The assault on the purity of the composition of the dollar came on April 20, 1933 when newly-elected President
Roosevelt signed the Emergency Banking Act. This legislation made it illegal for "Joe Average American" to own
gold and required private citizens to turn in their gold while allowing for the countries of the world holding our
currency to convert to gold at any time. With the exception of coin collectors, all American citizens who owned
gold or who had Gold Certificates were required to turn their gold in exchange for paper currency issued by the
Federal Reserve.
In 1944, the United Nations sponsored the UN Monetary and Financial Conference, known as the "Bretton
Woods" Monetary Conference as it was held in Bretton Woods, New Hampshire. There 700 delegates from 44
countries met to determine the value of money in the post-World War II era. At this conference, the United States
dollar, which had the highest amount of gold reserves backing it, was named the international reserve currency of
the world. What this meant was that all of world commerce would use the dollar to trade with and all other
currencies would be linked to it at a fixed exchange rate, thus stabilizing the value of world currencies to the value
of the dollar. In addition, participating countries could convert their dollars to gold at any time, if they chose to do
so. (Currently there is discussion to restructure the agreements made at Bretton Woods by removing the dollar as
the world's reserve currency.)
From that time, until 1968, when French President Charles deGaulle requested of President Lyndon Johnson that
the paper dollars he held be converted to gold, the dollar was premier, as it had plenty of gold backing it, or so
everyone thought. It was President deGaulle who very astutely realized that America was monetizing their debt to
finance the Vietnam War and he wanted his dollars in gold before the gold window was closed. By the time he
converted in June of that year, our gold reserves had dwindled from $30B in 1944 to less than $10.5B. It was,
however, President Richard M. Nixon who closed the gold window on August 13, 1971, thus changing the nature
of the world monetary system forever and perhaps signaling the "countdown to a world currency." |
