Monday, August 15, 2011

Tricky Dick

On this day, August 15th, 40 years ago, President Nixon announced the end of the Gold Standard and the end of the Bretton Woods international monetary system.   This was one of the most important decisions in modern financial, economic and monetary history and is a seminal moment in the creation of the global debt crisis confronting the U.S., Europe and the world today. Nixon ushered in an era of floating fiat currencies not backed by gold but rather deriving value through government “fiat” or diktat. While Nixon justified the move was that the U.S. , then as today, was living way beyond its means with the Vietnam war and growing military industrial complex leading to large budget deficits and inflation. Governments internationally including the French and their President Charles de Gaulle were concerned about the debasement of the dollar and began to exchange their dollar reserves for gold bullion bars. Subsequent to Nixon’s decision 40 years ago, the U.S. dollar has fallen from 1/35th of an ounce of gold to 1/1750th of an ounce of gold today. This is not the fault of “speculators”, rather it is the fault of profligate governments and central bankers debasing the U.S. dollar.

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