Why Moving off the Gold Standard Crushed the US Economy

I was stuck at the airport thanks to the government shut-down (thanks a lot), and was looking for things to do. I don’t watch movies or tv because of my PTSD (violence gets to me), so I turned to My First Million podcast to pass the time. Gotta love Sean Puri.
Anyway, it was an episode where he was talking to Cathie Wood and she mentioned in passing her mentor and friend Arthur Laffer and how in 1971 the world went to hell in a hand-basket when we got off the gold standard.

Enter my insatiable curiosity and unlimited time on my hands in the airport, and here we go. I ended up deep diving into the history of what happened when we went off the gold standard and why I now believe it was a huge mistake.

Just going to preface this by saying I’m not an expert or an economist, but I’m good at reading and critical thinking skills seem intact enough to reason my way around a brown paper bag, so take what I say with a grain of salt and do your own research before jumping to conclusions. I’m all about us all using our own logic and reasoning instead of being told what to think by others.

What actually was the gold standard?

In its classic form, a gold standard means that a nation’s paper money is tied to (or convertible into) a fixed amount of gold. Under this kind of system the money supply is constrained by gold-reserves: you can’t (in theory) issue infinite currency unless you have the gold to back it. So you wouldn’t be able to just print more money if you needed it, you would need to alter the gold backing somehow.

Exchange-rates could be more stable (because currency values are anchored to gold) but the trade-offs include less flexibility of course.

In the U.S., the gold standard (and a variant of bimetallism which started based off gold and silver) evolved in the 19th and early 20th centuries.

When the U.S. moved away from the gold standard

So, during the worst of the Great Depression, the U.S. faced banking collapses and a run on gold. People hoarded gold, reducing gold deposits in banks and limiting the money supply. Ever see the movie Mary Poppins? All the panic and chaos when everyone tried to yank their money out of the bank is just a little whiff of the reality of it.

On April 20, 1933, as the Great Depression tightened its grip on America, President Franklin D. Roosevelt made a move that would change the very meaning of money in the United States forever.
He suspended the gold standard for everyday transactions, forbidding banks and the Treasury from turning paper dollars into glittering coins or bars.
Gold, once the heartbeat of the economy, was suddenly off-limits, locked away in vaults.

A year later, through the Gold Reserve Act of 1934, the U.S. redefined the value of that precious metal itself, raising its official price from $20.67 to $35 an ounce. The dollar was quietly devalued, its power reshaped by decree rather than by weight. America had begun its long drift from metal to faith, from something you could hold to something you had to believe in.

In the wake of World War II’s chaos (1944–1945), global leaders gathered in a quiet New Hampshire town called Bretton Woods to rebuild a sense of financial order. The plan was ambitious to tie the world’s currencies to the U.S. dollar, and let the dollar itself rest on gold’s steady shoulders at $35 an ounce, no more, and no less. It was a compromise between the old solidity of gold and the new power of American confidence. For governments, the promise was real, but for everyday citizens, gold had already begun to slip out of reach.

Then came August 15, 1971. President Richard Nixon stepped before the cameras and calmly announced what would later be known as the Nixon Shock. He shut the door on the dollar’s convertibility to gold, ending the Bretton Woods experiment for good. From that moment forward, the dollar was no longer tethered to metal of any kind, it was backed only by belief, by government decree, and by collective trust.

Gold had been dethroned, and money itself became an idea.

Why the U.S. left the gold standard

In the end, the world had changed, and the old metal couldn’t bend with it.

When every dollar was chained to a speck of gold, there was no room to breathe. The U.S. couldn’t expand its money supply to soften the blows of recessions, bank panics, or national crises. In times when people needed relief, the economy’s pulse stayed locked inside a vault.

Then, by the 1960s, the dollar had become the world’s favorite currency, but that popularity carried a hidden cost most people didn’t foresee. Foreign governments held mountains of U.S. dollars, and under the Bretton Woods system, those dollars could be traded for gold.
As trade deficits widened and American spending stretched across oceans, the Treasury’s reserves began to drain. Gold was leaving the country faster than faith could replace it.

Then came the era of big promises: the Vietnam War, the Great Society programs, and the swelling budgets that came with both. Inflation crept higher, eroding confidence that one ounce of gold could forever equal thirty-five dollars. The math no longer worked and the world’s faith in that conversion was already cracking.

