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What’s valuable? I’m Mr. Beat, and I’m trying to pay off my student loan debt. Does
anyone have any money I can borrow?
Lydia: I do. Here you go.
Aw, Thank you. Yeah, look at this! Wait a second...Federal Reserve Note? How do I know this is worth anything?
Well, currently the United States dollar, the official currency of the United States
since 1792, is worth something because nearly everyone in the world believes it to be worth
something. It’s true, if everyone decided they didn’t like it as a form of payment,
then it wouldn’t be valuable at all.
But because the United States has such a strong economy and it has for a long time, people
around the world still believe in it. Yep, even during these somewhat chaotic times,
most around the world consider the United States stable, both economically and politically.
It’s true. Most global central banks hold U.S. dollars
in reserves, and traders use it as the standard unit of currency in international markets
for commodities like petroleum and gold.
Wait, hold up. Gold. Gold, you say? Now THERE’s something valuable. Can I get some GOLD?
Lydia: Here you go, I have some.
Wow, pulling through again. Thank you so much! You know, up until 1971, gold used to back up this. In other words, the
value of the U.S. dollar used to be linked directly with gold. They called it the gold
standard, and it wasn’t just the United States that used it. Countries converted paper
money into a fixed amount of gold while also setting a fixed price for gold. That fixed
price would determine the value of the currency. So, for example, if the United States set
the price of gold at $1,000 an ounce, the value of the dollar would be 1/1,000th of
an ounce of gold.
So why did countries do this? What were the benefits of the gold standard? Three big reasons
why countries used it was 1) to supposedly bring price stability to markets 2) to provide
a fixed international exchange rate for trading 3) and to combat risky monetary behavior by
governments that spend money they don’t have and therefore cause too much inflation.
Basically, the gold standard prevented debt and deficits from getting out of control and
helped reduce the size of government.
Oh my. I just realized I almost forgot about silver. Can I get some silver, too? Do you have some silver?
Lydia: Yes
Of course she does. Look at this. I am doing pretty well for myself paying off student loans. Thank you very much.
So theres also the silver standard.
It was basically the same thing as the gold standard, but with silver, linking the value
of currencies directly with silver.
heh heh heh silver and gold
Seems all he thinks about is silver and gold.
For thousands of years, silver and gold were used as currency all over the world.
So why gold and silver? I mean, I know they're pretty and all, but why have gold and silver been
so valuable historically?
Well, both silver and gold are rare enough that it’s like “woah” when you have
them, but common enough that you could turn them into coins. Both have a fairly low melting
point to turn into coins, and as coins, they were durable, easy to get around, and held
value for a very, very long time. Even during the tough times, gold and silver have value. Not
only that, but you can make highly desirable stuff out of them. Humans have been emotionally
connected to (silver and gold) like few other items. Now, gold always wins out over silver
since silver tarnishes over time and it’s more rare.
So that’s why folks used silver and gold as currency. Over time, though, they were
both just TOO rare to make a practical currency anymore, and so governments just began LINKING
their currencies to them.
For example, in 1704, the British West Indies began linking its currency to the Spanish
gold doubloon. By the 1800s, the majority of countries around the world were either
on a gold standard or silver standard, in varying degrees.
However, there was also this thing called bimetallism, in which, as the name suggests,
governments linked BOTH gold and silver to their currencies, and at a fixed ratio to
each other. Sooo, back to the United States. In 1787, the United States Constitution actually
established both (silver and gold) as the official money of the country. Throughout
the 1800s, there were actually quite passionate debates between pro-gold folks and pro-silver
folks, er...more accurately, pro-bimetallism folks. I mean, look at this. All these delegates
at the 1896 Democratic Party National Convention were so passionate about getting off the gold
standard and allowing silver as a currency that they carried William Jennings Bryan, their presidential nominee, out
of the building after he gave a Free Silver speech, which was known as the "Cross of Gold" speech by the way. Yeah, just like a football coach who
just won the Super Bowl.
By the way, that same year...1896...Americans could trade in $20.67 for an ounce of gold.
Ultimately, though, countries would abandon BOTH silver and gold. The gold standard, in
particular, lost a lot of steam during World War I, as major players in that war just started
printing a bunch of currency not backed up by anything to pay for all those weapons they
needed to destroy stuff. Countries eased back on the gold standard after the war ended,
but then the Great Depression happened.
In 1932, when the depression seemed to only be getting worse and worse, Americans could
still literally trade in $20.67 for an ounce of gold. But the next year?
They had to trade in $32.32. Why?
That was the year President Franklin Roosevelt got rid of the dollar being directly linked
to gold, allowing the federal government to get more money into the economy and to lower
interest rates, all in the name of fighting the Great Depression. Later, after World War
II shook up monetary management worldwide, the United States, Canada, Australia, Japan,
and a bunch of Western European countries all established the Bretton Woods system,
which was basically a modified gold standard in which the participating countries figured
out international balances in U.S. dollars, as long as the U.S. kept its promise to redeem
the holdings of their central banks for gold at a fixed rate of $35 per ounce. But this
just led to the United States beginning to run out of gold, and finally, on August 15,
1971, President Richard Nixon was like “nope,” and announced that the United States would
no longer redeem currency for gold. And thus, by 1973 the gold standard had died. Today,
while most countries have pretty much abandoned the gold standard, many do still have some
gold reserves.
Now, when you just print money without backing it up with anything, history has shown it
can lead to high inflation. I mean, think about it...if there is so much in circulation,
why would it be worth anything? We’ve seen hyperinflation even in the past two years
in places like Venezuela, which has had a more than 10 million percent inflation rate
since 2018. 10 million! Yep, their currency became worthless and they had to adopt a new one.
And whenever inflation starts to creep above 5%, people do get nervous, and start to worry,
and maybe even talk about bringing the gold standard back.
When Ron Paul ran for President in 2008 and 2012, he made bringing back the gold standard
a part of his platform. He called for the ending of the Federal Reserve Bank, or the
current central banking system of the country that works to create a more stable monetary
and financial system. For more on the Federal Reserve Bank, George Soros has paid Grant,
from The Casual Historian, $1 million in gold and silver to make a video
about it. Grant?
Thanks Mr. Beat. So yes, when you're done here, go ahead and come over to my channel and check out the founding of the Federal Reserve. I promise you that it is 100% not controversial in any shape or form.
Mr. Beat: Say, did you get that gold and silver from Soros yet?
He said he would give it to me after his next meeting with the W.H.O. Apparently they're still discussing how much autism to put into this next round of vaccines.
Right on. Thanks Grant. So go check his video after you’re done watching this one. Uh,
yeah, back to Ron Paul. His biggest criticism of the Federal Reserve is that it's
severely inflating the currency.
And he might have a point, because, like I said at the beginning of this video, the reason why
this currency is so strong is because the whole world perceives it to be so valuable, but that perception could change. After all, look at that chaos going on in the country
right now. Maybe that could alter the value of this thing. I better hurry up and go spend it. (walks off)
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Ok, so I simplified as much as I could with this video, but it gets much more complicated
once you dig deeper. So do check out Grant's video over on his channel The Casual Historian about the Federal Reserve.
And what do you think? Should the United States return to backing up its currency with an asset
of some sort? Let me know in the comments below. And thanks for watching,
and good luck out there trying to earn money. I hear earning money is hard. Good thing I know people. Am I right? (making phone call)
I have friends in high places.
Yeah Soros? I need some more money to pay off my student loan debt.