Why does it matter that gold is so shiny and should we get more gold cause its so shiny?

Q: Why did we abandon the gold standard? Do other countries still use it? Would our debt be so huge if we still used it?

Gold has a long and shiny history. In fact for most of human history, gold has been revered for its shininess. It went on to become the standard currency in most civilizations throughout the world. In Egypt, priests buried Pharaohs, such as King Tut, with gold death masks. The Greeks passed down myths about the Golden Fleece and Midas' golden touch. And in the New Testament, one of the Magi gave baby Jesus gold (leaving the two other Magi to comment, “Dude, what the hell? I thought we agreed that we would only spend 25 dinarii on the gifts for the kid.”) But the point stands, gold has been prized as a commodity ever since people started trading rocks for shinier rocks.

Mary only let you hold him cause you brought gold.

Soon enough, gold, along with other precious metals like silver and copper, was minted into coins and used as currency locally and internationally. The minting of these coins created an international currency and merchants thought that it was totally awesome that these metals were not only shiny, but also easy to transport and divvy up, that is until they started getting really freaking rich. Eventually, merchants became so rich that all of that coinage started to get really, really heavy. In particular, The problem began to escalate in China because their merchants mostly dealt with copper coinage, which would be roughly equivalent to paying all your bills with pennies. Well, after lugging around water jugs full of copper coins with Emperor Lincoln on the side for a few centuries, the Tang Chinese came up with the brilliant idea of paper money. These banknotes would represent coins that are left somewhere else. The idea spread throughout the world. Although the Far East based their system on mostly copper and silver, other countries based theirs on gold and the original gold standard was born, once again proving that all remotely good ideas originate in China.

In the United States and Europe, gold coins backed paper money while also circulating as coinage. However, the Industrial Revolution; expensive wars, like the American Civil War; and Ponzi schemes threw the gold standard for a loop. In the US in particular, there was a problematic legal loophole that nearly bankrupt the federal treasury. The law stipulated that the government must honor any exchange of paper money for gold, but it must also reissue all paper money. So, it would run something like this. Rich big wigs dressed up like Mr. Peanut would waltz in to the US Treasury and trade in paper money they earned from running businesses with deplorable working conditions for gold. Then, the government would redistribute the paper money and the cycle would repeat moving gold out of the federal bank leaving the treasury dangerously echo-y. Before long, the West was minting more paper money than it could back up and the problem caused a bit of a kerfuffle. Indebted farmers protested and pulled together to form a short-lived political party called the Populists. They wanted to either add silver to the treasury to compensate for the loss of gold or abandon the standard all together and they were serious about it.* Their leader, William Jennings Bryan, proclaimed, “we will not be crucified on a cross of gold!” And one populist, Jacob Coxey, even led an “army” of protesters on a march to Washington where they were promptly arrested for walking on the grass. Unfortunately, the party failed to capture the attention of the nation because they never talked about anything other than the gold standard. In the end, Bryan's opponent, McKinley won and reinvigorated the gold standard by accidentally stumbling upon some gold on the West Coast.

"Hey guys! Look at this big gold coin I found were saved!"

The gold standard prevailed for a few years until World War I quite thoroughly messed everything the hell up. During World War I, countries around the globe printed excessive amounts of money to pay for the war. After the war, there was not enough gold to go around and in some countries' currencies collapsed and the Great Depression did not do much to smooth things over for the gold standard. Soon, many countries discovered that abandoning the standard seemed to ease the pain of the depression and help them recover faster, kind of like an economic hangover cure. This worked because when countries abandoned the standard, they could produce however much paper money they wanted without any rules. Europeans started the trend and the US followed suit with Roosevelt's Gold Reserve Act, which forced Americans to sell all their gold coinage to government. (It is speculated that the act had the interesting side effect of making coin collectors very happy.) In some countries this worked great, more money without the need for more gold helped people pay back debts and get the hell out of the soup kitchen, but in other countries, like Germany, it led to hyperinflation, in which money's value falls faster than a fat kid trying to jump rope. In no time, sliced bread cost a billion marks, suddenly no one wants to tip the baker, and the whole system goes down the tubes. Unfortunately for the Germans, they began to lose a bit of their sanity from having to eat turnips for breakfast, lunch, and dinner and they decided that Hitler's idea of spending all the money on the military and then taking everything from everybody else sounded “wunderbar”. Needless to say, the rest of Europe did not like the Germans' plan and World War II broke out and all the countries involved dug themselves into some pretty deep debt yet again, you'd think they would figure out that wars mess everything up by now.

When the war finally ended, all of the countries realized that war sucked and they needed to make sure it did not happen again. One of the big problems the newly formed United Nations faced was the gold standard. They knew from past experiences, that the gold standard would take way too long to even out after a big, expensive war like World War II. So, the United Nations sat down in Bretton Woods, New Hampshire (quite possibly the second most snooty sounding city in American after Snootington's Vineyard, Rhode Island) and put a whole new economic system together from scratch. They established the World Bank, the International Monetary Fund, possibly FIFA, and the Bretton Woods exchange system. In this exchange system, it was decided that the US would be the only country with a gold standard and every other currency in the world would be pegged to the US dollar. At the time, this worked because the US dollar was the only currency that wasn't already completely screwed and Russia hadn't showed up to act as a counterweight to US influence at the conference (historians presume that Russia woke up late that morning.) This system worked until Nixon pulled the US off the gold standard in 1971 following the Vietnam War and the expensive introduction of disco thus leaving everyone pegged to a US dollar that was unbacked by any gold.

In the early 70s, disco sapped most of America's gold reserves.

Therefore, even though many countries still have gold and other precious metals in their treasury, after World War II every country except the US gave up the standard and in 1971 the US gave it up as well. Now, some people are arguing that a new gold standard would be a good idea. But really, the gold standard is not flexible enough to still work. It works during a steady economic peacetime, but during depression or war the debt piles up and the gold standard helps keep it high. Plus, in the end value is all relative. Some Sub-Saharan tribes used to trade salt for its weight in gold. At the time, they had plenty of gold, and no salt. They needed salt to survive, but they did not need the gold. Value is flexible. In the past, people liked gold because it was shiny and easy to cut up. However, if you walk into a Wal-Mart and try to buy a new TV with an ounce of gold, which is valued at about $1,500, the cashier will laugh at you a ask you, “wheres the Benjamins?” If the government is strong, then they could really make anything the valued currency under penalty of law even
paper, which makes up for what in lacks in shininess with its versatility.

*Now, we remember the Populist movement for inspiring L. Frank Baum's Wizard of Oz.  The scarecrow represented the plight of farmers, the tin man the heartlessness of industry, the lion Bryan's unbacked rhetoric, and Toto the Populists general like of small dogs.