The Gold Standard: When Money Meant Something | STUFF YOU SHOULD KNOW

Welcome [music] to Stuff You Should. Know, a production of iHeart Radio. >> [music]. >> Hey, and welcome to the podcast. I'm. Josh, and there's Chuck, and [music]. it's just us here today to explain. something that every person in the world. [music] should know about, the gold. standard. I have an intro. I have an intro. Hold. on. Oh, god. Chuck. Yes.

Have you ever gone to a bank. and traded a dollar in for actual gold? No, I've never even seen gold in person. that wasn't like, you know, on a whatever, a ring or something. Sure. And that is a huge use for gold. I've never seen nuggets or bars, ingots. I I haven't, either. I have. never even seen a gold coin, now that I. think about it. I don't think I have, either.

But, there was a point in time when you. could see gold anytime you wanted if you. went to your bank, and you took a. certain amount of dollars or pounds or. francs or pesos because countries all. over the world were on what's known as. the gold standard. And just a quick broad stroke. explanation, I guess, um is that on a gold standard, every. single one of your dollars or pesos or. francs or Deutschmarks are redeemable.

for gold, which means that you have to have an. equal amount of gold in your country in. safes and vaults. to cover every single dollar or peso or. um Deutschmark or franc out there. You. can't just keep printing money. You can. only print as much money as can cover. the amount of gold that you have. Yeah, which is, you know, it's sort of a. uh. um a public safeguard to say, "Hey, your. your dollar your paper money or your.

coins are worth something because it's. worth this much of this other thing that. we've also agreed is worth the money.". >> Exactly. And so, for you, if you're walking. around in a country that's on the gold. standard, you can go trade your dollars. in for gold, your paper currency in for. gold, right? It also gives you a lot of stability and. understanding that when you wake up in. the morning, what you bought for $1. yesterday, you're going to be able to. buy for $1 today. Prices don't fluctuate.

very much on the gold standard. And then. on more of a macro level, um, if you're a country and you're. importing tons of stuff, that means your. currency is going out. You're using your. currency to buy these imports. And when. a bunch of your currency is out there, you need it back home, so you have to. use some of that gold to buy your. currency back. So, there's the upshot. out of all of this is the gold standard. is very different from the type of. currency that we have today. And I feel.

like we should maybe explain a little. more eventually about how they're. different. Yeah, for sure. Uh, I mean, we've been back and forth. between the gold standard and uh, the. other which we call fiat currency, >> uh, which is a Latin term and that, you. know, fiat currency basically is what. we're working with now cuz the gold. standard is basically dead. But that's. where you can, you know, where you have. more you know, monetary policy uh, guiding the markets and stuff like that. rather than like, "Nope, it's like it's.

tied to a gold." Like, kind of end of. story. Yeah. Um, there are people that. love and, you know, we're going to talk. about sort of the benefits and the. arguments for and against. Uh, but. people that are into the gold standard. as an idea, uh, they're kind of out of. luck, but they're still around. They're. called gold bugs. They've been called. that since Edgar Allan Poe's story. Um, that's where it came from about the. search for buried treasure. Mhm. Uh, but. you know, it's still a fight in some. circles from people who are like way. into the gold standard. Yeah, and.

there's I mean, they have a lot of good. points, but the problem is is that that. train has left the station and it's not. coming back. >> Not coming back. So, um, why gold, right? There's all sort you could peg. your your currency to wheat, right? And. you could take your dollar bill and go. into the bank and they'll give you like. a bushel of wheat in return, right? Why. why gold in particular? Well, yeah, I said that, you know, that's something that they all agreed. was worth something and that's kind of. the deal. Like. something's only worth something if.

everyone agrees that it's worth. something. Right. Uh, but you can't, you. know, you've got to pick something that. makes sense and gold has always made a. lot of sense for a lot of reasons. Uh, it is. um, it's scarce, but not like. rare rare. Uh, it's rare enough to be. precious, Mhm. but not so rare that. like, >> Right. >> you got to have enough of it, but not. too much of the thing. Um, it's also uh, you can divide it up. into small things, you can melt it down, you can make it into stuff. Making it.

into coins, you know, is certainly. valuable. It's malleable. It's Mhm. >> resistant to being corroded and like. rusted. It's durable. So, all that stuff. makes it just sort of a valuable thing. to trade. Yeah, and you said it's. durable. Like most of the gold that's. ever been mined in the history of. humanity is still around because you can. change it from one form to another, say. like from a necklace into a gold coin, but there's still that same amount of.

gold on Earth. >> Yeah. And I guess as of 2025, I think the. World Gold Council. says that 219,890. tons of gold have been mined throughout. history. About 2/3 of those have been. mined since 1950 alone. Right. And most of that is still around. Like you said, it's still out there. Uh which kind of proves that gold was a. a pretty good pick. That and silver. I. mean, silver was we'll we'll talk about. the fact that.

um gold and silver kind of went back and. forth over the years. There's just a lot. more silver, so silver has just been. worth less. Right. But it's still. worthwhile. And in fact, if we're going. to start to go back a little bit in. history, um the very first um. I guess currency that the United States. came up with. And the the um history for. Great Britain tracks very similarly. But. um in the US, um they said we're going. to use gold and silver for coinage. And.

