KFLCC Kingdom Economics

Gold and Precious Metals in the Time of the End

countries, including America, began to adopt the gold standard due to world trade transactions. This guaranteed that any amount of fiat currency could be redeemed by that nation for its value in gold, which helped world trade because a country’s paper currency now had guaranteed value tied to gold. By World War I, nearly every country was on a gold standard. When the war began, countries needed money to pay for their military, so they suspended the gold standard and printed money, which devalued their currency and caused hyperinflation. When the war ended, most countries returned to some form of a gold standard. The gold standard was abandoned once again during the Great Depression. With the stock market crash, people began to invest in commodities and currencies. Those with dollars traded them in for gold because, at that time, the dollar currency was redeemable for gold and silver. This was depleting the federal gold reserves, so the government raised interest rates to try to make the dollar more valuable to those who were saving and investing the money. The government was attempting to keep people from exchanging their currency for gold. However, the higher interest rates had a negative effect on the economy and worsened the depression and unemployment, as it made the cost of doing business so much higher. Companies went bankrupt and more people were out of work. The Great Depression ended around the time World War II began, and most countries again went on a gold standard. Most adopted the Bretton-Woods System, which set all currency exchange values in terms of gold. The United States held most of the gold, so most countries set the value of their currency to the value of the American dollar. This made the dollar the defacto world currency, which led to an increase in the value of the dollar. At that time, gold was thirty-five dollars an ounce. Because of the way the financial system worked, the value of the dollar could either cause inflation or stagflation in the United States. Anytime the dollar was devalued, people began to exchange their currency for gold. Finally, by the end of 1973, the gold standard was dropped. Gold and silver became available for purchase in the free market, and gold quickly increased to $120 an ounce. This caused nations to begin to print more currency, which caused both inflation and economic growth. With no solid commodity to support the printing of U.S. currency, the value of the dollar is no longer based on a fixed asset. It is now based on the trust and

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