by James Garton

Created on: June 13, 2010

The United States Constitution in Article 1, section 8, it states that Congress will have the power to coin our nations money and regulate the value of that money. Throughout history, the government has changed the value of the nations currency.

The Coinage Act of 1792 created a national mint which produced coinage using both silver and gold. This coin was to be the currency of the new nation, and it's value would be backed by the amount of alloy that made up the coin. A $10.00 American Eagle coin contained 16.0 g of pure gold. The Dollar contained 27.1 g of pure silver. The Act defined the proportional value of gold and silver as 15 units of pure silver to 1 unit of pure gold.

In 1834, the government changed the ratio to 16 to 1, which devalued the dollar. Again, in 1853 congress decided to change the value of coinage by reducing the amount of silver it contained.

The Bland-Allison Act of 1878, required the government to make monthly purchases of silver and to create silver coins. This caused an increased supply and circulation of silver, and the value of a silver coin dropped. The problems with having both silver and gold represent the national currency caused a series of reforms that eventually resulted in the Gold Standard Act of 1900.

With the exception of the U.S. Silver Certificate, gold was the standard used to value the nations currency. The Gold Standard Act made the U.S. Dollar convertible to 1.5 g of fine gold.

The gold standard was the way the American Dollar was valued until 1933 when President Roosevelt suspended the gold standard by executive order, and confiscated all private gold. Again, by another executive order President Nixon took the U.S. completely off the gold standard.

Once the United States no longer backed the currency with gold or silver, this created what is known as a fiat currency. A fiat currency is money that is only based on the faith, credit and promises of the government. Because there is no real value to the currency the government or federal reserve are free to print as much as they want, and place whatever value they see fit.

While the currency of the past contained real value backed by gold and silver or actually contained the alloy in the coin. The national currency today is only valued based on what politicians say it's worth.

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