The Gold Standard: When Money Meant Something

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Welcome to Stuff You Should Know, a production of I Heart Radio.

Hey and welcome to the podcast.

I'm Josh and there's Chuck and it's just us here today to explain something that every person in the world should know about to Goldstein.

I have an intro.

I have an intro. Hold on.

Oh, God.

Chuck.

Yes.

Have you ever gone to a bank and traded a dollar in for actual gold?

No.

I've never even seen gold in person that wasn't like, you know, on a whatever, a ring or something.

Sure.

And that is a huge use for gold.

I've never seen nuggets or bars and gets.

I haven't either.

I haven't now very even seen a gold coin.

Now that I think about it, I don't think I have either.

But there was a point in time where you could see gold any time you wanted.

If you went to your bank and you took a certain amount of dollars or pounds or Frank's or pesos

because the countries all over the world were on what's known as the gold standard

and just a quick broad stroke explanation, I guess.

Is that on a gold standard, every single one of your dollars or pesos or Frank's or

Deutschmarks are redeemable for gold, which means that you have to have an equal amount

of gold in your country in safes and vaults to cover every single dollar or peso or a

Deutschmarker Frank out there.

You can't just keep printing money.

You can only print as much money as can cover the amount of gold that you have.

Yeah.

Which is, you know, it's sort of a public safeguard to say, hey, your dollar, your paper

money or your coins are worth something because it's worth this much of this other thing

that we've also agreed is worth money.

Exactly.

And so for you, if you're walking around in a country that's on the gold standard, you

can go trade your dollars in for gold, your paper currency in for gold, right?

It also gives you a lot of stability and understanding that when you wake up in the morning, what

you bought for $1 yesterday, you're going to be able to buy for $1 today.

Prices don't fluctuate very much on the gold standard.

And then on more of a macro level, if you're a country and you're importing tons of stuff,

that means your currency is going out.

You're using your currency to buy these imports.

And when a bunch of your currency is out there, you need it back home.

So you have to use some of that gold to buy your currency back.

So the upshot of all of this is the gold standard is very different from the type of currency

that we have today.

And I feel like we should maybe explain a little more eventually about how they're different.

Yeah.

For sure.

I mean, we've been back and forth between the gold standard and the other, which we

call fiat currency, which is a Latin term.

And that fiat currency basically is what we're working with now because the gold standard

is basically dead.

But that's where you have more monetary policy guiding the markets and stuff like that

rather than like, no, it's tied to gold, like kind of end of story.

There are people that love and we're going to talk about the benefits and the arguments

for and against.

But people that are into the gold standard as an idea, they're kind of out of luck.

But they're still around.

They're called gold bugs.

They've been called that since Edgar Allan Post's story.

That's where it came from about the search for buried treasure.

But it's still a fight in some circles from people who are like way into the gold standard.

Yeah.

And there's, I mean, they have a lot of good points.

But the problem is is that that train has left the station and it's not coming back.

Not coming back.

So why gold, right?

There's all sort of, you could pay your currency to wheat, right?

And you could take your dollar bill and go into the bank and they'll give you like a bushel

of wheat in return, right?

Why gold in particular?

Well, yeah.

I said that, you know, that's something that they all agreed was worth something.

And that's kind of the deal.

Something's only worth something if everyone agrees that it's worth something.

But you can't, you know, you've got to pick something that makes sense and gold has

always made a lot of sense for a lot of reasons.

It is, it's scarce, but not like rare, rare.

It's rare enough to be precious, but not so rare that like, you know, it's impossible

to find.

So you've got to have enough of it, but not too much of the thing.

It's also, you can divide it up into small things.

You can melt it down.

You can make it into stuff, making it into coins, you know, is certainly valuable.

It's valuable, it's resistant to being corroded and like rusted, it's durable.

So all that stuff makes it just sort of a valuable thing to trade.

Yeah.

And you said it's durable, like most of the gold that's ever been mined in the history

of humanity is still around because you can change it from one form to another, say

like from a necklace into a gold coin, but they're still that same amount of gold on

earth.

Yeah.

Of 2025, I think the world gold council says that 219,890 tons of gold have been mined

throughout history.

And about two thirds of those have been mined since 1950 alone.

Right.

And most of that is still around, like you said, it's still out there, which kind of proves

that gold was a pretty good pick.

That and silver.

I mean, silver was, we'll talk about the fact that gold and silver kind of went back

and forth over the years, there's just a lot more silver, so silver has just been worth

less.

Right.

But it's still worthwhile.

And in fact, if we're going to start to go back a little bit in history, the very first,

I guess, currency that the United States came up with and the history for Great Britain

tracks very similarly.

But in the US, they said we're going to use gold and silver for coinage.

And they had to set an amount.

How much silver do you need to buy one unit of gold because they are related to one another

you're using both for currency?

So they said, you know what, 15 pieces of silver grains, I think, is equal to one grain

of gold.

