00:00Imagine waking up one morning and finding that all your savings have lost 98% of their value overnight.
00:08Sounds like a nightmare? But that's already reality.
00:12Because that is exactly what has happened to the US dollar since 1970.
00:16And the same story is happening with virtually every currency in the world.
00:21What if I told you that this is no coincidence,
00:23but the direct result of one of the most consequential economic policy decisions of the 20th century.
00:28So welcome back.
00:31Today we talk about the gold standard and how its abolition changed our monetary system forever.
00:35I will show you in the next few minutes why this story is not only relevant for economic experts,
00:41but has a direct impact on your assets.
00:44Today more than ever.
00:45If you are interested in precious metals or financial education in general,
00:49Feel free to leave one on this channel.
00:51Part 1. What is a gold standard?
00:54Let's start with the foundation. What exactly is a gold standard?
00:58Essentially, the gold standard is a monetary system in which a country's currency is directly pegged to gold.
01:04Imagine that for every banknote in your pocket there is a corresponding gold equivalent somewhere in the vaults of the central bank.
01:11Under this system, every citizen could exchange his paper currency for physical gold at a fixed rate at any time.
01:17Never more paper money may be issued than is actually backed by gold.
01:22This creates a crucial feature.
01:24Trust.
01:25When you know that your money is backed by something real, valuable and limited,
01:30This gives you a security that goes far beyond the evil promises of a government.
01:35The classical gold standard began in 1871 when Germany introduced the Reichsmark as a strictly gold-backed currency.
01:42By 1900, virtually all major economic powers worldwide had followed suit.
01:46In the USA, the gold standard was officially established by the Gold Standard Act of 1900.
01:52Why was this system so popular?
01:54Very easy.
01:55It created stability.
01:57The money supply could not be increased arbitrarily because it was tied to the physical quantities of gold.
02:02This prevented excessive inflation and ensured price stability over long periods.
02:08A fascinating example.
02:09A high-quality men's suit costs about the same amount of gold today as it did a century ago.
02:15But in dollar terms, the price has multiplied.
02:18Measured in gold, it remained surprisingly constant.
02:20Part 2. The abolition of the gold standard.
02:24But what happened to this seemingly perfect system?
02:27Why did we give up?
02:29The history of abolition began with the First World War.
02:32To finance the immense costs of the war, many countries temporarily suspended the gold standard.
02:37They needed the freedom to print more money than they could back up their gold reserves.
02:41The next blow came during the Great Depression that began in 1929.
02:46The rigid rules of the gold standard made it difficult for governments to respond flexibly to the crisis.
02:51Great Britain therefore left the system as early as 1931.
02:54But the truly dramatic turning point came in 1933, when US President Franklin D. Roosevelt banned private gold ownership for US citizens.
03:04Yes, you heard right.
03:06Americans were actually banned from owning gold.
03:09With the so-called Executive Order 6102, citizens had to hand over their money.
03:14This is punishable by up to 10 years in prison.
03:16From 1934 to 1971, a modified gold standard remained in place, but only for international transactions between states.
03:24And then, on August 15, 1971, President Nixon completely suspended the gold convertibility of the dollar.
03:32An event that went down in history as the Nixon Shock.
03:35This decision marked the final end of the gold standard and the beginning of a new era.
03:41The era of fiat money.
03:43Part 3. The era of fiat money.
03:45What exactly is fiat money?
03:48The term comes from the Latin fiat for “Let it be.”
03:51And that describes it quite well.
03:53It is money that does not derive its value from any intrinsic value or link to gold or silver,
03:58but solely by government regulation.
04:01It is declared legal tender by decree.
04:04In other words, your money is only worth something today because governments say it is.
04:10It is not backed by gold or any other real value.
04:13It's basically just printed paper.
04:16Or even more abstractly, digital numbers on a screen.
04:20The consequences of this change were profound.
04:23First.
04:24Monetary policy became significantly more flexible.
04:27Central banks can now expand or decrease the money supply at will without being constrained by gold reserves.
04:33Not necessarily a good thing, if you ask me.
04:35Secondly.
04:37Government debt exploded.
04:39Without the discipline of the gold standard, governments could print unlimited amounts of money to finance their spending.
04:45The US national debt rose from about $40 million in 1971 to over $34 trillion today.
04:53So an increase of more than 85 times.
04:56Third.
04:58And perhaps most importantly.
04:59Continuous inflation became the norm.
05:02Under the gold standard there were periods of inflation and deflation.
05:06But in the long term, prices remained stable.
