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Did The Great Financial Crisis Start With The End Of The Gold Standard?

Tyler Durden's picture


It’s perhaps no co-incidence that the trend towards persistent deficits started around the final collapse of the last link to a quasi-Gold standard back in August 1971. As Deutsche Bank's Jim Reid notes, in a world of the Gold Standard or equivalent, those countries loosening policy too much would have seen a rush to convert their currencies into Gold thus destabilising their economic policy framework. Multi-year (let alone multi-decade) deficits and the GFC could not have occurred under a gold standard.

So with the shackles off and with nothing backing paper money, the post 1971 period has seen a uniquely long period of fiat currencies globally with a beggar-thy-neighbour rolling period of credit creation. Never before in observable history have so many countries been off a precious metal type currency system for so long. This move in 1971 helped create the conditions (alongside ever looser financial regulation) for almost unlimited credit and debt creation potential that would have been inconceivable through the annuls of economic history. The developed world in particular went on a 36 year credit/debt binge which probably lasted longer and was more aggressive than it would have been had it not been for China's globalisation moment 30 years ago. From this point they almost single handedly started a three decade period of suppressing global inflation thus allowing the credit/debt binge to become ever bigger without the inflationary check that would have likely otherwise occurred.

It’s worth reminding ourselves that this graph is compiled on a log scale which can visually understate the scale of the loss of purchasing power seen against Gold over the last century. Such losses did occur in stages though.


As can be seen from the graph, the 1930s Depressionary period, and the war-torn 1940s, saw sizeable devaluations against Gold from most countries as many re-valued or left the Gold Standard due to high economic stress. Post WWII, the Bretton Woods system then broadly stabilised currencies by creating a Dollar standard where the US agreed to convert Dollars into Gold at around $35 per ounce. After 20 plus years of relative currency stability (helped by heavy post WWII capital controls), the late 1960s started to see pressures building on this Dollar/Gold peg as some countries chose to switch their Dollars into Gold as concern mounted about the loosening of US monetary policy and on the other side some countries had to devalue within the system.

By 1971 President Nixon had decided that this peg was unsustainable and on 15th August he suspended convertibility - which leads to the inflationary debacle in our previous post.


So after 41 years of global fiat currencies and an unparalleled amount of debt that is proving very difficult to shift, we really are venturing into the unknown.


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Tue, 09/04/2012 - 12:57 | 2760887 reader2010
reader2010's picture

It was called the greatest "Financial Innovation."

Tue, 09/04/2012 - 13:14 | 2760897 Xibalba
Xibalba's picture

Like CDS and CDO's....and well, throw ETF's in there too. 




Tue, 09/04/2012 - 13:21 | 2760961 Badabing
Badabing's picture

The gold standard ended in 1913 when the fed started printing. By 1929 the market crashed with a bank run the excuse was “a gold shortage”.

Don’t you just love the way the fucking banks twist the truth, a gold shortage, not a surplus of paper dollars!!

Bring back the gold standard and use silver for the fluctuations along with the 90 day note and we be just fine. Last but not least put all responsible bankers in work camps for life!!!

Tue, 09/04/2012 - 13:31 | 2761000 ParkAveFlasher
ParkAveFlasher's picture

Well technically, it was a shortage of gold - as well as a shortage of ethics, responsibility, common sense, accountability, math prowess, ...

Tue, 09/04/2012 - 13:40 | 2761045 redpill
redpill's picture

To answer the question, no it began long before that, on Jekyll Island.

Tue, 09/04/2012 - 13:58 | 2761137 bloostar
bloostar's picture

Whilst Dr Moreau was visiting no doubt...

Tue, 09/04/2012 - 15:41 | 2761536 NewWorldOrange
NewWorldOrange's picture

A number of Dr Moreau's creatures.

Tue, 09/04/2012 - 13:43 | 2761056 Darth..Putter
Darth..Putter's picture

The only way there could possibly be a "shortage" of gold is by dictating the price of it.  No one was willing to sell at the price. 

