By Craig Reger
“This is the golden age and gold is the reason for the wars we wage”, Bono Vox. Lead singer, U2. Speaking of the hypothesis that Presidents lie, I am always reminded of Nixon’s temporary lie when I hear this celebrated line harmonized by Bono. https://www.youtube.com/watch?v=iRzr1QU6K1o
The Youtube link is a four minute video of Richard Nixon announcing the temporary end of the Gold Standard on August 15, 1971. On that historical day, Dick Nixon announced what was then considered by contemporary observers a bold and heroic change to the United States monetary system, whereby the United States dollar would no longer be anchored to gold, in other words, the dollar would no longer be convertible to gold at the window of the Federal Reserve Bank at the rate of thirty-five dollars per ounce. From this point forward, the U.S. dollar became a fiat currency in a gathering constellation of other world-wide fiat currencies. Fiat meaning that the dollar was backed by only a promise of the U.S. Government, not something tangible, such as gold or even silver.
Up until August 1971, Gold controlled the amount of money the Federal Reserve Bank of the United States could issue. By relieving the United States of the warm guiding shadow of the Gold Standard, the Federal Reserve was now able to print money without the burden of having gold reserves to support the currency in world-wide circulation. To be able to print money In the era of Vietnam War deficit spending was an exciting monetary convenience to government officials. The U.S. began peeling off those dollar bills and slapping them down at the poker table of war, inflation and political positioning.
Nixon tendered a calm and confident voice of American protectionism that sold very well to the country in the grainy four minute video. The problem during the great depression that began in 1929, was there was too little money, but not because there was too little gold, there was too little confidence on the part of the Federal Reserve. In 1971, Nixon created the opposite problem when removing the U.S from the Gold Standard. It’s strange to say that too much money is a problem, but too much money is a problem if that mystery money is created by printing presses to achieve what we don’t yet have by creating something that we don’t need. Said another way, borrowing from what doesn’t exist will have a chaotic climax.
No governmental policy has ever been unaffected by time. My penny-wise parents bought a sturdy middle-class house in the summer of 1971 for twenty-one thousand dollars, a good deal as far as deals go. Some would say that their house is worth more today, I would say the dollar is worth less. Nixon successfully ushered in the era of inflation and the U.S. government and Wall Street made off with the loot. If you don’t know what inflation is, you’re probably a victim of your own governments inflationary war.