Prior to 1972, the United States dollar was backed by gold. This, simply put, meant that for every dollar printed, you could theoretically turn the currency in and get a dollar's worth of gold. France called our hand on this in 1972 and started redeeming U. S. currency for gold. This is when, under the administration of Richard Nixon, we went off the "Gold Standard", rather than having a run on our gold supplies by foreign nations.

Prior to the above date, a citizen of the U. S. could not personally own gold. This reservoir of gold was kept at Fort Knox, Kentucky, among other places. After 1972, the average person in the United States could purchase gold and actually have it in their hands. With the U. S. government controlling the price of gold, the dollar was very stable. You knew that the paper currency was actually backed by a tangible precious metal...gold.

When we went off the Gold Standard, our currency was now backed, not by gold, but by the honor and strength of the United States Government. If you are now thinking, "in other words, the dollar is backed by nothing other than a countries reputation", your correct. Let me make this point. Never in the history of the world, has a paper currency system survived. Never! I know this is a real confidence builder, but that is the way it is! The U. S. dollar became a competitor on the world market as to it's value.

The U. S. dollar was strong until we began to borrow money to pay our own bills. With our country in debt several trillion dollars (yes you read it correctly), the confidence in our dollar is not that strong. As long as we keep going into debt, our dollar will continue to be weak against the Euro. You ask why is this so? Think of the situation this way. What happens when you borrow so much money that you cannot pay your bills? You go bankrupt, right? Now what happens when a country can not pay the bills? You have the point!

You say this could not happen to the greatest and strongest country on the planet! What about the former Soviet Union? They went under like the Titanic! Could we do the same? Yes!

One could continue and make the comment of how the Federal Reserve could step in to help our country. They could print more dollars for our economy. What happens when more money becomes circulated? The dollar becomes less valuable! A perfect example is the mortgage crisis in the U. S. The old trusty printing presses went to work and printed more to help with the problem. You answer this question. What happens to the value of the dollar when you print more currency? Unfortunately, some believe that the printing press will never break. What do you think?

Dave