There will always be plenty of gold if the price is allowed to be found by the markets.


Then do need a viable currency, at least Monopoly money is printed on paper, you just need enough of it.

Tue, 09/04/2012 - 16:04 | 2761611 ParkAveFlasher
ParkAveFlasher's picture

Exactly my point.  Such as, I will only buy apples for 1 cent (remember cents?  those were the days) per apple at the market one sunny day.  At the end of the day, I will find that I have an acute shortage of apples.

If the price falls in the woods, who will know it?



Tue, 09/04/2012 - 16:17 | 2761651 Chief KnocAHoma
Chief KnocAHoma's picture

Herbert Stein - advisor to Richard Nixon had a saying "Something that cannot continue, won't."

At the time he was refering to the trade balance with Japan as those little yellow bastards were standing in line at our gold window shoveling paper through in return for metal.

So we decided to changes the rules, and go fiat only. Now Mr. Stein is about to be proven correct yet again. Something that cannot continue, won't... like relying on unbacked paper and blips of light, and this adjustment is going to be interesting.

The only way I can see it working is a US default, then adoption of a new currency. Then we could load cargo ships full of our current dollar and ship them to China with a note that reads "Choke on it". After that we can launch our new gold backed money for use in the states because something tells me no one will be willing to trade with us for a while.

Tue, 09/04/2012 - 18:11 | 2762117 outofhere
outofhere's picture

Looks like at least 2 bankers have read your post!

Tue, 09/04/2012 - 15:01 | 2761418 Stoploss
Stoploss's picture

The gold standard's main influence was to control runaway gov't spending, in all govt's that used it. It has advantages, and disadvantages.

Tue, 09/04/2012 - 15:40 | 2761533 NewWorldOrange
NewWorldOrange's picture

B-b-but several brilliant zh readers, just this morning, proved that the persistent high inflation in recent decades was caused not by CNTRL-P but by technological advances, increased industrial capacity, and population growth! They laid a chart of those things over the inflation chart, Hockey Stick like, and voila! They looked similar!


Tue, 09/04/2012 - 13:01 | 2760891 Cognitive Dissonance
Cognitive Dissonance's picture

Of course it did. You can't screw things up this badly without at least several decades of trying.

And trust me on this one. They will continue to "try" until nothing's left but a smoking heap of ashes.

Tue, 09/04/2012 - 13:12 | 2760932 Unprepared
Unprepared's picture

Go Long phoenixes?

Tue, 09/04/2012 - 13:58 | 2760998 Xibalba
Xibalba's picture

If only bullshit were a currency...oh wait...IT IS!!!

Tue, 09/04/2012 - 13:14 | 2760936 JPM Hater001
JPM Hater001's picture

Do you know how to get to Brokeway?

Practice practice practice.

Tue, 09/04/2012 - 13:52 | 2761114 SpykerSpeed
SpykerSpeed's picture

That's one thing you have to admire the socialists for:  persevering in the face of difficulty.  They just don't give up!

Tue, 09/04/2012 - 15:44 | 2761546 NewWorldOrange
NewWorldOrange's picture

"They just don't give up!"

They just don't give up on demanding other people's money!

There. Completed it for ya'.

Tue, 09/04/2012 - 18:15 | 2762083 outofhere
outofhere's picture

And Bill Cooper was warning us all through the 90's but only a few listened.  Now he is dead because he reported the the TRUTH.

Wake up 'sheople' was his mantra.


Wed, 09/05/2012 - 09:20 | 2764116 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

People brought stones from all 50 States to lay on his grave.

YouTube "Death of William Cooper" for a very interesting story.

He also warned of Government getting us to voluntarily surrender our rights via contracts.

To the awakened? at ZH: have you read what you signed and agreed to when you opened your last bank account?