they had to set an amount. How much. silver uh do you need to buy, you know, one unit of gold? Because they're. related to one another. You're using. both for currency. So they said, "You. know what? 15 pieces of silver, grains I. think, um is equal to one grain of. gold.". Yeah. So like a 15:1 ratio. But they. realized right away that like if they're. going to start setting. this um. like these ratios in these sort of units.

as being, you know, kind of blocked in, um it's just going to create a lot of. trouble over time. Like especially when. the amount of gold and silver increases. and de- well, I guess not so much. decrease, but um you know, like when. there's a gold rush or when like they. find a new vein of silver somewhere, that changes the amount of gold and. silver in the world. But they still had. locked into that 15:1 ratio. It's not. like they kept changing it over and. over. So I can I think kind of right. away people were like, "Oh, wait a.

minute. This is all a little bit. artificial in a way." Yeah. And that's. something that gold bugs have trouble. with is that, you know, it doesn't. really matter how, you know, um. honest a gold standard keeps the. government, it's still all artificial. There's still manipulation that can. happen. Yeah. >> And yeah, when a bunch of gold comes on. the market, gold becomes less valuable. If a bunch of silver comes on the market. relative to gold, silver becomes less. valuable. And one of the problems with.

using a commodity to back your currency. is that sometimes the the value of the. commodity can rise beyond the face value. of the currency. Yeah. >> a $10 gold piece and the price of gold. actually puts that 1 oz at um, $20, you're not going to go spend that 10. bucks. You're going to melt that thing. down or sell it to somebody for $20. Yeah. >> So, that's a there there's problems here. with with money that actually means. something in in the world.

Yeah, for sure. And that happened. And. when that happened, kind of the first. time, I guess, for the United States, um, people started doing that. They. started melting gold coins. They or. keeping them and hoarding gold coins. Yeah. And they started trading and using. silver as currency. So, all of a sudden, we were like, "Wait a minute. We thought. we were on a gold or we were heading. toward a gold standard, and now we're. kind of on a de facto silver standard. because that's what people are using.". Yeah. So, the government was like, "Well, let's just make this 16 to 1." And it.

brought everything a little bit more. into parity. Then there was the minor. '49er gold rush in California. And then there was also another gold. rush in Australia about the same time. So, the the market price for gold went. down again because the supply increased, which basically made the US government. throw their hands up in the air and say, "We give up. We're going to go watch. football.". Yeah, their their kind of football. I. guess, over across the pond, um, Isaac. Newton finished out his.

his long storied career as the Master of. the Mint. Mhm. Uh, he did a lot of other. stuff, obviously, before that. But he he. worked as the master of the mint at the. end of his life uh until his death. And. he was he was all about gold. He was. like he encouraged overvaluing it and. said we should really just set gold as. the gold standard for England and they. adopted that in what like 1819. Yeah. So they I think they were the first. country on an actual gold standard and. then it kind of spread around Europe.

from there because they're like, "Hey, this is actually pretty good pretty good. idea." Because you don't need. necessarily a central bank. You don't. have to have somebody figuring out what. lever to pull or whatever. The gold. actually kind of naturally flows from. one place to another to Mhm. to. basically keep this homeostasis, this. balance throughout the world among all. the countries that are on the gold. standard, right? Yeah. So the thing is is humans are humans. Um. you can mess up anything that it is even. something that naturally flows from one.

place to another. We can basically put. our foot in it and screw it up. And that was the case usually um as. we'll see throughout history. That's. usually the case when war comes along. And that happened uh in the United. States with the Civil War. And we've. talked many times about this about how. before the Civil War there was like. 8,000 different types of currency in use. in the United States. Like your general. store in town might have its own. currency that you could use. And as the.

Civil War came along that all changed. very quickly. Yeah, that was I remember we took that. feels like very many years ago we were. talking about that and. a few episodes. It was kind of the hot. topic for us for a while. It was so hot. >> When we were talking about all those. different currencies like one town might. have a currency and then 2 mi down the. road the next town might have their own. currency. >> Mhm. Which you know, within that town as. long as every again, if everyone agrees. what something is worth, it's working. out okay. But that's a mess if you're.

trying to be a country. Uh which. Right. And so. uh. the Civil War starts and the federal. government was like, "Hey, like you you. know, Josh Clark will say one day, wars. are expensive." Mhm. And so they issued. war bonds. I think about half of. $500 billion in war bonds. Uh war bonds are what you buy to. basically, you know, or you sell as a. government and people buy to kind of. finance the world and saying, "Hey, I'll.

loan you money to go fight this war um. because that bond is insured. Uh I know. for a fact that eventually I'm going to. get repaid um with interest um for. lending you that money to fight this. war." Right. So it's like it's super. safe on the investor side, but it's just. a long-term payout. Yeah. The thing is. is when they issue those as far as I. know they weren't backed with gold and. then they went even further. They just. started issuing straight-up paper. currency that had it wasn't pegged to. gold or silver backed up by any of it.

