America’s Monetary Insanity Illustrated in the “Gold Coverage Price”
By Patrick Barron
One way to illustrate the complete monetary insanity of dollar debasement is via what may be called the “gold coverage price”. This is the price which the central bank should charge dollar holders to redeem the entire monetary base in gold. In other words, as the last dollar is presented for gold redemption the last ounce of gold is available. Of course, it would never come to this extreme, because fewer and fewer dollar holders would demand gold when it became apparent that the central bank had sufficient gold reserves. Nevertheless, it is an interesting exercise to see the extent of dollar debasement to gold over time.
Gold Coverage Price in 1944: $50
In 1944 the US held 20 metric tonnes of gold or approximately 705.5 million ounces. The dollar was redeemable for gold at $35 per ounce per the Bretton Woods Agreement. The monetary base was approximately $35 billion. By a simple calculation, the price to redeem every last dollar should have been approximately $50. ($35 billion divided by 707.5 million ounces of gold.) As Master of the Royal Mint, Sir Isaac Newton had decreed that a gold-to-currency ratio of forty percent was sufficient to reassure the markets, and he was correct. Therefore, a seventy percent ratio ($35/$50) was more than sufficient to prevent a complete run on America’s gold reserves.
Gold Coverage Price in 1971: $323
When President Nixon suspended gold redemption for dollars in September 1971 the US monetary base had risen from $35 billion to $84.4 billion. Reserves had fallen to 261.5 million ounces from 705.5 million. The gold coverage ratio was $323. ($84.4 billion divided by 261.5 million ounces of gold.) That doesn’t sound too bad today, but debasement to that level was enough to end the Bretton Woods Agreement. Had Nixon devalued the dollar and promised to stop money printing, he probably could have stopped the run on US gold. Raising the redemption rate to $130 per ounce, per Sir Isaac Newton’s forty percent formula, probably would have worked. Again, these amounts seem so low and reasonable today that it is hard to believe that this wasn’t attempted. (In the 1980’s New York Congressman Jack Kemp lobbied unsuccessfully to reestablish convertibility at $400 per ounce.)
Gold Coverage Price in 2025: $21,745
Today the ratio is enormous and only getting bigger, even if we assume that the US still has all 261.5 million ounces of gold. The monetary base as of August 2025 was $5,686.4 billion, resulting in a gold coverage price of an astonishing $21,745 per ounce. So, in roughly eighty years the US has devalued its currency to gold, as illustrated by the gold coverage price, by 99.75%. ($50/$21,745) Sadly, this downward trend continues, and no one in government is calling attention to this debacle much less trying to stop it.