Historically until President Nixon closed the gold window, the external debt of the United States was collateralized by gold owned by the U.S. Nations knew that they could trade their dollars for gold upon request. This created a stable and verified currency market. Confidence in the U.S. Dollar was at 100% because other countries had that convertibility option. Economic cycles of mild expansion and contraction were manageable. The Vietnam war began to take its toll on the system. Debts were piling up as the U.S. continued its attempt to assert its dominance in Asia. France decided to exercise its right to exchange excess dollars and convert to gold. Loss of confidence in America’s ability to manage its external debt led to this move. Nixon responded by closing the gold window and letting the price of gold float rather than keeping at a fixed convertibility rate. This was the beginning of the end of the dominance of the U.S. Dollar.
If you were to graph the relationship of the external debt to the “stated” gold reserves of the U.S., the following would result:
The external debt of the U.S. could be satisfied if the gold reserves were valued at $19,500 per ounce, a ten fold increase of the current price. Which would a country rather hold, a piece of paper or an ounce of gold? Which medium of exchange promotes confidence in future value? Based on historical ratios, silver would demand $1,220 per ounce. You can see why Our Heavenly Father encouraged a precious metal as a medium of exchange. Man can’t manipulate it.