It was the first fiat currency in the. United States and fiat, like you said, is just basically the government saying, "This has value because we say it has. value. You can use this to buy stuff. You can use this to pay your taxes. It. is currency even though it's not backed. by anything.". And the reason they did that is because. it was so expensive. They literally had. to print money, say it was it had worth, and then start using it to pay their. debts to basically fight this war. And.

so the the market, the the United States. um well, the the United States just. became flooded with all of this paper. currency. So the paper currency plus all. the gold-backed currency just became. less and less valuable and I think um. the inflation that came about after the. Civil War because inflation happens when. the value of your currency is weak. because there's too much of it like out. there. Yeah. >> it was at like 25%.

during the Civil War. And just for a. reference, uh in 2022 at the peak of the. most recent inflation in June, it was at. 9%. And that was pretty uncomfortable. I. can't imagine 25%. No, we were in a pretty bad way. And. this was also a time when the country. started uh dabbling in national debt and. saying like, "Hey, like as a country we. can go into deep debt." Yeah. >> And like let's let's see if anybody. really cares. Uh it went This is These are pretty. staggering numbers.

Uh the national debt in 1860 was 65. million. Six years later, it was 2.76. billion dollars. >> Yeah. And this is when gold standard or. what are they called? Gold bugs. >> Yeah. started saying, "Hey, um I think. you've just proved our point. Like you. printed all this money, uh this fiat. currency, and we're in real trouble. now." Yeah. And so Lincoln says, "Hold on, hold on.". Uh and he rolls up his sleeves a little. bit and gets to work. Spits in his hand, rubs them together,

picks up an axe for no reason just to. kind of look tough. Yeah, sure. That. works. And he says, "We're going to take. all of those the all of the bills out. there, all the dollars on the market, [clears throat] and just take them back. and start destroying them.". >> Yeah. And by doing that, we're going to. actually lower the supply of dollars, which increases their value, right? Mhm. >> problem solved. That's going to fight. inflation because the dollar is stronger. again because there's less dollars on. there. And on a just a basic economic.

basis of. supply and demand, it makes sense. But. what the government didn't realize all. the way back in the 1860s is that it. takes a little more finesse than that to. not just screw up the economy like a. pendulum from one problem to the. opposite problem. Yeah, like can you imagine being uh. a citizen of the United States back then. in those early days when they're just. trying to figure this stuff out? And you. know, I I bet a lot of people didn't.

have a real understanding of this, but. if you did, could you imagine just. seeing your country be like, "Hey, let's. print a bunch of paper and say it's. really valuable." And then when they got. in trouble be like, "Hey, let's burn all. that stuff that we printed and said was. valuable.". >> Yeah, like you you they would just come. up behind like congressmen would come up. behind people counting their money and. just yank it out of their hand and run. off and you couldn't [laughter] do. anything about it. Yeah, paper footballs. That was a real. hot item at the time. So, um okay, a. bunch of.

uh bills, a bunch of money just gets. taken back, burned, destroyed, taken off of the. market. It's just not there anymore and. the value of the dollar strengthens. The. problem is. because the dollar is more um is worth. more than it was before, it seems like. it's just going to keep going up in. value. People are like, "Well, I'm going. to hang on to my dollar because it's. going to increase in value, so I'll be. able to buy more later." The problem is. in the current term, that means that people aren't out buying.

stuff and if you're making, say, uh. pre-industrial televisions, which were. just boxes that, you know, like somebody. with a puppet could get in and and make. a little show, but they called them TVs. back then. If you're making those and. people are not spending money on the. pre-industrial televisions, your um. profits are going to start to go down. You have less reason to produce more and. more of those, which means you need less. workers, which means you start laying. people off, which means those workers.

have less wages to spend money on and. the whole thing becomes this. self-feeding cycle that just gets worse. and worse and worse and we call them. recessions and when they're really bad, we call them depressions. And that. happened from the government soaking up. all of those bills after the Civil War. and they caused what's called the long. depression from 1873 to 1879. Yeah, and some say it it almost went to. like 1900 like 1897 before we were fully.

out of that and it was a real. like I think it was a real wake-up call. early on to the United States of like. hey, you can't um. there's got to be a better way than just. printing a bunch of money when you think. you need it like kind of artificially. manipulating the value of the dollar. like that. Um it is is only going to. lead to trouble. So, uh boy, that's a. great first act, I think. I think so, too. Back in form after vacation? Yeah? Yeah, I feel pretty good. Okay,

you feeling good? Yeah, and you're doing. great. You're looking sharp, man. I appreciate it. So, let's uh let's take. a break and we'll come back and we'll. talk about the golden age. We love our. golden ages. The golden age of the gold. standard right after this. >> [music]. [music].

[music]. [music]. >> So, um the United States is basically. just stepping in it and then stepping. out of it and stepping in another pile. of it um Yeah. in the 1870s. Th- This is. the. >> talking about gold, either, right? >> N- No. No. Uh the uh. no, I couldn't come up with something. that wasn't just absolutely gross. So, Yeah. >> we'll keep moving on. But, this is the.

time when the world was globalizing for. kind of the first time and so other. countries are taking note of this and. they're like, "Yeah, this gold standard. might be a good thing." And like you. said, it kicked off a golden age from. 1871 to basically through war about to. World War I. It was a golden age for. gold. There's no other way to put it. I. didn't want to say that, but there's no. other way to put it. Yeah, it's like what, 40-something. years? Uh where everyone was sort of agreeing.

that the gold standard was the place to. be. Uh because there was debate like. after the the mess, you know, post-Civil. War uh of like what were even allowed to. do as a country and like can the. government even um print money like. that. Supreme Court came along in 1871. and they said, "Yes, they can print. money. Um maybe they need to, you know, we need. to rethink our um process, but but the. government printing money is is okay.". Yeah, it's kind of settled. >> It's It's legal. Yeah. Yeah. So, that.

