What do you think that I think that it means? or better yet, what do you think that it means? I am sure by your answer, that it is you who does not know what it means.
Reserve currency doesn't mean that other nations peg the value of their money to the dollar, which is how you were using the term. Most major currencies float, which means the market sets the exchange rate. If these currencies were pegged to the dollar there would be a constant exchange rate, and it hasn�t been like that in nearly 30 years.
The US would NOT devalue the dollar by backing it with gold. To think so is folly. Think about what you just said. You really believe that a dollar backed by nothing is more valuable than a dollar backed by gold???? As far as buying things (anywhere in the world - - not just in the US) at firesale prices - - - - this is one of the points I made in my last post. This is why people are buying precious metals! The value of the dollar would decrease as compared with the value of precious metals, not other currencies.
I posted the number using the most gold the U.S. Government ever held, and to have enough dollars to replace the current money supply the official exchange rate would need to be over $15,000 per oz. If it takes $1,700 to buy an oz of gold today and tomorrow it takes $15,000 to buy that same oz of gold, that's devaluing the dollar relative to gold, particularly if you then are backing dollars by gold. Remember, for the dollar to be backed by gold the exchange rate is set by the government, not by markets, so we would be locked in, but other nations could still buy and sell gold on the $1,700 per oz market price. There's no law saying other nations have to follow us over the cliff.
In order to be backed by gold the government must set the exchange rate by law (fiat) and be willing to both buy and sell dollars for gold at that official rate, at least with other governments. So Canada could use their gold reserves to purchase dollars at $15,000 an oz and then use those dollars to buy U.S. property and goods. The same for China, Europe, Russia and every other nation. If we increased the dollar price to compensate, that would mean something that sold for $1,000 would have to sell for $8,823 to represent the world market value of gold. If we didn't do the 882% inflation we would end up with lots of gold, but the world would own the U.S.
Don' pay attention to mike762, he's hopelessly stuck in the past and wanting to go back to using rocks for money. If there is a future without central banks it won't be based on gold or any other physical commodity, but on crypto-currency such as
Bitcoin. Like gold, there's a fixed amount and there's no central control, yet it can be transferred electronically.
