Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UnHappy 40th Birthday for Fiat U.S. Dollar

Currencies / US Dollar Aug 15, 2011 - 03:56 AM GMT

By: Jeff_Berwick

Currencies

Best Financial Markets Analysis ArticleAugust 15 marks the 40th birthday of the Federal Reserve Note as a completely fiat currency.

On that date, on August 15, 1971, Richard Nixon commandeered the airwaves to announce the closing of the gold window. According to him, this was necessary to protect the US dollar from attacks from the "international money speculators'.


Nixon Ends Bretton Woods International Monetary System

According to Nixon, the problems weren't caused by the debt and inflation produced by the military industrial complex and the fractional reserve banking system in the sixties in support of the Vietnam war and the expansion of American empire (following WWII). It was not that the so called "civil" war turned the concept of government upside down and empowered the Federal government, or the creation of the system of public debt by the Hamiltonians who believed that putting people in hock solidifies public support of their government. No, we didn't need to do away with the central bank, burdensome competition restricting regulation or the use of force in matters of money... and many of the same problems that are setting the streets in Athens on fire.

The problem, according to Nixon, wasn't that the US had been bankrupted again, this time by Lyndon B. Johnson's disastrous Vietnam War starting in 1965 and his welfare programs (War on Poverty).

No, none of these were the problem. What was the problem according to Nixon? It was the universal scapegoat used by all governments and central bankers: the speculators.

The reason Nixon was forced to close the gold window was that overspending on the wars and welfare programs left them with empty coffers and neither they nor Congress were willing, or able, to raise taxes to support an increasingly unpopular war. So, Johnson and then Nixon borrowed, and then spent, billions of dollars. In the process, they infused a huge amount of money into the economy, which led to serious inflation. It also led to a balance of trade problem in which the U.S. was importing far more than it was exporting. As a result, more and more US dollars came to be held outside the country.

To keep foreign countries from trading in their surplus dollars for gold, Nixon, in 1971, unilaterally decreed that, from now on, the U.S. would not exchange dollars for gold for anyone. It was the second de-facto default since the Federal Reserve was created.

The Slippery Slope

The first default, in 1933, set the US on a course for failure. By seizing real money (gold) and issuing currency only somewhat backed by that gold, the underpinnings of a free market economy had been seriously weakened. By 1971, again, this system, politically, was untenable. On August 15, 1971, the US underwent its second default and the countdown to the next default began, this time at a more accelerated pace.

Every chart pertaining to money or the price of things, whether they be commodities, houses or stocks, all changed on that date.

The money supply, unchained by anything, went from being on a mild incline to near vertical by 2008.

True Money Supply

And, although the Consumer Price Index is not a good way to gauge the effects of monetary inflation on prices, it does provide some basis for understanding of its effects over the long term:

Consumer Price Index

Again, after a century of declining prices the creation of the Federal Reserve began an uptick in prices by 1920 and after 1971, it went vertical.

Prices haven't skyrocketed since 1971 - not in real terms. Only in terms of the constantly depreciating dollar, a collapse that has only increased since its gold backing was removed.

Will the fiat dollar live to see 50? Highly unlikely - at least not in its current form. It will be lucky to see 42 at the rate it is going. So, enjoy your birthday while it lasts, dollar. Your fate, the same as every other unbacked fiat currency in history, draws near.

This evening we are releasing the August issue of TDV where we talk much more in depth about the coming collapse and strategies and info for how best to survive the coming storm.  Subscribe today to become a part of our community of dollar crash survivors.

The Dollar Vigilante is a free-market financial newsletter focused on covering all aspects of the ongoing financial collapse. The newsletter has news, information and analysis on investments for safety and for profit during the collapse including investments in gold, silver, energy and agriculture commodities and publicly traded stocks. As well, the newsletter covers other aspects including expatriation, both financially and physically and news and info on health, safety and other ways to survive the coming collapse of the US Dollar safely and comfortably. The Dollar Vigilante offers a free newsletter at DollarVigilante.com.

© 2011 Copyright Jeff Berwick - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in