was settled, but that still didn't mean. like that the government should do that. There was still this question, should we. keep going this way as supported by the. Greenback Party. who were like, "Yes, this actually makes. a lot of sense." Or there are other. groups like the silver movement, the. gold bugs were out there who were like, "No, we need a commodity-backed. um uh currency, right?" Uh. apparently The Wizard of Oz, and I'm. sure we've mentioned this before, but it. was supposed to be an allegory for this. debate over whether to go. with the greenbacks, Emerald City, go.

with the gold standard, um the uh yellow. brick road, >> road. uh or um to go with uh the ruby. standard, which were the slippers. Right, or they were wheat, like you. suggested. That would be the the. scarecrow. Exactly. Um yeah. So, all of. those, scarecrow, rubies, gold, um. the the greenbacks, all of those were um. part of this this national debate. And.

finally, it was settled in 1900 when. William McKinley was um made president. and he said, "No, it's gold. We're just. going with gold." And even more than. that, you cannot print a dollar beyond. the amount of gold we have to back it. up. Yeah, that was that was key to that. whole declaration. He was a pro-gold. candidate, uh pro-gold standard, and. like you said, in 1900 when he won, he. was like, "We got to have some real. teeth behind this. Uh I can't just say. it as president and make it so." So,

they passed the Gold Standard Act of. 1900. And that had some language in. there that said, exactly that is, "Hey, that circulation, it's got to be tied to gold. We can't. print $1 more than we have in equal. amounts of gold." And that was it. Um. you know, that was the the classic gold. standard period. It meant that nations. were trading uh with one another on. equal ground, uh and it was dependent on. sending like physical gold to one.

another. Um if you were producing more and. exporting more, then you had a lot of. gold, you know, stockpiled in your. country. If you had a trade deficit, you. had a lot less gold, and it was everyone. kind of knew what that meant. And it. worked for a long time. It did work. I. mean, there were dozens of nations all. on the gold standard at the same time. So, you knew how much you were going to. get paid for your um for your shipment. of uh pre-industrial televisions. overseas, right? Cuz they were bonkers.

for them in Portugal. Yeah. But, the reason why you knew was. because there was such stability among. your um your currency and international. currency pegged to the to gold um that. when you shipped that shipment out, by. the time it arrived, it was the same. price. Yeah. With fiat currency, the. price of stuff can fluctuate so much. over a day or a week that when you send. a shipment out, if you hadn't already. settled the contract, which you probably.

did, but by the time it arrived, you. might be making way less than you were. going to when you shipped it out. That's. not really what happened during the the. classic golden age of the gold standard. It was all much more stable than that. That's right. But, uh like you said, we. pegged the end of that to basically. World War I because as you mentioned. earlier, wars are really expensive. They're going to spike your national. debt if you get involved in one. And in Europe in World War I, they were. like, this war's really, really. expensive. And our supply of gold is.

being constrained, so we have to uh we. we have to leave it. So, the. international gold standard uh dissolved. basically, um. mostly worldwide except for the US and. UK. We stayed on that gold standard. And. because of that for for a while, the the. British pound and the US dollar were. basically the global reserve currencies. Uh cuz, you know, they had gold to back. them. So, they were they were the gold. standard, the the dollar and the and the.

pound. Yeah, because it's not I mean, it's not figurative when you're saying. like you had to use your gold to buy. back your currency if you were in a. trade deficit, right? You actually had. to ship gold to the country you were. buying your dollars or your pounds back. from. Yeah. So, with the the US and the. UK having currencies pegged to gold and. them being the global reserve currency, you could just ship currency overseas, which is so much easier than shipping. gold, right? So, that was a huge.

>> It is super light. So, um the US and. England both ended up with like the vast. majority of the world's gold because, you know, you you could take a dollar, you could take a pound to the US or the. UK and say, "Give me some gold for. this." And those those notes, those the. paper dollars were uh good as gold. essentially, which is I'm pretty sure. where that came from. Yeah. I mean, it's funny, the gold. standard and good as gold like a lot of. these terms like literally come from. this these weird monetary policies. Yeah. Yeah, William McKinley.

Yeah. >> [laughter]. >> Old gold gold back? Uh so, things were going along okay. after that. Uh and then the 1929 stock. market crash came. and banks started failing all over the. world and everyone, you know, there was. you know, when stuff like this happens. there's. it seems like it used to happen more but. there can be a real panic and people. start converting their dollars and their. pounds to gold cuz they were like we.

know gold is worth something. Um I don't. want to have like this this paper. currency on hand that's like clearly. losing value very quickly. Right, if I. wait a day I might get less gold than I. will if I cash my bank account in today. Um and remember earlier I said like how. this is all it all kind of. self-regulates, it all moves naturally. from one place to another but still. humans can screw things up just cuz. we're human. This is how we screwed it. up. There were banking panics after.

banking panics where people just made. runs on banks and said give me all my. money and the bank would be like we. don't have it. They would shell out all. their money and end up closing and there. were like 10,000. bank closures in the early 1930s in the. United States alone between 1930 and. 1932 because people would run in and and. like just take all their money out. And. so banks were failing. This is before. the FDIC. So, if you had a bunch of. money and the bank like closed forever. before you could cash it in, you were.

