The Fiat system means that the value of money is determined by the power
backing the money. The money itself has no value except that the
government says so. Our dollar bills are just worthless pieces of linen
paper without the government backing and guarantee.
Under the gold standard, the dollar was worth something in and of itself because it was easily exchanged for gold. The US decided to leave the gold standard after Briton did. There were runs on the bank and people were worried about the USD and converting it for gold. FDR realized that in order to save the banking system it might be necessary to abandon the gold standard. His advisers all disagreed, except for one. Taking the advise of that one adviser, the end of the gold standard was embraced here in the US.
Economists now hold it as fact that one of the reasons we came out of the Great Depression was because of that move away from the gold standard. Not being on the gold standard gave the government power to change interest rates and to control the flow of money into and out of the economy.
Under the gold standard, the dollar was worth something in and of itself because it was easily exchanged for gold. The US decided to leave the gold standard after Briton did. There were runs on the bank and people were worried about the USD and converting it for gold. FDR realized that in order to save the banking system it might be necessary to abandon the gold standard. His advisers all disagreed, except for one. Taking the advise of that one adviser, the end of the gold standard was embraced here in the US.
Economists now hold it as fact that one of the reasons we came out of the Great Depression was because of that move away from the gold standard. Not being on the gold standard gave the government power to change interest rates and to control the flow of money into and out of the economy.