Yeah.

So like a 15 to one ratio, but they realize right away that if they're going to start

setting these ratios in these sort of units as being kind of locked in, it's just going

to create a lot of trouble over time, especially when the amount of gold and silver increases

in deep well, I guess not so much decrease.

But when there's a gold rush or when they find a new vein of silver somewhere, that changes

the amount of gold and silver in the world, but they still had locked into that 15 to

one ratio, it's not like they kept changing it over and over.

So I think kind of right away people were like, oh, wait a minute, this is all a little

bit artificial in a way.

Yeah.

And that's something that gold bugs have trouble with is that, you know, it doesn't really

matter how, you know, honest, a gold standard keeps the government.

It's still all artificial.

There's still manipulation that can happen.

Yeah.

When a bunch of gold comes on the market, gold becomes less valuable.

If a bunch of silver comes on the market, relative to gold, silver becomes less valuable.

And one of the problems with using a commodity to back your currency is that sometimes the

value of the commodity can rise beyond the face value of the currency.

So if you have a $10 gold piece and the price of gold actually puts that one ounce at $20,

you're not going to go spend that $10 bucks, you're going to melt that thing down or sell

it to somebody for $20.

Yeah.

So there's problems here with money that actually means something in the world.

Yeah.

For sure.

And that happened.

And when that happened, kind of the first time, I guess, for the United States, people

started doing that.

They started melting gold coins or keeping them in hoarding gold coins.

Yeah.

And they started trading and using silver as currency.

So all of a sudden, we were like, wait a minute, we thought we were on a gold or we were

heading toward a gold standard.

And now we're kind of on a de facto silver standard because that's what people are

using.

Yeah.

So the government was like, well, let's just make the 16 to one and it brought everything

a little bit more into parity than there was the minor 49 or gold rush in California.

And then there was also another gold rush in Australia about the same time.

So the market price for gold went down again because the supply increased, which basically

made the US government throw their hands up in the air and say, we give up, we're going

to go watch football.

Yeah.

They're, they're kind of football, I guess, over across the pond, Isaac Newton finished

out his, his long, storied career as the master of the mint.

He did a lot of other stuff, obviously, before that.

But he worked as the master of the mint at the end of his life until his death.

And he was, he was all about gold.

He was like, he encouraged overvaluing it and said, we should really just set gold as

the gold standard for England.

And they adopted that in what, like, 18, 19, yeah.

So they, I think they were the first country on an actual gold standard and then it kind

of spread around Europe from there because they're like, it's actually pretty good, pretty

good idea because you don't need necessarily a central bank.

You don't have to have somebody figuring out what lever to pull or whatever.

The gold actually kind of naturally flows from one place to another to basically keep

this homeostasis, this balance throughout the world among all the countries that are

on the gold standard, right?

Yeah.

So the thing is is humans are humans.

You can mess up anything that it is even something that naturally flows from one place

to another.

We can basically put our foot in it and screw it up.

And that was the case, usually, as we'll see throughout history, that's usually the

case when war comes along.

And that happened in the United States with the Civil War, and we've talked many times

about this, about how before the Civil War, there was like 8,000 different types of currency

in use in the United States.

Like your general store in town might have its own currency that you could use.

And as the Civil War came along, that all changed very quickly.

Yeah, that was, I remember we, that feels like very many years ago.

We were talking about that in a few episodes, it was kind of the hot topic for us for

a while.

It was so hot.

We were talking about all those different currencies.

Like one town might have a currency and then two miles down the road, the next town

might have their own currency, which within that town, as long as everyone, again, if

everyone agrees what something is worth, it's working out okay, but that's a mess if you're

trying to be a country, which we, despite the Civil War, we were trying to be a country.

And so the Civil War starts and the federal government was like, hey, like Josh Clark

will say one day, wars are expensive.

And so they issued war bonds.

I think about half of $500 billion in war bonds, war bonds are what you buy to basically,

or you sell as a government and people buy to kind of finance the world and saying, hey,

I'll loan you money to go fight this war because that bond is insured.

I know for a fact that eventually I'm going to get repaid with interest for lending you

that money to fight this war.

Right.

So it's like it's super safe on the investor side, but it's just a long-term payout.

Yeah.

The thing is, is when they issued those, as far as I know, they weren't backed with gold

and then they went even further.

They just started issuing straight up paper currency that had, it wasn't pegged to gold

or silver backed up by any of it.

It was the first fiat currency in the United States.

And fiat, like you said, is just basically the government saying, this has value because

we say it has value.

You can use this to buy stuff.

You can use this to pay your taxes.

It is currency, even though it's not backed by anything.

And the reason they did that is because it was so expensive, they literally had to print

money, say it was, it had worth, and it's using it to pay their debts to basically fight

this war.

And so the market, the United States, well, the United States just became flooded with

all of this paper currency.

So the paper currency, plus all the gold backed currency, just became less and less valuable.