broke. Like that money was worthless, right? And that caused even more people. to make runs on banks which created this. huge terrible. ripple effect. And so the UK and the US. were both faced with this this. challenge. Like what do you do? Do you. stay on the gold standard or do you go. off the gold standard? And uh, the UK. was up first. Yeah, they abandoned the gold standard. in 1931. Mhm. Uh, apparently there's a. story that their central banker, a guy.

named, uh, Montagu Norman at the time suffered. a nervous breakdown because he was, you. know, it was kind of up to him to make. that final call. And can you imagine the pressure. to be in charge of like, uh, kind of a worldwide economy almost? >> Right. And and how important these. decisions are. Um, so the pound's value. >> you a question. No, no, I cannot imagine. that kind of pressure. >> either. So, the pound's value, of. course, immediately drops, uh, even. further than it already was. So, people. that were,

uh, had lost faith in the paper money. were saying like, "See there? Um, like. good thing we traded in our our pounds. for gold." And America and, of course, everywhere around the world is seeing. this happen. So, everyone else is losing. confidence and this is when, you know, further runs on banks happened. And we had a a president, a lame duck. named Herbert Hoover who was leaving. office in 1933 and told incoming FDR, he. was like, "Hey, you know, we're in real trouble here. Uh, the reason we have gold is cuz we.

can't trust governments." And FDR was. like, "You know what? I think I've got. this." So, he went in office and he. said, "I'm going to I'm going to fix. this crisis for good.". One of Yeah, one of the first things he. did was, um, I think the day after he. was inaugurated, he, um, declared a. four-day banking holiday. So, the all. the banks were closed, right? For four. days. So, there couldn't be any runs on. banks. >> And, um, I was watching this there's. this dude who's, uh, YouTuber named The.

Casual Historian and he, uh, bills. himself as a conservatarian, um, which I take to be in a combination. of a conservative and a vegetarian. Right. Yeah, probably. But, um, he was. explaining that this actually didn't do. much is real terms. like the banks that. were about to fail before the banking. holiday still failed afterwards. >> Yeah. >> But as far as the public was concerned, it was a huge signal for essentially the. first time that the government was going. to step in. Because one thing that you.

cannot argue against with the gold. standard is because you're constrained, you cannot print more money than you. have gold to back it. There is nothing. you can do in an economic crisis except. sit there and watch it happen. You can't. do anything. There's no levers for you. to pull to pull the country out of it. The only way that you can pull your. country out of a recession or a. depression is by printing more money and. actually devaluing the money that people.

are hoarding. So, it's you're basically saying, you. got all this money that you stashed away. because it's so valuable. Well, guess. what? It's not so valuable anymore. So, you might as well get out there and. spend it. Yeah, for sure. Uh, and you know, we. were in big trouble obviously in the. 1930s. You know, you mentioned earlier. sort of that cycle that happens. um, when companies are producing less. and fewer customers and. uh, not hiring people or firing people. And in 1933, the unemployment in the.

United States was 25%. >> That's so crazy. I know, it's staggering and I think. worldwide almost one in three people. were out of work in 1932. So, it wasn't. just the United States. Like that many. people being out of work at once. um, and that's the thing that I always. uh, you know, thankfully it hasn't happened. yet, but with the AI conversations and. people I've had conversations with. people in in my sphere Are you sure they. were people and not bots? >> [laughter]. >> They think it's such a great thing and I. was like, you know, I'm not even arguing.

the merits of art or not and things like. that, but I said, I just worry about. what what would happen if like 20% of. the workforce was laid off in the span. of like a year or so. because of AI. It's like that's what I. worry about. And we haven't seen that. yet, thankfully, but I guess we'll see. Yeah, you me and I were talking about. the same thing and she brought up a. really great question, which is like one. of the things that a lot of the AI. proponents say is like eventually we're. going to create this utopia where like. no one has to work and everybody's. wealthy. >> Right.

And her question is like if that's your. goal, why don't we take some of that. wealth and just start now before AI? Why. do we have to wait for AI to do that? We. can do it now. >> I thought that was rather clever. I. stood up and clapped and went woo. She was like, that's weird. You're We're. in our living room. She left the room. Uh all right, so things are bad. Uh they. had that banking holiday. Um Congress passes uh what's called the. Emergency Banking Act at the time, which.

basically, like you said, allowed them. to in an emergency issue just start. printing money basically that's not. pegged to the gold standard. >> Mhm. And but we had that gold standard. because the Gold Standard Act of 1900, so um. they had to create this banking act I. guess to work around that, right? Yeah, they they basically said, "Okay, this is. just emergency measures and we're just. printing this money to give to banks to. keep them from going under.". So the government is signaling all over. the place, "We're stepping in. We're.

going to make sure that this that that. like. we're going to do something about this. for the first time." I think that was my. point before I got off um on a tangent. for a little while a minute ago, but the. government is signaling all over the. place that they're going to back up. banks so you don't have to run and get. all of your money out. >> Right. And just keep making this whole. thing worse. Yeah. So um that was like a. first step, but the problem is is there. was still plenty of gold out there that. people were hoarding. They're like, "Yeah, that's great. Thanks a lot, but. I'm not taking this gold back to the.

bank right now because I don't have any. confidence in the banking system." So. the government figured out how to deal. with this. They said, "Well, you know. what? Uh we will put you in jail for 10. years and fine you the the modern. equivalent of $250,000. if you don't give us your gold. We'll. give you the the equal amount of um. of paper dollars back, but you can't. legally own gold anymore.". Yeah, and that that was it. That was I. mean, I think it was about a month after.

