Why Did the U.S. Abandon the Gold Standard?

Some have called for a return to the gold standard. How would it affect the economy?

What is the gold standard?

It’s a monetary system that directly links a currency’s value to that of gold. A country on the gold standard cannot increase the amount of money in circulation without also increasing its gold reserves. Because the global gold supply grows only slowly, being on the gold standard would theoretically hold government overspending and inflation in check. No country currently backs its currency with gold, but many have in the past, including the U.S.; for half a century beginning in 1879, Americans could trade in $20.67 for an ounce of gold. The country effectively abandoned the gold standard in 1933, and completely severed the link between the dollar and gold in 1971. The U.S. now has a fiat money system, meaning the dollar’s value is not linked to any specific asset.

Why did the U.S. abandon the gold standard?

To help combat the Great Depression. Faced with mounting unemployment and spiraling deflation in the early 1930s, the U.S. government found it could do little to stimulate the economy. To deter people from cashing in deposits and depleting the gold supply, the U.S. and other governments had to keep interest rates high, but that made it too expensive for people and businesses to borrow. So in 1933, President Franklin D. Roosevelt cut the dollar’s ties with gold, allowing the government to pump money into the economy and lower interest rates. “Most economists now agree 90 percent of the reason why the U.S. got out of the Great Depression was the break with gold,” said Liaquat Ahamed, author of the book Lords of Finance. The U.S. continued to allow foreign governments to exchange dollars for gold until 1971, when President Richard Nixon abruptly ended the practice to stop dollar-flush foreigners from sapping U.S. gold reserves.

Why is gold in debate again?

Libertarian Rep. Ron Paul (R-Texas) made a return to “honest money” a key plank of his presidential run, and the idea took hold among Tea Party conservatives outraged over the Federal Reserve’s loose monetary policies since the financial crisis. They argue that the U.S. debt now exceeds $16 trillion because the government has become too cavalier about borrowing and printing money. When the Fed prints money, gold-standard advocates say, it cheapens the value of a dollar, promotes inflation, and effectively steals money from the citizenry. In a nod to those ideas, the Republican Party’s 2012 platform calls for the creation of a commission to investigate setting a fixed value for the dollar. The gold standard “forces the U.S. to live within its means,” said investment strategist Mark Luschini. “Think of it as a person with a debit card rather than a credit card. The debit card holder can only spend what he or she has in the bank.”

What are the downsides?

A fixed link between the dollar and gold would make the Fed powerless to fight recessions or put the brakes on an overheating economy. “If you like the euro and how it’s been working, you should love the gold standard,” said economist Barry Eichengreen. Beleaguered Greece, for instance, cannot print more money or lower its interest rates because it’s a member of a fixed-currency union, the euro zone. A gold standard would put the Fed in a similar predicament. Gold supplies are also unreliable: If miners went on strike or new gold discoveries suddenly stalled, economic growth could grind to a halt. If the output of goods and services grew faster than gold supplies, the Fed couldn’t put more money into circulation to keep up, driving down wages and stifling investment.

Could the gold standard come back?

It’s very unlikely. In a University of Chicago poll this year, not one of 40 top economists surveyed supported a return to gold. The last gold standard commission, established by President Ronald Reagan, voted by a wide margin against bringing it back. The size and complexity of the U.S. economy would also make the conversion extremely difficult. Just to back the dollars now in circulation and on deposit—about $2.7 trillion—with the approximately 261 million ounces of gold held by the U.S. government, gold prices would have to rise as high as $10,000 an ounce, up from about $1,780, causing huge inflation. “It could do massive damage to the economy,” said John Makin, an economist at the American Enterprise Institute. So why the clamor for its return? Nostalgia, said economist Charles Wyplosz. “People long for a simpler age,” when the U.S. “was the dominant economy and there were no financial markets to speak of.” It’s like “getting back together with that old girlfriend,” said MarketWatch’s David Weidner. The current system may not be perfect, he says, but what people forget is that “the gold standard never works.”

Every so often, we'll reprint something from our sister publication, The Week. This is one of those times.

In 2015, a study confirmed what many convenience store shoppers already knew: Wawa is the best. Seven thousand consumers, polled by Market Force, gave Wawa a "composite loyalty score" of 68 percent, ahead of other stores like QuikTrip (62 percent) and Sheetz (59 percent), and it also nabbed the top spot in the fresh food category. In celebration of Wawa Day, here are some things you might not have known about the absolute best place on earth to buy a hoagie, iced tea, and Tastykakes.

1. IT WAS FOUNDED MORE THAN 200 YEARS AGO, AS AN IRON FACTORY.

Though the first Wawa store was opened in 1964, the company actually has more than 200 years of history: It began in 1803 as a New Jersey iron factory and was incorporated in 1865 as the Millville Manufacturing Company. Then, in 1902, Millville's owner George Wood opened up a milk processing plant in Wawa, Pennsylvania. (The cows for the plant came from the English Channel island of Guernsey.)

2. "DOCTOR CERTIFIED" MILK WAS A KEY TO ITS EARLY SUCCESS.

In the early 1900s, many children were becoming sick from drinking raw milk, so Wood had doctors vouch for his product. The "doctor certified" milk, delivered directly to a customer's home, made the business a huge success.

3. THE VERY FIRST WAWA STORE IS STILL OPEN.

As the milk delivery business dwindled in the 1960s, Wood's grandson, Grahame, noticed that customers were shopping more at supermarkets, and thought Wawa could distribute its products that way. The first Wawa Food Market opened at 1212 MacDade Boulevard in Folsom, Pennsylvania, on April 16, 1964—and it's still there!

