US Dollar
The shortcomings of gold gave birth to paper money. The scarcity of gold made it great for storing value into the future but it lacked portability and divisibility. The dollar was a layer added on top of gold to add those qualities. This addition aided humanity in many ways as you could easily carry paper around and divide it up to make a multitude of purchases. The dollar was great for transacting and it carried a promise that it could be exchanged back to gold upon request.
The US won World War II and held the majority of the worlds gold. Because of this in 1944 the Bretton Woods Agreement said the dollar would be the only currency pegged to gold and every other currency would be pegged to the dollar. Setting up the US to be the unanimous world power.
Fiat Money
Fiat money is referred to as money that lacks the backing of a hard asset. In 1971 the peg to gold was removed by President Nixon. You could no longer exchange your dollars for gold and the dollar was now backed by the full faith of the US government.
Why did this happen? The government was creating too many dollars, primarily through war financing, for the amount of gold they held. Without this peg there was no hard asset to keep government spending in check.
The Minneapolis Fed Chair Neel Kashkari told us on "60 Minutes" in March 2020: “There is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there's enough cash in the banking system.” Click here to see the clip on YouTube.
I would like to emphasize the word INFINITE!
Fiat Standard
We went from a gold standard to a fiat standard. This has been the largest monetary experiment the world has ever seen and this year marked its 50th anniversary. It has not come without consequences which can be seen at WTFhappenedin1971.com.
I would highly recommend that everyone reads the book, The Bitcoin Standard by Saifedean Ammous. It walks you through the history of money and then demonstrates how Bitcoin can provide the framework for a new monetary system. Bitcoin makes hard money possible again by providing scarcity to the money.
If your money isn’t scarce it isn’t valuable. It’s that simple.