they um sort of restored that public. confidence with the emergency banking. act. Like FDR was moving very quickly. and said, "All right, we're we're. suspending the gold standard. officially." And then the next year uh. what's that Gold Reserve Act of 1934. that you were talking about where they. were like, "Yeah, you can't I mean, you. can keep your your rings and if you got. like collectible coins and stuff, we're. not coming after those, yeah, but you. can't have bars of gold in a safe in. your house anymore." Yeah, and Jimmy the. Greek was like, "Woah,

that was close.". >> [laughter]. >> So, uh yeah, so now you had to have you. had to use paper currency. So, this is. this is the shift in the United States. and this had already happened in other. countries, like you said, especially in. Europe after World War I, um and like. the gold standard was um. was dead. And one of the things that. demonstrated the death of the gold. standard was uh economists generally. today say that the US being able to. print money.

Mhm. and um basically kickstart. inflation to pull us out of the. deflationary spiral, aka the depression, uh that's basically 90% of the reason. that the US got out of the Great. Depression. It was leaving the gold. standard, being able to print money, cuz. if you can just print money and take. money off the market and put more money. on the market when you need it, you can. adjust the economy enough to get it out. of crises one way or the other. And that.

that's that's actually the better way of. doing it. And so the gold standard never. came back again. That's right. And so that could be the. end of our show. Uh but that would be weird because we. haven't had our second ad break yet. So we're going to. do that and we're going to come back and. just say see you later and read a. listener mail, right? Cuz the gold. standard's gone forever. >> Gone forever. All right, we'll be right back. >> [music].

[music]. >> Okay, we're back here for act three, uh. which means it's time for listener mail. cuz the gold standard is dead. >> This is where the golden gun goes off.

That's right, because no, the gold. standard is not dead. Uh it actually had. another sort of brief. not even stint, like it kind of had a. maybe not a golden age, but uh maybe a. heyday. uh when the Bretton Woods agreement came. around, which was a UN a United Nations. agreement um that came around in 1944. in Bretton Woods, New Hampshire that had. a a whole brand new system that was. really kind of like that original gold. standard with 44 uh countries signed on.

uh along with the US that said, "All. right, the US dollar now is pegged to. gold at $35 an ounce and everybody else. that's signing on is tying their. currency to our dollar." Right. So for. there's a fixed rate, like there's 15. pesos for $1 and $1 equals this much. gold. So it's essentially the the world. going back on a gold standard, they just. figured out a a good way around it to. make it much easier, right? Yeah. And.

again, just like the first time, if. everybody's playing by the rules, then. this keeps you from monkeying with. interest rates to make your exports more. attractive. It It prevents trade wars. It does all sorts of calm, peaceful. stuff. Um but the problem is there's just and. this is the same problem today. There. just wasn't enough gold in the world to. cover the increasing expense of modern. life. Yeah, for sure. And they had put things. in place cuz, you know, they were a little smarter this time.

around. They were like, all right, we'll. create the International Monetary Fund. We'll create the World Bank. So, that. means that there's there are official. worldwide bodies kind of coordinating. this monetary policy between all the. countries make sure that no one's doing. hinky stuff. And it took a long time. This wasn't like, you know, they reached. this agreement in 1944 and by 1945 it. was all set in stone. I think it didn't actually take effect. till 14 years later in 1958. Um by the 1960s, like shortly. thereafter,

uh the US was was spending like a like a. drunk 10-year-old. Um military spending. was and foreign aid were all just like. ramping up. Uh spending on imports, foreign investment. There are a lot of. dollars from the United States in. worldwide circulation. >> Yeah. And even though we held a lot of. the world's gold reserves, like 75% at. the time, like you said, we still didn't. have enough gold to cover all that kind. of money. No. And this is the I mean, this is what keeps governments honest. There is a possibility of a worst-case.

scenario where all of the people holding. those dollars can all come back at once. and say, "Hey, we want this we want our. gold. We're turning in our our currency. Give us our gold." And you know, it's. bad enough when you're talking about um. citizens making runs on banks. If you're. talking about entire. foreign governments bringing all of. their cash reserves to you and saying we. want gold, you got a really big problem. And finally, in 1971, Nixon admitted. like we don't have enough gold to cover.

the currency out there. Sorry, guys. You. can't turn that in for gold anymore. Sorry. And just kind of backed out of. the room. Yeah, he backed out of the room. Um. And it was it was a big deal because. this isn't the kind of thing that we. could uh. we had pegged our dollar to like. worldwide value. So, we couldn't just. say that by ourselves. >> Right. Uh in 1973, the uh the monetary. fund um they went off the gold standard.

