On February 6, 2026, the Dow Jones hit a record level of 50,000. It was now 5 times its level in 1999 when it hit 10,000 for the first time. But how real has the increase been? In 1999, $10,000 would have bought you 40 ounces (oz.) of gold. In 2026, $50,000 buys you only 10oz. of gold.

The fact is that in 27 years, the dollar has lost 75% of its value.

The dollar has been the world's reserve currency since the Bretton Woods agreement in 1944. It was backed by gold at $35 per oz. until President Nixon effectively ended the Bretton Woods system in 1971. Since then, the world has relied on fiat currencies, and had to trust the governments that control them. The dollar has remained the major currency for international trade; central banks have typically held most of their reserves in US Treasury bonds.

But it is under threat. As their US Treasury bonds mature, many central banks are not rolling them over; instead, they are replacing them with gold. The World Gold Council reports net purchases by central banks of over 4,000 metric tons for the 2022–25 period.

To put this in context, most of the gold ever mined is still in existence—estimated to be 216,000 metric tons. Central Banks currently hold at least 16.5%—36,000 metric tons.

In 1997, the Reserve Bank of Australia (RBA) sold two-thirds of its gold holdings (167 metric tons) for about AUD 2.4 billion—less than AUD 450 per oz. At the current price of over AUD 7,000 per oz. that represents a real-term loss of AUD 35 billion.

Key to understanding this is that the RBA sees its primary responsibilities as maintaining full employment and the stability of the currency. The use of monetary policy to maintain full employment is a throwback to Keynesian economics—the concept that unused labor should be soaked up by government projects funded by increasing the money supply.

Suffice to say, for the moment, that government projects do not have the entrepreneurial discipline to make the best use of scarce resources, have no measure of economic success, and are usually delivered late and over budget.

To meet its objective of maintaining the stability of its currency, the RBA aims to keep inflation in the range of 2% to 3%. If they were to achieve this objective, then the value of the currency would halve in each generation. If the RBA is successful in its policy, at an average of 2.5% inflation, one AUD will be worth about 50 cents in 28 years' time.

That is not what I would call a stable currency. I would rather have one that was worth 100 cents in 28 years' time. I would rather be able to write contracts without having to consider the currency risks. I would rather be able to save without having to consider how much I would lose from inflation. In practice, of course, central banks do not meet even their own arbitrary targets. Consequently, the value of the currency halves in fewer years. As we have noted, the dollar has lost 75% of its value in the last 27 years.

So, we have three reasons to be concerned about the RBA. Its judgement in managing our reserves was poor, and, unlike other central banks, it is not taking action to correct its mistakes. Its use of monetary policy to manage full employment is based on discredited economic theory. Its inflation objective is counter to its brief to maintain a stable currency.

It seems fair to ask, "Is it fit for purpose?"

Concern about the desirability of central banks is international. My colleagues at the Mises Institute in the USA have recently produced a documentary on the US Federal Reserve called Playing with Fire: Money, Banking, and the Federal Reserve.