Tue, 09/04/2012 - 12:59 | 2760895 Dr. Richard Head
Dr. Richard Head's picture

Linking to a barbaric relic is for sewing into garments. /sarc

Tue, 09/04/2012 - 13:06 | 2760910 Cognitive Dissonance
Cognitive Dissonance's picture

When the looting of the middle class is over and the wealth and asset transfer is complete we will be lucky to have clothes to carry into the resettlement camps. We ain't seen nuttin' yet.

Don't think kaboom. Rather think of an elevator falling 100 floors in fits and starts. First it drops 15 stories, then catches for a bit, then down another 10 floors, then grinds to a halt on some debris.

Repeat as needed until there is a two class system world wide. The elite.....and everyone else.

Disclosure: Mrs Cog does NOT agree with me. :)

Tue, 09/04/2012 - 13:15 | 2760944 JPM Hater001
JPM Hater001's picture

Does "everyone else class" come with a free soda and snack?

If not I'll take elite please.

Tue, 09/04/2012 - 13:26 | 2760971 Cognitive Dissonance
Cognitive Dissonance's picture

The resettlement camps will provide you with everything you need bro.

Personally I'm shooting for elite lite. No sense in getting greedy and screwing with my Karma. :>)

Tue, 09/04/2012 - 13:25 | 2760979 Dagny Taggart
Dagny Taggart's picture

Kaboom happens whenever the reality of the looting crashes into YOUR life. For the homeless and permanently unemployed, the elevator has already crashed to the basement.

Ya know Cog, it's not your usual glowy and optimistic self to think "they" will succeed in making this a two class system. Agreed we ain't seen nothin' yet, but things have a way of not working out the way we think. Just sayin'...

Tue, 09/04/2012 - 13:37 | 2761019 Cognitive Dissonance
Cognitive Dissonance's picture

"For the homeless and permanently unemployed, the elevator has already crashed to the basement."

I respectfully disagree simply because things can (and often do) go from bad to worse to horrible to Armageddon. Collapse occurs in stages.....unless of course you're talking about a controlled demolition. While I do think this financial crisis has been engineered there is still plenty of wealth remaining to be looted before the deed is done.

The barbarians at the gate are the last stage of the fall of empire. And they rarely find anything of value inside once they storm the gates because those in power within the (fallen) empire have already looted before beating a hasty retreat.

Unfortunately we (the collective we) have been so conditioned and corrupted that only a complete and utter collapse will be sufficient to wake us from our slumber so that we may recognize that we have, and always had, the power within.


Tue, 09/04/2012 - 13:43 | 2761059 OneTinSoldier66
OneTinSoldier66's picture

Sad but True.

Tue, 09/04/2012 - 18:21 | 2762147 outofhere
outofhere's picture

The key phrase being "the power within"

Tue, 09/04/2012 - 13:01 | 2760899 mrktwtch2
mrktwtch2's picture

it was the repeal of glass stegal and of letting banks go from 12 to 1 leverage to 40 to some research you guys!! standard has nothing to do with it..!!

Tue, 09/04/2012 - 13:05 | 2760918 Quintus
Quintus's picture

Repealing the Glass Steagall act in 1999 caused the persistant and unprecedented accumulation of debt at all levels (Sovereign, Corporate, Individual...) that started in the 1970's?


Tue, 09/04/2012 - 13:58 | 2761126 ebworthen
ebworthen's picture

Repealing Glass Steagall kept the ball rolling.

After the S&L crisis, bankers needed more ways to leverage the markets.

Repealing Glass Steagall let the banks gamble with depositor money and create nefarious street games as MBS's, CDS's, rehypothecation, etc., etc.

When that well ran dry; they threatened collapse if they weren't bailed out with taxpayer money - a direct theft much more brazen and straightforward than printing money unhinged to gold or selling worthless crap to pension funds and municipalities.

Now, the bankers have in their pockets:  two candidates, a Supine Court, a Justice Department, a CONgress, and state governments to continue their legerdemain and skullduggery until they bleed every last penny from honest people and induce another World War.




Tue, 09/04/2012 - 13:14 | 2760940 whatsinaname
whatsinaname's picture

401k money started coming into the markets in 1982.