They basically kind of came along for. the ride. >> Yeah. Uh and said, "All right, everybody. should kind of go to this fiat currency. system.". >> Mhm. And like that was the true real end. of the gold standard. And like there's. just. that ship is so far out of the harbor. now, there's no way they could go back. to it. No. And it eventually kind of. became a fringe right-wing position. Um. for some reason, they're they just kind. of adopted it, but that doesn't mean all. um of the right wing agrees with it. In. fact, Milton Friedman, who's a. right-wing conservative economist hero,

um he was even like, "That's a terrible. idea to go back on it." He wrote a paper. in I think 1990 or co-wrote one that. basically demonstrated just how bad of. an idea it would be. >> Um but there's still plenty of people. who are like, "No, gold is gold is where. I want to put my my faith in." Um one of. the reasons why it's still around is. because. people. believe that if there's a social. collapse, Right. >> afterward, there people will still.

accept gold. They won't accept dollars. or pounds or euros, but they'll take. gold in return. So, that's one reason a. lot of people still have faith in gold. as an investment. There's other people. who are like, "Gold's always going to. become more and more valuable because. there's a finite amount of it, right? Um and that actually is um the same. thing for uh Bitcoin. There's a finite amount of Bitcoins, which means that over time it's going to. become more and more valuable. It's. going to buy more and more stuff, which.

makes it a deflationary currency, which. actually makes it dangerous because that. means people are more likely to buy and. hoard Bitcoins or buy and hoard gold. because eventually it's going to become. more valuable and that's how you go into. a recession. Yeah, I've never. I'm just you know me and economics and. money, I'm just a big dummy with all. that. So, cryptocurrency is something. that. even though we podcasted on it, I I just. it's not like I'm saying like I don't. trust cryptocurrency. I just I don't.

understand it and I have no interest in. understanding it. >> Yeah. Yeah, although I it does seem to. have gained a lot of legitimacy, especially Bitcoin. >> Sure. But it I mean it's a wild ride. Like it was at. like 16,000 earlier this year or early. like last year and now it's at like 61. and 61 is down from 90 something a month. or two ago. Like it maybe it's a. long-term thing, but that's not. something you want to I mean, you would. have to be so insane to trade that stuff.

on a daily basis. Yeah, I don't have the stomach for I I'm. just that's not who I am. >> Me either. You know, I want to I want to sit around. and you and I want to sit around and. listen to elevator music. Not not track the currency uh. cryptocurrency. >> No, but for some people that is quite. thrilling. Oh, I bet it is. Have have fun with that. if that's your thing. For Larry David. Right. Uh so, like we said if I think in act. one uh that you know, there are still. people that argue for the gold standard. and people that argue against it even.

though that ship has sailed. Um and there are you know, some pretty. good arguments each way. Uh if you're for the gold standard, um. you You you can say like, "Hey, that's. going to definitely put a a lid on this. crazy government spending that we have. had going on. and it'll stabilize the money supply. We've seen it do that literally. Um. So, you know, that's a pretty decent. like they got a lot of like data to back. those claims up for sure. Yeah, one of them is it's just basically.

throwing shade at how out of control. government spending gets when the. government is allowed to literally just. print money when it wants to. Um one of those things that you'll see a. lot is that the purchasing power of the. dollar has declined by more than 85%. since the US left the gold standard in. 1971. And the reason why is because the. government just keeps printing money. anytime it likes, which causes. inflation. Well, that's purposeful. Like.

a fiat currency is an inflationary. currency as opposed to a deflationary. currency like gold. They want inflation. to happen because inflation you can keep. on top of. It's deflation that's really. hard to come out of. So, yeah, it's not. really a problem. if you can buy less with a dollar than. you did before because you're adjusting. for inflation. It's not a problem as. long as your wages are keeping up with. it. The problem is is wages haven't kept. up with it and so people are being paid.

the same amount as before and are able. to buy less because they have less money. even though the cost of living has. increased. Their wages our wages haven't. gone up commensurate to it. Yeah, for sure. And if you want to talk. about like, you know, we're talking. about printing money and a spike in the. cash supply. Uh here's a a pretty staggering. statistic. Uh the supply of money in. 1970, this is the what they call the M2. money supply, which is all the. cash, all the money in checking. accounts, all the traveler's checks was. about $600 billion in 1970, the year.

before I was born. Uh. in August of last year, it was. $22 trillion. Which is a a increase of 3,566%. over whatever, 54 years. >> Mhm. And uh 20% of that. was created in 2020. Yeah, just that year. Yeah. Yeah, so there's this I mean, there's. clear. evidence that like the government will.

just print money as much as it can. whenever it wants to. Part of the. problem is is that also increases the. national debt because more money out. there, if you can print money, make new. money, you can spend that new money if. you're the the the organization that is. creating the money. So, the national. debt increased tremendously, too, over. that same time period from 1970 to. 2025. Yeah, it increased 9,000%. Uh it was 398 billion back then, and now.

it is over $36 trillion. Uh and it's a number that is just hard. to even comprehend that seemingly nobody. Well, not nobody, but uh the the right. people aren't concerned enough about. >> Right. So, so gold bugs are like, "See, if you let the government print money, they're going to print money, and. they're going to spend more money. The. gold standard keeps them from being able. to do that. End of story.". That's right, but there are anti-gold. bugs. There are people who prefer fiat.

currency and the ability for the. government to step in and throw levers. and and control monetary through uh. through debate and and decision-making. And that's one of the big arguments. It's like, "Hey, we need to be able to. um. to to make these decisions sort of on. the fly and move quickly to to save. ourselves in times of doubt and in times. of economic stress.". And they can also combat a lot of those. a lot of that data, too. They can also. say, "Well, yeah, but you really should. look at these numbers instead.".

