The “Gold Standard Act” of 1900 established gold as the official official means of payment and as the sole basis for redeeming paper currency.
What was the purpose of the Gold Standard Act of 1900?
The purpose of the Gold Standard Act of 1900 was to settle the debate over the relative value of gold and silver and which should be preferred over the other in the United States monetary system.
1900 Gold Standard Act of 1900 for kids: Panic of 1893 and the Repeal of the Sherman Silver Purchase Act
During the Civil War paper money had been introduced which promised to redeem on demand the money in either gold or silver. In this period silver had been more plentiful in the United States, so the dual monetary system had made sense. However, as the price of silver declined, and holders of paper currency understandably redeemed their paper dollars for gold rather than silver. This resulted in the depletion of the U.S. gold reserves and the federal government reduced the number of dollars that were printed, an event that played prominently during the Panic of 1893. Following the Panic, Congress repealed the Sherman Silver Purchase Act which had enabled the Treasury to issued dollars backed by silver, as well as gold.
1900 Gold Standard Act of 1900 for kids: What did the Gold Standard Act of 1900 do?
The Gold Standard Act reflected Republican monetary conservatism and made gold the standard for all of the nation’s currency. The United States Treasury was required to maintain a minimum of $150 million dollars in gold reserves and the price of gold was set at $20.67 per ounce.
Gold Standard Act of 1900 for kids: The Significance of the Gold Standard Act of 1900
The Gold Standard Act of 1900 was passed to prevent the country from printing too much money and running out of gold. A gold standard restricts the Federal Reserve from enacting policies which significantly alters the growth of the money supply, which in turn limits the inflation rate of a country.
Gold Standard Act of 1900 for kids: What happened to the Gold Standard?
The United States retained the gold standard until April 25, 1933, when it was dropped as a means of combating the Great Depression. The link between the dollar and gold was completely broken in 1971 and the United States now has a fiat money system, meaning the dollar’s value is not linked to any specific asset.