Why Was the Gold System Abandoned?

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Known as the gold standard, this was a system by which currency printing was restricted and this caused several issues. In 1971, the gold standard was abolished to curb inflation, while also preventing some countries from overburdening the financial system redeeming gold for dollars. It is a very complex number of variables in play when nations trade and abolishing the gold standard was a natural step in the evolution of currency-based economies.

Licence To Print Money

One of the off spins from the abandonment of the gold standard was the fact that governments could now print as much money as they wished, as they no longer had to show gold reserves. This wasn’t the first time the gold standard was abandoned, it was temporarily frozen during the great depression, before being reinstated. After WW2, the majority of economists believed that it was time for the gold standard to be dropped and this finally led to the end of this standard in 1971.

Bretton Woods System

This was the result of a special meeting at Brent Woods, New Hampshire in 1944, when major western nations came to an agreement to govern monetary relations between countries. Forty four nations came together to hammer out this agreement, which took a total of 22 days and 748 delegates finally put pen to paper to render this agreement active. This turned out to be a pivotal moment for the global economy and it enabled growth.

Evolution Continues

In 1971, the Bretton Woods System was ended, thus rendering the US dollar a fiat currency, one that is not backed by gold. The system had served its purpose and for over 25 years, nations abided to the agreement, yet it was time to make some changes in a bid to gain control of growing economies around the world.

Gold Investing

As you would expect, gold has long been the foundation of global wealth and is traded constantly. A top dealer like City Gold Bullion is where you can buy gold bars Brisbane investors would go for, paying spot prices and once you are registered, you can buy and sell gold instantly. If you want dealers in your area, a quick online search is all it takes.

More and more private investors are pulling out of stocks and shares, preferring the safety of gold and with the current situation, who could blame them? Gold has traditionally been used as a hedge against inflation and when you look at how gold has performed since the start of the pandemic, you can understand why private investors are switching to precious metals.

Unknown Commodities

One of the interesting things to emerge from the abolishment of the gold standard was the lack of knowledge regarding how gold a nation actually has. Of course, some countries have more gold than others and each would have at least one secure vault for gold storage, if not many more. China, Russia, the UK, Germany and Australia are certain to top the list of gold holders, while Monaco is also likely to be up among the top gold spots in the world.

The global wealth system is indeed complex and gold is the cornerstone of every economy, which is never likely to change.

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