Photo courtesy of Wawa

4. BEING ALLOWED TO REMAIN OPEN ON SUNDAYS HELPED BUSINESS BOOM.

The stores were successful in part because convenience stores were exempt from laws that kept other stores closed on Sundays.

5. BUSINESS GREW QUICKLY.

By 1972, there were 100 Wawa stores open for business. By 1992, there were 500 stores. Today, there are more than 750 Wawa stores.

6. IT'S AN OJIBWE WORD.

Wawa is Ojibwe for Canada Goose.

7. YOU MIGHT NOT BE PRONOUNCING IT CORRECTLY.

Want to pronounce "Wawa" correctly? It rhymes with Saw Saw, according to locals.

8. THEY SELL A LOT OF HOAGIES.

Wawa's stores—located in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, and Florida—sell more than 60 million made-to-order hoagies annually.

9. COFFEE IS HOT, TOO.

Wawa sells enough coffee—195 million cups—to fill Shamu's tank more than 11 times. That signature coffee, introduced in the 1970s, is proprietary, and available only in Wawa stores.

10. THERE'S A WAWA UNIVERSITY.

Some Wawa employees attend Wawa University, which, according to the company, "will guide you with comprehensive training courses and continuing educational programs. On-site, off-site. On the job, in the virtual and traditional classroom. The goal is always to meet your evolving training and education needs. From Brand Fundamentals to Leadership Development to Career Enhancement, you'll have the chance to strengthen your career potential and achieve your goals."

11. THEIR SLOGAN HAS CHANGED A NUMBER OF TIMES.

These days, Wawa's slogan is "Gottahava Wawa," but past slogans include "Mama I Luv Wawa," "People on the Go, Go to Wawa," "My Choice, My Wawa," and "We Do it Better." 

Image courtesy of Wawa

12. PEOPLE LOVE THEIR WAWA.

People love their Wawa. In 2009, five West Chester women completed a two-year quest to visit every Wawa then in existence. The New York Times Magazine asked if the chain was a "Convenience Cult." And Jackass star Johnny Knoxville has a Wawa tattoo, which he got thanks to "whiskey and adrenaline."

13. WAWA, PENNSYLVANIA IS LOCATED IN TWO PLACES AT ONCE.

Half of the town of Wawa, Pennsylvania is in Middletown, and half of it is in Chester Heights, the official location of the company's headquarters. According to a 1989 Philadelphia Inquirer article, "Estimates of those who do live in Wawa range from about five families ... to 265 families. ... 'No one's ever drawn a line on a map saying this is where Wawa begins and ends,' explained W. Bruce Clark, Middletown's manager."

Of the many eventful holidays that fall in April, none is more delicious than April 12th, a.k.a. National Grilled Cheese Day. Yes, like so many culinary delights before it, the ooey-gooey sandwiches you grew up craving have their very own day of celebration. Even better, it happens to fall in the middle of Grilled Cheese Month. Which is why we’ve enlisted the expertise of Spencer Rubin, founder and managing partner of Melt Shop, a New York City-based mini empire of grilled cheese eateries, to share his secrets on making the perfect grilled cheese sandwich. (For the record, Rubin gives his mom full credit for his own grilled cheese-making skills.)

1. GOLDEN BROWN AND CRUNCHY IS KEY.

“The perfect grilled cheese is golden brown, crunchy to the touch, and has a little bit of cheese that is nearly burnt on the side because it spilled out over the edges from cooking directly on the skillet,” Rubin says. “The cheese pulls away from you after your first, second, and third bite. It’s savory, salty, and I always like a little bit of acid from a tomato to cut through the richness of the cheese.”

2. BUTTER ISN’T YOUR ONLY BASE OPTION.

But it’s probably your best option. “I like salted butter, but people talk about using mayo and margarine all the time,” says Rubin of what to put in your pan. “Salted butter drives the best results, if you ask me.”

3. DON’T SKIMP ON THE BREAD.

“Quality bread is key,” Rubin says. “Too soft and it doesn’t develop the right crust; too hard and it's like eating a crouton. Ideally you want day-old sourdough. Sourdough is key because the air pockets that develop while proofing help add to the texture. You want day-old bread because it has firmed up a bit, giving it a better crunch after toasting."

Daniel Krieger

4. ALL CHEESE IS DELICIOUS CHEESE.

“Obviously good cheese is the key to a great grilled cheese,” Rubin says. “But the best thing about grilled cheese is you can never really go wrong. Whether it’s a 5-year aged cheddar, cave-aged Gruyere, or Kraft singles, they're all delicious in their own ways.” As for which cheeses melt best? Rubin says that semi-soft varieties like Muenster and Havarti are the way to go.

5. FLAVOR YOUR BUTTER FOR AN INSTANT UPGRADE.

You don’t have to break out the fine china to fancy up your sandwich. Let the butter and/or bread do all work. If you want to take your sandwich to a more sophisticated culinary level, Rubin recommends using “truffle butter, herb butter, or garlic bread with garlic and Parmigiano.”

6. SALTY AND SWEET IS A GREAT COMBINATION.

Tomatoes and bacon are tried and true add-ons. For an unexpected combination, Rubin recommends throwing in some jams and sweets. “I always love salty and sweet combinations,” he says. “My favorite sandwich on our menu is the Maple Bacon with aged cheddar, brick spread, Applewood smoked bacon, and maple syrup. The combination is insane.”

7. SIDES AREN’T REQUIRED, BUT THEY MAKE IT A MEAL.

Though for some diners a grilled cheese sandwich is an entire meal in itself, there’s no reason not to indulge in a side dish. Melt Shop is well known for its menu of tater tots, but lighter sides work, too. “I like a nice side salad with my grilled cheese,” Rubin says. “It’s nice to get a little green in your meal and a good vinaigrette always helps brighten things up."