Tue, 09/04/2012 - 13:16 | 2760952 jimmyjames
jimmyjames's picture

it was the repeal of glass stegal and of letting banks go from 12 to 1 leverage to 40 to 1


What allowed banks to go beyond the 12-1 ratio was not the repeal of glass stegal-it was greenspan allowing banks to use sweeps to override reserve requirements and artificially ramp up reserves-starting in 1994-

Tue, 09/04/2012 - 14:17 | 2761223 FRBNYrCROOKS
FRBNYrCROOKS's picture

you mean REPO agreements?

Tue, 09/04/2012 - 13:45 | 2761008 LMAOLORI
LMAOLORI's picture



I am not going to agree/disagree on the Gold Standard but if you are going to talk about the current crisis/Glasss Steagall some information might be helpful for discussion

"Those who say that the financial recent crisis tells us to re-enact Glass-Steagall overlook what failed and what did not: the largest failures in the 2008 crisis – Lehman Brothers, AIG, and the Reserve Primary Fund – were not deposit-taking commercial banks on which Glass-Steagall’s repeal had a major impact. AIG was a mega-insurer. Lehman was an investment bank. The Reserve Primary Fund – brought down by its purchases of IOU’s from Lehman – was a money-market mutual fund, not a commercial bank."

 Lehman, Reserve Primary were not under the Fed's jurisdiction btw the SEC was responsible for them...


"Consider the experience of 2008. When Lehman Brothers Holdings Inc. went bankrupt, many money funds suffered significant losses. Sponsors supported all but one fund, and that single money fund -- the Reserve Primary Fund -- broke the buck. This triggered a stampede of withdrawals across the sector that threatened severe consequences for the economy and for millions of investors. The stampede was halted only when the U.S. Treasury stepped in to guarantee the value of the money funds, at taxpayer risk, and the Federal Reserve put in place additional emergency programs to backstop credit markets."


Money Market Funds are NOT 100% Safe

What triggered Lehman's loss?

Tue, 09/04/2012 - 14:27 | 2761266 bank guy in Brussels
bank guy in Brussels's picture

But the problem in the money-market funds really goes back to the problem of allowing lending above the 12-to-1 leverage ratio.

The whole new lending securitisation monster lets lending everywhere get out of control because instead of the old, stuffy, conservative, low-profit banking, we now have lenders whose source of funding is short-term paper getting rolled over from the money-market funds ... and the repos (repurchase agreements) and so on

In other words, shadow banking, as ZeroHedge as been quite ahead of the curve in covering

Everything levered up, 30 to 1 or even 50 or 60 to 1 ... immense fragility, and subject almost instantly to a 'crisis' that can be triggered in hundreds of ways, in runs on things that are not deposit banks but which governments have allowed to become systemically important

It's hard to wind down now ... but I suppose it will be like after the Great Depression in the US or the World Wars in Europe ... the coming decades will be scarred by what is happening in 2007-201x.

Tue, 09/04/2012 - 14:57 | 2761400 Landotfree
Landotfree's picture

No the problem is you are using interest.   Eventually you can't sustain the demands of the equation.  Eventually peak then collapse.  

The problem is the use of an equation which demands exponential growth.   You do not feed the equation its starts feeding on itself or more like humans. 

Tue, 09/04/2012 - 16:27 | 2761623 LMAOLORI
LMAOLORI's picture



I was just pointing out the crisis originated from a run on Lehman an investment bank that was full of sub-prime mortgages. In addition to Repo 105 Lehman had accounting fraud and it was claimed it would be moral hazard to bail them out since Lehman didn't have collateral to back up the loan & was the reason given as to why the Fed didn't rescue Lehman like they did AIG. That in turn caused the $2.4 Trillion Money Market's to start breaking the buck.  Again not a traditional bank.

Boston Fed: 78 money funds needed help Between 2007 and 2011, 21 funds would have ‘broken the buck,’ report says

AIG was an insurance company regulated by the Federal Office of Thrift Supervision whose trouble came because they sold too many credit default swipes (insurance against loan failures.) 