And I think the inflation that came about after the Civil War, because inflation happens

when the value of your currency is weak, because there's too much of it out there, it

was at like 25% during the Civil War.

And just for reference, in 2022, at the peak of the most recent inflation in June, it

was at 9%.

And that was pretty uncomfortable.

I can't imagine 25%.

No, we were in a pretty bad way.

And this was also a time when the country started dabbling in national debt and saying,

like, hey, like as a country, we can go into deep debt.

And like, let's see if anybody really cares.

It went, these are pretty staggering numbers.

The national debt in the 1860 was 65 million.

Six years later, it was $2.76 billion.

And this is when gold standard, or what are they called, gold bugs, started saying, hey,

I think you've just proved our point.

Like you printed all this money, this fiat currency, and we're in real trouble now.

Yeah.

And so Lincoln says, hold on, hold on.

And he rolls up his sleeves a little bit and gets to work.

Spits in his hand, rubs him together, picks up an X for no reason just to kind of look

tough.

Yeah, sure.

There works.

And he says, we're going to take all of those, all of the bills out there, all the dollars

on the market and just take them back and start destroying them.

And by doing that, we're going to actually lower the supply of dollars, which increases

their value, right?

And so problem salt, that's going to fight inflation because the dollar is stronger again

because there's less dollars on there.

And on just a basic economic basis of supply and demand, it makes sense.

But what the government didn't realize all the way back in the 1860s is that it takes

a little more finesse than that to not just screw up the economy like a pendulum from

one problem to the opposite problem.

Yeah, like, can you imagine being a citizen of the United States back then in those early

days, when they're just trying to figure this stuff out?

And you know, I bet a lot of people didn't have a real understanding of this.

But if you did, could you imagine just seeing your country be like, Hey, let's print a

bunch of paper and say it's really valuable, right?

And then when they got in trouble, be like, Hey, let's burn all that stuff that we printed

and said was valuable.

Yeah.

They would just come up behind like congressman would come up behind people counting their

money and just yank it out of their hand and run off and you couldn't do anything about

it.

Yeah, the paper footballs.

So that was a real hot item at the time.

So okay, a bunch of bills, a bunch of money just gets taken back, burned, destroyed, taken

off of the market.

It's just not there anymore.

And the value of the dollar strengthens the problem is because the dollar is more

as worth more than it was before and seems like it's just going to keep going up in value.

People are like, well, I'm going to hang on to my dollar because it's going to increase

in value.

So I'll be able to buy more later.

The problem is in the current term, that means that people aren't out buying stuff.

And if you're making say pre-industrial televisions, which were just boxes that, you know, like

somebody with a puppet could get in and make a little show, but they call them TVs back

then.

So we're making those and people are not spending money on the pre-industrial televisions.

Your profits are going to start to go down.

You have less reason to produce more and more of those, which means you need less workers,

which means you start laying people off, which means those workers have less wages to

spend money on.

And the whole thing becomes this self-feeding cycle that just gets worse and worse and worse.

And we call them recessions.

And when they're really bad, we call them depressions.

And that happened from the government soaking up all of those bills after the Civil War.

And it caused what's called the long depression from 1873 to 1879.

Yeah.

And so I'm say it almost went to like 1900, like 1897 before we were fully out of that.

It was a real, like, I think it was a real wake-up call early on to the United States of like,

hey, you can't, there's got to be a better way than just printing a bunch of money when

you think you need it, like kind of artificially manipulating the value of the dollar like

that is only going to lead to trouble.

So boy, that's a great first act, I think.

I think so too.

Back in form after vacation, yeah?

Yeah, I feel pretty good.

Okay.

You feeling good?

Yeah.

And you're doing great.

You're looking sharp, man.

I appreciate it.

So let's take a break.

And we'll come back and we'll talk about the golden age.

We love our golden ages.

The golden age of the gold standard right after this.

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So the United States is basically just stepping in it and then stepping out of it and stepping

in another pile of it in the 1870s.

We're not talking about gold either, right?

No.

No.

No.

I couldn't come up with something that wasn't just absolutely gross, so keep moving on.

This was the time when the world was globalizing for kind of the first time and so other countries

are taking note of this and they're like, yeah, this gold standard might be a good thing.

And like you said, it kicked off a golden age from 1871 to basically through about two

World War One, it was a golden age for gold.

There's no other way to put it.

I didn't want to say that, but there's no other way to put it.

Yeah.

40 something years where everyone was sort of agreeing that the gold standard was the

place to be because it was debate like after the mess, you know, post-civil war of like

what were even allowed to do as a country and like, can the government even print money

like that?

Supreme Court came along in 1871 and they said, yes, they can print money.

Maybe they need to, you know, we need to rethink our process, but the government printing

money is, is okay.

Yeah, it's legal.

It's legal.

Yeah.

So that was settled, but that still didn't mean like that the government should do that.

There was still this question, should we keep going this way as supported by the Greenback

Party who were like, yes, this actually makes a lot of sense.