05:08Since the abolition of the gold standard, we have experienced permanent monetary devaluation.
05:13Ask your grandparents how much a loaf of bread, a house or a car cost when they were young.
05:17The answer will shock you.
05:19Not because things were so cheap back then, but because our money has lost purchasing power dramatically since then.
05:25It is worth almost nothing and has lost almost 98% of its purchasing power.
05:29Part 4. Advantages and disadvantages of the fiat money system
05:32Proponents of fiat money argue that it offers the following advantages.
05:37It enables a flexible response to economic crises.
05:40During the 2008 financial crisis and the 2019 Covid pandemic, central banks were able to massively expand the money supply to prevent economic collapse.
05:50However, this is also the biggest disadvantage in the long term.
05:53It promotes economic growth because the money supply can grow with the economy rather than being limited by the limited amount of gold.
06:00It facilitates international trade through flexible exchange rates that can adapt to changing economic conditions.
06:07But this flexibility comes with a high price.
06:10Inflation continually erodes the purchasing power of your money.
06:14What is worth 100 euros today may only have a purchasing power of 40 euros in 20 years.
06:19National debt rose immeasurably because governments are no longer constrained by gold limits.
06:25These debts will ultimately be passed on to future generations.
06:28And at some point there will be a big bang.
06:31We are getting closer and closer to that.
06:33Currency volatility is increasing.
06:35Without the stability of gold, currencies fluctuate dramatically, making planning security difficult.
06:40Most seriously, fiat money shifts power from citizens to central banks and governments.
06:46They alone decide on the money supply and thus indirectly on the value of your savings.
06:51And all this without you having any say.
06:53Part 5. A Return to the Gold Standard
06:56Could there be a return to the gold standard?
06:59This question is becoming increasingly relevant in the current times of massive monetary expansion and inflation.
07:05Some economists and political movements actually advocate a return.
07:10They argue that a new gold standard would curb inflation,
07:14would force governments to exercise fiscal discipline,
07:16would create a stable monetary system,
07:19would decentralize power and shift it back from the state to the citizens.
07:22However, there are also counterarguments.
07:25The global gold supply grows by only about 1.5% per year,
07:28which could potentially have a deflationary effect in the event of economic growth.
07:32Adapting to economic shocks would be much more difficult
07:35and the transition from the current system would be extremely complex and potentially destabilizing.
07:41Interestingly, there are signs
07:43that gold could experience a renaissance as an internationally recognized measure of value.
07:47In particular, the BRICS countries, i.e. Brazil, Russia, India, China and South Africa,
07:53have signaled interest in gold-backed transactions.
07:57Russia has specifically proposed
07:59To use gold as a medium for trade settlements within the BRICS.
08:03This could be the beginning of a gradual return to gold-backed currency.
08:07Not necessarily to a complete gold standard like before,
08:09but possibly a hybrid form.
08:11What does this mean for investors?
08:14What does this mean specifically for you as an investor?
08:17What conclusions should you draw from this story?
08:19Of course, it should be said again here,
08:21that this is just my personal opinion and not investment advice.
08:25But let’s get to the points.
08:261. In a fiat money system, inflation is not an anomaly.
08:30It is a feature of the system.
08:32It is wanted.
08:33The money in your account is continually losing value.
08:36A 2% inflation rate, often described as healthy by central banks,
08:41halves the purchasing power of your money in about 35 years.
08:442. Physical gold offers protection against systemic monetary devaluation.
08:49While no investment is perfect, gold has retained its value for thousands of years.
08:53It is no coincidence that central banks themselves in recent years
08:56have massively increased their gold reserves.
08:593. Diversification is crucial.
09:02The smartest investors spread their assets across different asset classes.
09:06And physical gold often plays a central role as a hedge
09:09against currency risks and inflation.
09:124. Education is the best defense.
09:15The better you understand the mechanisms of our monetary system,
09:18the better you can protect yourself and your assets.
09:21So why don't you leave a free subscription to this channel?
09:24The history of the gold standard is more than a chapter in economics books.
09:28It is the story of how fundamental changes in the monetary system
09:31have a direct impact on each of us.
09:34What do you think? Was the abolition of the gold standard a necessary step
09:38for a more flexible, modern economy
09:39or the beginning of a dangerous era of monetary devaluation?
09:43Share your opinion in the comments.
09:45I read every single one of them.
09:48If you have learned something, please share the knowledge with your friends,
09:51to inform them.
09:52Oh and one more thing.
09:53YouTube thinks this video will help you a lot.
09:56Don't you want to check it out?
09:57If you haven't checked,
Kommentare