell in value and another gold run followed, and France withdrew from the pool.
Central banks agreed to use their gold only to settle international debts and not to sell monetary gold on the private market. . .