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The Dollar Is Not Your Daddy’s Hard Currency

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The U.S. monetary system, as with most others, was built on the principle of hard currency. However, the definition of ‘hard currency’ has changed over the years. So much so, that today’s hard currency is not what your parents or grandparents understood in decades past.

Under the original definition, hard currency was a currency that was backed by precious metals such as silver or gold. Until the early 1970s, the U.S. dollar was directly convertible to gold. Every dollar a consumer held in his/her pocket was a certificate that represented a certain amount of gold held by the government. The Nixon Shock of 1971 changed all of that – and not necessarily for the better.

The Nixon Shock was a series of economic initiatives implemented at the direction of the 37th President of the United States. Among those initiatives was the across-the-board cancellation of the gold standard for the U.S. dollar. From that point forward, American currency was no longer directly convertible to gold. Canceling the gold standard enabled the government to print more money without having to worry about how much gold was held in reserve.

Today, the term ‘hard currency’ is used to define any currency that is expected to retain its value and potentially appreciate in the future. Furthermore, a currency must also be accepted for the majority of international transactions in order to be considered hard currency. The U.S. dollar fits that qualification and, at the current time, is the standard currency throughout the world. The values of all other currencies are measured against the U.S. dollar. Other examples of modern hard currencies include the European euro, the British pound, and the Swiss franc.

Next time you hear someone speak of “cold, hard cash” you will understand it as a reference to the coins and bills that used to be backed by precious metals. Those were the days when currency was based on something tangible rather than just an agreement among consumers that money had value. Suffice it to say that today’s U.S. dollar is not your daddy’s hard currency.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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