Some economists had long warned that the gold standard was a beautiful relic, steady, yes, but suffocating. It stifled recovery during the Great Depression and limited innovation in a modern, interconnected economy. By the 1970s, the world needed a financial system that could move as quickly as human ambition could.

So America stepped away, not out of rebellion, but out of necessity.
Gold had once been the anchor of the world’s money, but now, it was the weight that held it back.

What changed after leaving the gold standard

When the link between paper and metal finally snapped, the world didn’t collapse, it transformed itself. The dollar, once bound by the shimmer of gold, began to float on something far more fragile and powerful in the American people, our collective belief.

Without gold dictating its limits, the U.S. could finally breathe. The Federal Reserve gained the freedom to expand or contract the money supply as needed, to fight recessions, cool inflation, and react to the rhythm of the real world instead of the contents of Fort Knox. Money became more elastic, molded by circumstance rather than scarcity.

Fixed exchange rates gave way to a more fluid global market. Currencies began to rise and fall according to trade, trust, and timing. It was messy, unpredictable, but alive, the first true test of a world no longer anchored to one metal.

Of course, the 1970s saw inflation soar, the so-called “Great Inflation.” Oil shocks, wage pressures, and policy missteps all played their parts, but many people looked back at 1971 as the moment Pandora’s box was opened. When money was no longer tethered to something tangible, it became more vulnerable to human error and ambition.

Oddly enough, the U.S. dollar grew stronger in influence after it lost its dependency on the golden standard. It became the world’s reserve currency not because it was backed by gold, but because it was backed by America’s economy, its military reach, and global trust in its stability.

Was it the “downfall” of the American economy?

Okay, this is where history turns gray and I’m leaning more into opinion than fact. Economists don’t agree from what I see online on whether it was horrible for the economy or great for it. What they do agree on is that it changed everything.

When the dollar was no longer chained to gold, money became much more malleable, a promise that could stretch as far as politics or policy demanded. Critics say that freedom came with a price as inflation rose, debt expanded, and restraint faded.
The 1970s became a decade of utter chaos where manufacturing struggled, and the once-steady beat of the industrial heartland began to fade.
Without a gold anchor, currencies drifted, and faith itself became the only measure of value. To some, that shift opened the door to volatility, asset bubbles, and the quiet erosion of the dollar’s soul.

Others see it differently, not as collapse, but as evolution. The gold standard, they argue, was a beautiful shackle, the literal definition of golden handcuffs, elegant, but paralyzing. It bound policy in times of crisis and deepened wounds like the Great Depression, when flexibility might have saved jobs and lives.
Freed from gold, the U.S. could steer its economy with new tools, adjusting interest rates, printing stimulus, and absorbing shocks. Innovation flourished and entire industries rose from circuits and code instead of steel and coal.

My Opinion

I believe that when America walked away from gold, it wasn’t liberation, it was pure detachment. We untethered our currency from something real, something that had weight and real consequence. Gold didn’t just back the dollar, it reminded us that value was earned, not imagined.

When Nixon closed the gold window in 1971, he didn’t just end a monetary system, he ended a kind of honesty. From that moment, money became an abstraction, printed at will, swelling and shrinking with political appetite. Debt became invisible, numbers replaced worth, and the dollar became a belief. And that belief is great when you’re a politician who is stealing blind from the people (I don’t care which side you’re on, they’re all stealing from us), but when you’re working two or three jobs to keep your family afloat, that “belief” looks like another purchase made on credit.

Look at what followed in the aftermath of it all. Inflation devoured savings, the cost of living absolutely exploded, wages lagged behind while prices sprinted forward faster than Usain Bolt. Manufacturing which was once the core of the American dream died into almost nothing.

We began exporting jobs, importing goods, and calling it growth. The economy got bigger, yes, but it also got a lot more hollow.

The gold standard was imperfect, rigid, even archaic at times, but it held us accountable. Every coin minted was a reflection of something tangible in the vaults beneath our feet. Now our economy floats untethered, buoyed by confidence and politics instead of substance. The discipline is gone, the restraint has left the building.

And with that, something deeper disappeared too, trust.
Not just in government or banks, but in the very idea of value. We entered an era where money could be created by keystrokes, where scarcity was simulated, and where wealth became increasingly theoretical.

I think that’s where the true downfall began, not in charts or GDP figures, but in spirit.
When we stopped measuring our prosperity by the gold we held and started measuring it by the credit we could extend, we changed what it meant to be rich. And ever since we let go of that weight, America has been floating toward a horizon where value means whatever we say it does.