Or there are other groups like the silver movement, the gold bugs were out there who were

like, no, we need a commodity backed currency, right?

Yeah.

Apparently the Wizard of Oz, and I'm sure we've mentioned this before, but it was supposed

to be an allegory for this debate over whether to go with the Greenbacks and Road City,

go with the gold standard, the yellow brick road, or to go with the ruby standard, which

were the slippers, right, or the were wheat, like you suggested that would be the scarecrow.

Exactly.

Yeah.

So all of those scarecrow, rubies, gold, the Greenbacks, all of those were part of this

national debate.

And finally, it was settled in 1900 when William McKinley was made president and he said,

no, it's gold.

We're just going with gold.

And even more than that, you cannot print a dollar beyond the amount of gold we have

to back it up.

Yeah.

That was key to that whole declaration.

He was a pro gold candidate, pro gold standard.

And like you said, in 1921, he was like, we got to have some real teeth behind this.

I can't just say it as president and make it so.

So they passed the gold standard act of 1900, and that had some language in there that

said, exactly that is, hey, that circulation, it's got to be tied to gold.

We can't print one dollar more than we have in equal amounts of gold.

And that was it.

That was the classic gold standard period.

It meant that nations were trading with one another on equal ground, and it was dependent

on sending like physical gold to one another.

If you were producing more and exporting more, then you had a lot of gold stockpiled in

your country.

If you had a trade deficit, you had a lot less gold.

And it was everyone kind of knew what that meant, and it worked for a long time.

It did work.

I mean, there were dozens of nations all on the gold standard at the same time.

So you knew how much you were going to get paid for your shipment of pre-industrial televisions

overseas, right, because they were bonkers for them in Portugal.

But the reason why you knew is because there was such stability among your currency and international

currency, you paid to gold, that when you shipped that shipment out, by the time it arrived,

it was the same price.

With Fiat currency, the price of stuff can fluctuate so much over a day or a week that

when you sent a shipment out, if you hadn't already settled the contract, which you probably

did, but by the time it arrived, you might be making way less than you were going to when

you shipped it out.

That's not really what happened during the classic golden age of the gold standard.

It was all much more stable than that.

That's right.

But like you said, we pegged the end of that to basically World War One, because as you

mentioned earlier, wars are really expensive.

They're going to spike your national debt if you get involved in one.

And in Europe and World War One, they were like, this war is really, really expensive.

And our supply of gold is being constrained.

So we have to leave it.

So the international gold standard dissolved basically, mostly worldwide, except for the

US and UK.

We stayed on that gold standard, and because of that, for a while, the British pound and

the US dollar were basically the global reserve currencies, because they had gold to back

them.

So they were the gold standard, the dollar in the pound.

Yeah, because it's not, I mean, it's not figurative when you're saying like you had to use

your gold to buy back your currency if you were in a trade deficit, right?

You actually had to ship gold to the country you were buying your dollars or your pounds

back from.

So with the US and the UK having currencies pegged to gold and them being the global reserve

currency, you could just ship currency overseas, which is so much easier than shipping gold,

right?

So that was a huge...

So much lighter.

So the US and England both ended up with the vast majority of the world's gold, because

you could take a dollar, you could take a pound to the US and the UK and say, give me some

gold for this, and those notes, the paper dollars were good as gold, essentially, which

is I'm pretty sure where that came from.

Yeah, I mean, it's funny, the gold standard and good as gold, like a lot of these terms

literally come from these weird monetary policies.

Yeah.

William McKinley?

Yeah.

Old gold back.

So things were going along okay after that.

And then the 1929 stock market crash came and banks started failing all over the world.

And everyone, you know, when stuff like this happens, there's...it seems like it used

to happen more, but there can be a real panic and people start converting their dollars

and their pounds to gold, because they were like, we know gold is worth something.

I don't want to have like this paper currency on hand that's like clearly losing value

very quickly.

Right.

If I wait a day, I might get less gold than I will if I cash my bank account in today.

And remember earlier, I said like how this is all...it all kind of self-regulates, it all

moves naturally from one place to another, but still humans can screw things up just because

we're human.

This is how we screwed it up.

There were banking panics after banking panics where people just made runs on banks and

said, give me all my money.

And the bank would be like, we don't have it.

They would shout out all their money and end up closing.

And there were like 10,000 bank closures in the early 1930s in the United States alone

between 1930 and 1932 because people would run in and like just take all their money out.

And so banks were failing.

This is before the FDIC.

So if you had a bunch of money and the bank closed forever before you could cash it in,

you were broke.

Like that money was worthless, right?

And that caused even more people to make runs on banks which created this huge terrible

ripple effect.

And so the UK and the US were both faced with this challenge.

Like what do you do?

Do you stay on the gold standard or do you go off the gold standard?

And the UK was up first.

Yeah, they abandoned the gold standard in 1931.

