The Gold Standard (Why Gold?)

For most of modern history, paper money was backed by gold. If you held a $20 bill, you could theoretically redeem it for $20 worth of gold. This constrained how much money governments could print — you could only print as much as you had gold reserves.
1944 — The Bretton Woods Agreement: After WWII, the world tied all major currencies to the US dollar, and the dollar was tied to gold at $35/ounce. The US became the world's reserve currency.
1971 — Nixon Shock: President Nixon ended the convertibility of the dollar into gold. Reason: the US was spending massively on the Vietnam War and the Great Society programs, printing more dollars than it had gold to back. Rather than default, Nixon simply ended the gold standard. The entire world shifted to pure fiat currency overnight.
Consequences: Governments can now create money without physical constraint. This gives central banks enormous power — and enormous responsibility.

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