Since 1971 government promissory notes have had a floating value, in the intervening forty years the value of $1 has decreased from 1/35th of a troy ounce of gold to just 1/1900th of a troy ounce of gold. A decrease in value of 98.15%.
The decision to break the gold standard which allowed $35 to be exchanged for one troy ounce of gold was taken by Nixon in 1971 after the cost of the Vietnam War had bankrupted the United States. Yes, the United States of America has been bankrupt longer than I have been alive and they are still denying it!
It has met its debts by employing the insidious tax on capital, inflation. Inflation is the most politically acceptable form of taxation as it is hidden from view.
The USA borrows the money with a promise to repay it a number of years later with interest payments in the interim. Of course the value of the debt at the end of the period which may be as long as thirty years is not the same as it was when it was lent. Thirty years ago the prices of goods were about 1/5th of what they are now so unless the total interest payments made over the course of those years exceed 400% the creditor, be it you or I or our pension fund will actually lose money.
People blame the previous generation for not saving enough, but when a bank manager was earning £5,000 per year who would have thought that within their lifetime the equivalent position would have attracted a £50,000 salary and how could they possibly hope to set aside enough on a £5,000 salary to maintain a £30,000 per year retirement?
The real problem is governments spending so much that they need a way to diminish the outstanding amount and that method is to de-value the debt along with our pensions, savings, salaries and yes, even benefits.
But is a return to a gold standard possible? How could it be done? Well Republican Nomination Candidate and Libertarian Ron Paul has a plan.