Apparently there's a story that their central banker, a guy named Matihue Norman at the

time suffered a nervous breakdown because he was, you know, it was kind of up to him

to make that final call.

And can you imagine the pressure to be in charge of like a kind of a worldwide economy

almost?

Right.

And how important these decisions are.

So wait, I want to answer your question.

No.

I cannot imagine that kind of pressure either.

So the pound's value of course immediately drops even further than it already was.

So people that were, had lost faith in the paper money we're saying like see there,

like good thing we traded in our, our pounds for gold.

And America and of course everywhere around the world is seeing this happen.

So everyone else is losing confidence.

And this is when, you know, further runs on banks happen.

And we had a president, a lame duck named Herbert Hoover who was leaving office in

1933 and told incoming FDR, he was like, hey, you know, we're in real trouble here.

The reason we have gold is because we can't trust governments.

And FDR was like, you know what, I think I've got this.

So he went in office and he said, I'm going to, I'm going to fix this crisis for good.

One of the, yeah, one of the first things he did was I think the day after he was inaugurated,

he declared a four day banking holiday.

So all the banks are closed, right?

For four days, so there couldn't be any runs on banks.

And I was watching this, there's this dude who's a YouTuber named the casual historian.

And he builds himself as a conservatorian, which I take to be an accommodation of a conservative

and a vegetarian, right?

Yeah, probably.

But he was explaining that this actually didn't do much in real terms like the banks that

were about to fail before the banking holiday still failed afterward.

Yeah.

But as far as the public was concerned, it was a huge signal for essentially the first

time that the government was going to step in because one thing that you cannot argue

against with the gold standard is because you're constrained, you cannot print more money

than you have gold to back it.

There is nothing you can do in an economic crisis except sit there and watch it happen.

You can't do anything.

There's no leverage for you to pull the country out of it.

The only way that you can pull your country out of a recession or a depression is by printing

more money and actually devaluing the money that people are hoarding.

So you're basically saying, you got all this money that you're stashed away because it's

so valuable.

Well, guess what?

It's not so valuable anymore.

So you might as well get out there and spend it.

Yeah, for sure.

We were in big trouble, obviously, in the 1930s.

You mentioned earlier that cycle that happens when companies are producing less and fewer

customers and not hiring people or firing people.

In 1933, the unemployment in the United States was 25 percent.

That's so crazy.

I know.

It's staggering.

I think worldwide, almost one in three people were out of work in 1932, so it wasn't

just the United States.

That many people being out at work at once.

That's the thing that thankfully it hasn't happened yet, but with the AI conversations

and people, I've had conversations with people in my sphere.

Are you sure they were just people and not bots?

They think it's such a great thing.

I'm not even arguing the merits of arts or not and things like that, but I said, I

just worry about what would happen if 20 percent of the workforce was laid off in the span

of like a year or so because of AI.

It's like, that's what I worry about.

We haven't seen that yet, thankfully, but I guess we'll see.

Yeah.

You and I were talking about the same thing, and she brought up a really great question,

which is one of the things that a lot of the AI proponents say is, eventually we're

going to create this utopia where no one has to work and everybody's ready.

Her question is, if that's your goal, why don't we take some of that wealth and just start

now before AI?

Right.

We need to wait for AI to do that.

We can do it now.

I thought that was rather clever.

I stood up and clapped and went, whoo.

Right.

And she's like, that's weird.

We're in our living room.

She left the room.

All right.

So things are bad.

They had that banking holiday.

Congress passes what's called the Emergency Banking Act at the time, which basically,

like you said, allowed them to in an emergency issue, just start printing money basically

that's not pegged to the gold standard.

And but we had that gold standard because the gold standard act of 1900.

So they had to create this banking act, I guess, to work around that, right?

Yeah.

They basically said, okay, this is just emergency measures and we're just printing this money

to give to banks to keep them from going under.

So the government is signaling all over the place.

We're stepping in.

We're going to make sure that this, that like, we're going to do something about this

for the first time.

I think that was my point before I got off on the tangent for a little while, a minute

ago.

But the government is signaling all over the place that they're going to back up banks

so you don't have to run and get all of your money out and just keep making this whole

thing worse.

So that was like a first step.

But the problem is, is there was still plenty of gold out there that people were hoarding.

They're like, yeah, that's great.

Thanks a lot.

But I'm not taking this gold back to the bank right now because I don't have any confidence

in the banking system.

So the government figured out how to deal with this.

They said, well, you know what?

We will put you in jail for 10 years and find you the modern equivalent of $250,000.

If you don't give us your gold, we'll give you the equal amount of paper dollars back,

but you can't legally own gold anymore.

Yeah.

And that was it.

I think it was about a month after they sort of restored that public confidence with the

Emergency Banking Act.

Like FDR was moving very quickly and said, all right, we're suspending the gold standard

officially.

And then the next year, what's that gold reserve act of 1934 that you were talking about

where they were like, yeah, you can't, I mean, you can keep your rings.

