Was Dropping The Gold Standard A Mistake?
Economics Explained
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The US Dollar and the Peg System
Under the bretonwood system, was unique in that its currency was pegged both to gold, also to a whole bunch of other currencies as well. High levels of borrowing to fund the viitnam war meant that the us. Economy was not particularly healthy towards the end of the sixties. Other countries were able to take advantage of this by stock piling american dollars for less than they were truly worth. Most modern gold standards have been fractional reserve systems where only a fraction of the gold necessary to honor all the outstanding dollars are kept in vaults. But there is still the inherent risk that despite the government's best efforts, their currency will still tank in foreign exchange markets.
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