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<p>[QUOTE=&quot;InfleXion, post: 1366353, member: 29012&quot;]Maybe I&#039;m oversimplifying this, but wouldn&#039;t it just be a matter of your currency being priced in gold that sets the exchange ratio? You are assuming a gold backed currency would have the exchange ratio set by some sort of basket, but that would be an obsolete practice. </p><p><br /></p><p>Also, my understanding of why Nixon closed the gold window is because we were printing money without adding more gold, and were unable to maintain our gold to dollar ratio as a result. Maintaining this ratio is the key to sound money. Because of the devaluation of the money taking place it prompted other nations to want their gold back instead of dollars, and since there wasn&#039;t enough gold to support the existing ratio they closed the gold window. </p><p><br /></p><p>The number breakdown in this link shows that the money supply was in fact increasing while we were on the gold standard before which is what I view as its undoing.&nbsp; </p><p><br /></p><p><a href="http://bullionbullscanada.com/index.php?option=com_content&amp;view=article&amp;id=21934:nixon-isnt-the-only-reason-the-us-closed-the-gold-window&amp;catid=79:mark-j-lundeen&amp;Itemid=150" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://bullionbullscanada.com/index.php?option=com_content&amp;view=article&amp;id=21934:nixon-isnt-the-only-reason-the-us-closed-the-gold-window&amp;catid=79:mark-j-lundeen&amp;Itemid=150" rel="nofollow">http://bullionbullscanada.com/index.php?option=com_content&amp;view=article&amp;id=21934:nixon-isnt-the-only-reason-the-us-closed-the-gold-window&amp;catid=79:mark-j-lundeen&amp;Itemid=150</a> </p><p><br /></p><p>I did notice that they put Dollars per One Ounce US Gold Reserve at $3952.06:1 in 2011 which doesn&#039;t match up with the number calculations fatima did which I verified to be pretty close to the mark based on the numbers he provided. So I wonder which is correct now, maybe they forgot to type in a zero in their calculations on this link. </p><p><br /></p><p>The only way for a gold backed currency to not propel the price of gold is by purposefully enacting deflation, by actually removing dollars from circulation, with the goal being to get gold at today&#039;s prices to support the gold to dollar ratio. This is why gold can potentially avoid losing value and outperform other assets even in a deflationary environment. The alternative is buying more gold on the open market which would drive the price up, or to just back it at current levels and revalue gold at a much higher price.[/QUOTE]</p><p><br /></p>

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