And if you got like collectible coins and stuff, we're not coming after those.

But you can't have bars of gold in a safe in your house anymore.

Yeah.

In Jimmy, the Greek was like, woo, that's close.

So yeah.

So now you had to have, you had to use paper currency.

So this was the shift in the United States.

And this had already happened in other countries, like you say, especially in Europe, after World

War I.

And the gold standard was dead.

And one of the things that demonstrated the death of the gold standard was economists

generally today say that the US being able to print money and basically kickstart inflation

to pull us out of the deflationary spiral, aka the depression.

That's basically 90% of the reason that the US got out of the Great Depression.

It was leaving the gold standard, being able to print money because if you can just print

money and take money off the market and put more money on the market when you need it,

you can adjust the economy enough to get it out of crises one way or the other.

And that's actually the better way of doing it.

And so the gold standard never came back again.

That's right.

And so that could be the end of our show.

But that would be weird because we haven't had our second ad break yet.

So we're going to do that and we're going to come back and just say see you later and read

a listener mail, right?

Because the gold standard's gone forever.

Gone forever.

All right, we'll be right back.

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Okay, we're back here for act three, which means it's time for listener mail,

because the gold standard is dead.

This is where the golden gun goes off.

That's right, because no, the gold standard is not dead.

It actually had another sort of brief, not even stint,

like it kind of had a, maybe not a golden age,

but maybe a heyday when the Bretton Woods agreement came around,

which was a U and a United Nations agreement that came around in 1944

in Bretton Woods, New Hampshire,

that had a whole brand new system that was really kind of like that original gold standard,

with 44 countries signed on, along with the US that said,

all right, the US dollar now is pegged to gold at $35 an ounce.

And everybody else that's signing on is tying their currency to our dollar.

Right, so for there's a fixed rate,

like there's 15 pesos for $1 and $1 equals this much gold.

So it's essentially the world going back on a gold standard.

They just figured out a good way around it to make it much easier, right?

Yeah.

And again, just like the first time if everybody's playing by the rules,

then this keeps you from munking with interest rates

to make your exports more attractive.

It prevents trade wars.

It does all sorts of calm, peaceful stuff.

But the problem is, there's just, and this is the same problem today,

there just wasn't enough gold in the world to cover the increasing expense of modern life.

Yeah, for sure.

And they had put things in place because, you know,

they were a little smarter this time around.

They were like, all right, we'll create the International Monetary Fund.

We'll create the World Bank.

So that means that there are official worldwide bodies kind of coordinating this monetary policy

between all the countries to make sure that no one's doing hinky stuff.

And it took a long time.

This wasn't like, you know, they reached this agreement in 1944 and by 1945,

it was all set in stone.

I think it didn't actually take effect until 14 years later in 1958.

By the 1960s, like shortly thereafter,

the US was spending like a, like a drunk 10-year-old.

Military spending was in foreign aid.

We're all just like ramping up, spending on imports, foreign investment.

There are a lot of dollars from the United States in worldwide circulation.

And even though we held a lot of the world's gold reserves,

like 75% at the time, like you said,

we still didn't have enough gold to cover all that kind of money.

No, and this is the, I mean, this is what keeps governments on us.

There is a possibility of a worst-case scenario

where all of the people holding those dollars can all come back at once

and say, hey, we want this, we want our gold.

We're turning in our currency, give us our gold.

And, you know, it's bad enough when you're talking about citizens making runs on banks.

If you're talking about entire foreign governments bringing all of their cash reserves

to you and saying, we want gold, you got a really big problem.

And finally, in 1971, Nixon admitted like we don't have enough gold

to cover the currency out there.

Sorry, guys, you can't turn that in for gold anymore.

Sorry, and just kind of backed out of the room.

Yeah, he backed out of the room.

And it was a big deal because this isn't the kind of thing that we could,

we had pegged our dollar to like worldwide value.

So we couldn't just say that by ourselves.

In 1973, the monetary fund, they went off the gold standard.

They basically kind of came along for the ride and said,

all right, everybody should kind of go to this fiat currency system.

And like that was the true real end of the gold standard.

And like there's this, that ship is so far out of the harbor now,

there's no way they could go back to it.

Now, and it eventually kind of became a fringe right wing position.

For some reason, they just kind of adopted it,

but that doesn't mean all of the right wing agrees with it.

In fact, Milton Friedman, who's a right wing conservative economist hero,

he was even like, that's a terrible idea to go back on it.

He wrote a paper in I think 1990, your co-wrote one,

that basically demonstrated just how bad of an idea it would be.

But there's still plenty of people who are like,

no, gold is, gold is where I want to put my, my faith in.

One of the reasons why it's still around is because people believe that if there's a social collapse,

right afterward, people will still accept gold.

They won't accept dollars or pounds or euros,

but they'll take gold in return.

So that's one reason a lot of people still have faith in gold as an investment.