Yeah, so um gold bugs always say that. there that there's um. stability in in gold currency, right? But the problem is is that if you look. at the gold markets, they fluctuate. tremendously. Um so that's actually kind. of out the window. Another one, this one. I couldn't find an answer to that I. can't wrap my head around though is. the the total value of all the gold in. the world is $36 trillion, which is eye-popping. That's our national debt. But yeah,

exactly. Ironically. But if you took um. the entire global economy and valued. that, that's more like $126 trillion. So if the world went on a gold standard. again, how would you shrink $126. trillion into $36 trillion? That right. there, that's what we've been saying, the ship has left the harbor, that train. has left the station. It's just there's. again, there's not enough gold to cover. the value of everything in the world.

Yeah, for sure. Uh another big sort of. argument that people against the gold. standard point to is like, "Hey, look at. our stock market.". >> Mhm. Uh people aren't putting their. money in their mattress anymore and. making runs on banks. They're shifting. that money, their cash dollars into the. stock market. And those dollars have. have grown and grown and grown. I mean, there are always dips in the stock. markets and even. you know, there've been some very bad. days in a row uh with the stock market. And and you know, the the crash of 2008.

and the dot-com bubble and all that. stuff always affects stock the stock. market. But it's it's proven to be a. pretty stable thing over time. It has. And in fact, um if you There's. this um comparison I found. I can't. remember where I found it, but if you. took $5,000. in 1971 to celebrate the birth of Chuck, Yeah. and you you said, "I'm going to go buy. $5,000 worth of gold. It's going to be a. great present for Chuck. I'm also going. to bring him a little myrrh, a little.

frankincense. It's going to get biblical. in here. Um the the gold actually would have. increased about 7,500%. and this is gold gold prices are so all. over the place. This is probably already. out of date. But I think in the end of. 2025, you would have had $379,500. worth of gold from that $5,000 worth of. gold you bought in 1971. So that makes. it seem like, okay, great. Gold's a good.

investment. What happens if you invested. it in the stock market? Well, if you would had that same five. grand after my birth and put it in the. S&P 500, um you would have made. $271,500. So the gold standard wins in that case, but that is if you are just taking those. dividends. If you're taking the money. that you're making from the stocks and. saying like, all right, that's that's my. income or whatever. If you had kept. reinvesting all that from the five. grand, it would be 1.185.

million plus what? 500 bucks? >> Yeah. So that's a return of almost 24,000%. rather than 7,500%. >> Right. And even if you're like, okay, well, wait a minute. Adjusting for. inflation, how much is that? So I looked. it up. >> [laughter]. >> I went on our beloved Westegg and. something that cost $5,000 in 1971 would. cost you $40,000. today. Um so even after you bought that $5,000. thing, you'd still have 1.1 million in.

change left over. So it would be it much. better to invest it in the market as. volatile as it is, as unpredictable as. it is, as as easy as it is to lose your. shirt over the course of time, uh. the ability to unleash the stock market. that having a fiat currency and being. able to print money uh creates is a it's. a better return on investment. >> Yeah. I'm surprised I got through this one. You did great. Well, you did great. >> You did great. Who wrote the original.

article here or who was this? >> That was Olivia Joint. She did great. Yeah. She did great, too, and you did a. lot of great supplemental research. Everyone's doing great, everybody. >> Well, it's just great up in here. Um we should also say we probably got a. lot of stuff wrong. We probably walked. past a lot of stuff. This is such a. detailed, nuanced discussion that people. who are like monetary policy wonks, this. is one of their favorite things to do is. to point out all of these nitpicky. little things based on. >> Mhm. mind-boggling economics that are. really hard to describe. We [music] just.

glanced over the surface of this, but I. think probably we got more right than. than you'd think. Yeah, it's tough to tackle something. like this cuz there are people that know. [music] a gazillion times more about. this kind of thing that we do. Yep, and. Chuck just said tackle, so he unlocked. listener mail. Uh I'm going to call this um this is. from our crowds episode. And this is a classroom hack a question. hack from a uh I think a teacher. Okay. Um hey guys, loved the episode about. crowds. Yeah, I'm a middle school.

teacher and crowds are my standard. environment. Uh your comments about. being afraid to ask a question in class. really [music] spoke to me because a big. part of my job is navigating the power. of language with crowds and my students. Uh there's a simple teacher hack that is. most effective and easiest [music]. um the easiest change I've ever made to. my communication with students. And. Aaron from New Brunswick, Canada, I will. go ahead and say that like uh anyone. speaking in front of a crowd where you. like source questions, um I think this. is a pretty [music] good way to go. Okay. Um and here it is. Instead of.

saying, "Does anyone have any. questions?". uh what I say instead is, "What. questions do you have? There must be. questions.". Give me some questions. >> Uh completely different response from. the students, guys. The assumption. [music] that questions are are expected. always prompts at least one kid to get. the courage, which opens up the gates. for everyone else who is too. apprehensive. Uh thanks for being my first podcast in. 2012 and for continuing to bring joy and. relaxation to a tired but satisfied. teacher. Peace and love and again that.

is from Aaron with an E from New. Brunswick, Canada. >> Thanks Aaron, peace and love back to. you, too. And thanks for teaching. It's good hack. It's a great hack. Questions, who's got them? I know. there's some, don't lie. Right. And then you just get more aggressive. Right. Huh? Huh? Give me a question. Yeah, that that works. If you want to be. like Aaron and send us a great email and. say peace and love, that's awesome. You. can send it off again via email to the. email address. stuffpodcast@iheartradio.com.

>> [music]. >> Stuff You Should Know is a production of. iHeartRadio. For more podcasts from. iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen. to your favorite shows. [music].