america was taken off the gold standard, but still allowed foreign governments to trade dollars for gold in 1944.
america was taken off the gold standard, but still allowed foreign governments to trade dollars for gold in 1944.
when was america taken off the gold standard, but still allowed foreign governments to trade dollars for gold?
1944
these gold deposits would become known as federal reserve deposits and quickly lost their 100% gold backing. during the fed's inception, the fed needed only to back gold deposits by 35%. this created a very dangerous situation because if more than 35% of banks demanded their federal reserve deposits as gold, then the fed would be insolvent. such a crisis did happen in 1933 and federal reserve deposits (as well as federal reserve notes) lost their gold backing. foreign governments were still allowed to be on the gold standard and their federal reserve deposits were still redeemable in gold. but these too were only fractionally backed. this inevitably led to another gold run in 1971, led by heavy withdrawals by switzerland (51 million) and france (191 million). nixon chose instead of heavily devaluing the dollar against gold, to simply remove the us from the international gold standard.
federal reserve deposits
in 1873, congress enacted the fourth coinage act, which effectively ended the bimetallic standard in the united states by demonetizing silver bullion. prior to enactment of the coinage act, silver could be brought to the mints and coined into legal tender for a small fee. with such a system in place, bullion producers could have silver coined into dollars when the intrinsic value of a silver dollar was lower than the face value, thus making a profit, flooding the money supply and causing inflation. the act ended production of the standard silver dollar (then the seated liberty dollar, as designed by christian gobrecht) and provided for mintage of a silver trade dollar, which was intended to compete with mexican dollars for use in the orient. under the act, bullion producers were allowed to bring bullion to the mints in order to be cast into bars or coined into the newly authorized trade dollars for a small fee. trade dollars initially held legal tender status, but it was revoked in 1876 to prevent bullion producers from making a profit by coining silver into trade dollars when the value of the metal was low. the restrictions on free coinage laid out in the coinage act initially met little resistance from mining interests until the price of silver declined rapidly due to increased mining in the western united states. protests also came from bankers, manufacturers and farmers, who felt an increased money supply would have a positive impact. groups were formed that demanded the free coinage of silver (or "free silver") in order to inflate the dollar following the panic of 1873.
morgan dollar