There's other people who are like, gold's always going to become more and more valuable,

because there's a finite amount of it, right?

And that actually is the same thing for Bitcoin.

There's a finite amount of Bitcoins, which means that over time,

it's going to become more and more valuable.

It's going to buy more and more stuff,

which makes it a deflationary currency,

which actually makes it dangerous,

because that means people are more likely to buy and hoard Bitcoins,

or buy and hoard gold,

because eventually it's going to become more valuable,

and that's how you go into a recession.

Yeah, I've never,

well, I'm just, you know, me in economics and money.

I'm just a big dummy with all that.

So cryptocurrency is something that,

even though we've podcasted on it,

I just, it's not like I'm saying like,

I don't trust cryptocurrency.

I just, I don't understand it,

and I have no interest in understanding it.

Yeah, yeah, although it does seem to have gained a lot of legitimacy,

especially at the point.

Sure, but I mean, it's a wild ride.

Like it was like 16,000 earlier this year,

or like last year,

and now it's at like 61,

and 61 is down from 90 something a month or two ago.

Like, maybe it's a long term thing,

but that's not something you want to,

I mean, you would have to be so insane to trade that stuff on a daily basis.

I don't have the stomach,

I'm just, that's not who I am.

Me either.

You know, I want to sit around,

and you and I want to sit around and listen to elevator music.

Not, not track the currency,

you know, cryptocurrency.

No, but for some people, that is quite thrilling.

Oh, I bet it is.

Have fun with that, if that's your thing.

For Larry David.

Right.

So like we said, I think in Act One,

that, you know, there are still people that argue for the gold standard,

and people that argue against it,

even though that ship is sailed.

And there are, you know, some pretty good arguments each way.

If you're for the gold standard,

you know, you can say like,

hey, that's going to definitely put a lid on this crazy government spending

that we have had going on.

And it'll stabilize the money supply.

We've seen it do that literally.

So, you know, that's a pretty decent,

like they got a lot of like data to back those claims up, for sure.

Yeah, one of them is,

it's just basically throwing shade at how out of control government spending

gets when the government is allowed to literally just print money

when it wants to.

One of those things that you'll see a lot,

is that the purchasing power of the dollar

has declined by more than 85%

since the US left the gold standard in 1971.

The reason why is because the government

just keep printing money any time it likes,

which causes inflation.

Well, that's purposeful.

Like a fiat currency is an inflationary currency

as opposed to a deflationary currency like gold.

They want inflation to happen because inflation,

you can keep on top of,

it's deflation that's really hard to come out of.

So yeah, it's not really a problem.

If you can buy less with a dollar than you did before

because you're adjusting for inflation,

it's not a problem as long as your wages are keeping up with it.

The problem is wages haven't kept up with it.

And so people are being paid the same amount as before

and are able to buy less because they have less money

even though the cost of living has increased.

Their wages, our wages,

haven't gone up, commensurate to it.

Yeah, for sure.

And if you want to talk about, like,

you know, we're talking about printing money

and a spike in the cash supply,

here's a pretty staggering statistic.

The supply of money in 1970,

this is what they call the M2 money supply,

which is all the cash, all the money in checking accounts,

all the travelers checks was about $600 billion in 1970.

The year before I was born.

In August of last year, it was $22 trillion,

which is an increase of 3,566% over whatever, 54 years.

And 20% of that was created in 2020.

Yeah, just that year.

Yeah.

Yeah, so there's this, I mean, there's clear evidence

that like the government will just print money

as much as it can whenever it wants to.

Part of the problem is that also increases the national debt

because more money out there if you can print money,

make new money, you can spend that new money

if you're the organization that is creating the money.

So the national debt increased tremendously too

over that same time period from 1970 to 2025.

Yeah, it increased 9,000%.

It was 398 billion back then.

And now it is over $36 trillion.

And it's a number that is just hard to even comprehend

that seemingly nobody, well, not nobody,

but the right people aren't concerned enough about.

So gold bugs are like, see, if you let the government

print money, they're gonna print money

and they're going to spend more money,

the gold standard keeps them from being able to do that

end of story.

That's right, but there are anti gold bugs

or people who prefer fiat currency

and the ability for the government to step in

and throw levers and control monetary policy

through debate and decision making.

And that's one of the big arguments is like,

hey, we need to be able to make these decisions

sort of on the fly and move quickly to save ourselves

in times of doubt and in times of economic stress.

And they can also combat a lot of that data too.

They can also say, well, yeah,

but you really should look at these numbers instead.

Yeah, so gold bugs always say that there's stability

in gold currency, right?

But the problem is is that if you look at the gold markets,

they fluctuate tremendously.

So that's actually kind of out the window.

Another one, this one I couldn't find an answer to

that I can't wrap my head around, though,

is the total value of all the gold in the world

is $36 trillion, which is eye popping.

But that's our national debt.

But yeah, exactly.

Ironically.

