>the US dollar was never 100% backed by gold reserves
The dollar was created by the coinage act in 1792, with dollars being made of the equivalent amount of silver or gold. To me this seems like practically same thing as being 100% backed by gold reserves.
If we're talking about paper dollars or originally "Demand Notes" from 1861 onward that would be the case as they were put in place because the government was broke trying to fund the Civil War,[1] and had to issue currency on credit[2] (about $1.5b additional in todays dollars, for comparison there's about $51b total in 2021).
>A gold standard is actually just a peg, a promise by the government to exchange dollars for gold (and vice versa) at a fixed rate. And you don't technically need any gold for that.
Wouldn't you need enough reserves to allow anyone who attempted to exchange their dollars for gold to do so? Fractional banking and bank runs seem like a rough analog.
Regarding gold/silver backing - yes, if they let you actually do that redemption or exchange. Something that has historically been suspended or banned multiple times. Including by FDR in 1933, and Nixon when the US exited the gold standard entirely.
If I remember right Nixon's exit from the gold standard was at least pitched to the public as a temporary measure, and his team was slightly surprised at how little effect it had in terms of causing panic.
I think to some extent we've been riding that initial wave of trust and backing. The alternative I suppose is we've figured out how to manage things correctly and no longer need a peg, but the lead up to the end of Bretton woods sounds ominously familiar to the 2000s. CBDCs seem like the only thing that could potentially fill a similar role.
"However, from 1950 to 1969, as Germany and Japan recovered, the US share of the world's economic output dropped significantly, from 35% to 27%. Furthermore, a negative balance of payments, growing public debt incurred by the Vietnam War, and monetary inflation by the Federal Reserve caused the dollar to become increasingly overvalued in the 1960s...The American public believed the government was rescuing them from price gougers and from a foreign-caused exchange crisis."[1]
The dollar was created by the coinage act in 1792, with dollars being made of the equivalent amount of silver or gold. To me this seems like practically same thing as being 100% backed by gold reserves.
If we're talking about paper dollars or originally "Demand Notes" from 1861 onward that would be the case as they were put in place because the government was broke trying to fund the Civil War,[1] and had to issue currency on credit[2] (about $1.5b additional in todays dollars, for comparison there's about $51b total in 2021).
>A gold standard is actually just a peg, a promise by the government to exchange dollars for gold (and vice versa) at a fixed rate. And you don't technically need any gold for that.
Wouldn't you need enough reserves to allow anyone who attempted to exchange their dollars for gold to do so? Fractional banking and bank runs seem like a rough analog.
[1]https://www.mycreditunion.gov/financial-resources/history-un...
[2]https://www.cs.mcgill.ca/~rwest/wikispeedia/wpcd/wp/d/Demand...