But if you took the entire global economy and valued that,

that's more like $126 trillion.

So if the world went on a gold standard again,

how would you shrink $126 trillion into $36 trillion?

That right there, that's what we've been saying.

The ship has left the harbor, that train has left the station.

It's just, there's, again, there's not enough gold

to cover the value of everything in the world.

Yeah, for sure.

Another big sort of argument that people

against the gold standard point, too, is like,

hey, look at our stock market.

People aren't putting their money in their mattress anymore

and making runs on banks.

They're shifting that money.

They're cash dollars into the stock market.

And those dollars have grown and grown and grown.

I mean, there are always dips in the stock markets

and even, you know, there have been some very bad days

in a row with the stock market and, you know,

the crash of 2008 and the .com bubble

and all that stuff always affects the stock market.

But it's proven to be a pretty stable thing over time.

It has.

And in fact, if you, there's this comparison,

I found, I can't remember where I found it,

but if you took $5,000 in 1971

to celebrate the birth of Chuck.

Yeah.

And you said, I'm going to go by $5,000 worth of gold.

It's going to be a great present for Chuck.

I'm also going to bring a little mer,

a little frankincense.

It's going to get biblical in the year.

The gold actually would have increased about 7,500%.

And this is gold prices are so all over the place.

This is probably already out of date.

But I think in the end of 2025,

you would have had $379,500 worth of gold

from that $5,000 worth of gold you bought in 1971.

So that makes it seem like, okay, great.

Gold's a good investment.

What happens if you invested it in the stock market?

Well, if you would have that same 5 grand after my birth

and put it in the S&P 500,

you would have made $271,500.

So the gold standard wins in that case.

But that is if you are just taking those dividends,

if you're taking the money that you're making

from the stocks and saying like, all right,

that's my income or whatever.

If you had kept reinvesting all that from the 5 grand,

it would be 1.185 million plus what, 500 bucks?

Yeah.

So that's a return of almost 24,000% rather than 7,500%.

Right, and even if you're like, okay,

we'll wait a minute adjusting for inflation.

How much is that?

So I looked it up, I went on our beloved Westsegg,

and something that cost $5,000 in 1971

would cost you $40,000 today.

So even after you bought that $5,000 thing,

you'd still have 1.1 million and change leftover.

So it would be much better to invest it in the market

as volatile as it is, as unpredictable as it is,

as easy as it is to lose your shirt.

Over the course of time,

the ability to unleash the stock market

that having a fiat currency and being able to print money

creates is a better return on investment.

Yeah.

I'm surprised I got through this one.

You did great.

Well, you did great.

You did great.

Who wrote the original article here?

Who was it?

That was Olivia joint, she did great.

Yeah, she did great too.

And you did a lot of great supplemental research.

Everyone's doing great, everybody.

Well, it's just great up in here.

We should also say we probably got a lot of stuff wrong.

We probably walked past a lot of stuff.

This is such a detailed nuance discussion

that people who are like monetary policy walks.

This is one of their favorite things to do

is to point out all of these nitpicky little things

based on mind-boggling economics

that are really hard to describe.

We just clanced over the surface of this.

But I think, probably, we got more right

than you'd think.

Yeah, it's tough to tackle something like this

because there are people that know

a gazillion times and more about this kind of thing

that we do.

Yep, and Chuck just said tackle.

So he unlocked listener mail.

I'm going to call this.

This is from our crowds episode.

And this is a classroom hack, a question hack

from a, I think, a teacher.

Hey guys, love the episode about crowds?

Yeah, I'm a middle school teacher.

And crowds are my standard environment.

Your comments about being afraid to ask a question

in class really spoke to me because a big part of my job

is navigating the power of language with crowds

in my students.

There's a simple teacher hack that is most effective

and easiest, the easiest change I've ever made

to my communication with students.

And Aaron, from New Brunswick, Canada,

I will go ahead and say that anyone speaking in front

of a crowd where you like source questions,

I think this is a pretty good way to go.

OK.

And here it is.

Instead of saying, does anyone have any questions?

What I say instead is, what questions do you have?

There must be questions.

It really works.

Completely different response from the students, guys.

The assumption that questions are expected always

prompts at least one kid to get the courage, which

opens up the gates for everyone else, who is too apprehensive.

Thanks for being my first podcast in 2012.

And for continuing to bring joy and relaxation

to a tie-up at Satisfied Teacher.

Peace and love.

And again, that is from Aaron, with an E,

from New Brunswick, Canada.

Thanks, Aaron.

Peace and love back to you too.

And thanks for teaching.

It's a good hack.

It's a great hack.

Questions.

Who's got them?

I know there's some don't lie.

Right.

And then just get more aggressive.

Right?

Huh?

Give me a question.

Yeah, that works.

If you want to be like Aaron and send us a great email

and say, peace and love, that's awesome.

You can send it off, again, via email to the email address,

stuffpodcast.

at iHeartRadio.com.

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