You have to remember also that the non traditional banks could not have money from the Fed window prior to the crisis they had to become Bank Holding Companies to do so thus the Goldman-SUCKS conspiracy. That is why Glass-Steagall would not have prevented the crisis the entities that got the crisis rolling were not traditional banks and were regulated by the SEC/Fed.Office of Thrift not the Fed.

"It's hard to wind down now"

I don't know why it would be so hard to wind them down I think that's just political nonsense. 


Tue, 09/04/2012 - 23:15 | 2763156 Clowns on Acid
Clowns on Acid's picture

mrktwtch - some research ? Dude ..stand back and just read and listen...

If there had been a gold standard, to achieve 40 to 1 leverage would either, been impossible to reach given the restrictions of the gold standard, OR if still "blessed" by the would have quadrupled in price.

Now do you see how a gold standard would "restrict" immoral levels of leverage?

Oh wait a minute...who cares about morality..?

Tue, 09/04/2012 - 13:03 | 2760907 apberusdisvet
apberusdisvet's picture

The true unknown is what happens when the $quadrillion derivatives market implodes; which is why, of course, that QE-n on a global scale is coming.

Tue, 09/04/2012 - 13:27 | 2760987 madcows
madcows's picture

Not to worry.  AIG has that covered.

Tue, 09/04/2012 - 13:08 | 2760908 kito
kito's picture


Did The Great Financial Crisis Start With The End Of The Gold Standard?



hmmm...answer seems too easy...............trick question tyler?..........................

Tue, 09/04/2012 - 13:12 | 2760909 Money 4 Nothing
Money 4 Nothing's picture

No, it started in 1913 under the Federal Reserve Act and hasn't stopped since. That's what happens when you have an offshore Central Bank with no loyalty to our nations flag run our Finances.

Kinda like Greece hiring Goldman Sachs to help manage their affairs, see how that turned out?

How do you own anything when you have spent the King's money to get it? So technically, You didn't build that.


"Give me control over a nations currency, and I care not who makes its laws.”

Baron M.A. Rothschild 

Tue, 09/04/2012 - 13:05 | 2760914 ParkAveFlasher
ParkAveFlasher's picture

Why does Figure 17 hate our freedoms?

Tue, 09/04/2012 - 13:08 | 2760923 jimmyjames
jimmyjames's picture

From this point they almost single handedly started a three decade period of suppressing global inflation thus allowing the credit/debt binge to become ever bigger without the inflationary check that would have likely otherwise occurred.


Expanding credit is inflationary and is in fact-genuine inflation-

How does he come up with "suppressing global inflation"?

Tue, 09/04/2012 - 13:14 | 2760938 ParkAveFlasher
ParkAveFlasher's picture

Good one ... does he mean "supress nominal price inflation via market manipulations on a vast scale

Tue, 09/04/2012 - 13:08 | 2760925 css1971
css1971's picture

Yes it did.

Politicians find it easier to run a deficit to cover their lies than to tax people to cover their lies.

Tue, 09/04/2012 - 13:21 | 2760939 Dr. Engali
Dr. Engali's picture



End the Fed and the strangle hold the bankers have on the country.

It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. ... Abraham Lincoln



Tue, 09/04/2012 - 14:31 | 2761289 MaggieL
MaggieL's picture

Um...quote isn't Lincoln. 


It's Thomas Edison. See about halfway down the third column... NYT,  December 6, 1921

Tue, 09/04/2012 - 13:16 | 2760946 Turin Turambar
Turin Turambar's picture

Central banking and fractional reserve fiat currency are the seeds of inevitable financial destruction.  All that is lacking to bake the cake and watch it implode is time. Despite protestations to the contrary, anything else is just misdirection.

Tue, 09/04/2012 - 13:29 | 2760997 Badabing
Badabing's picture

Weet Wah

Little rascals

Tue, 09/04/2012 - 13:16 | 2760948 blunderdog
blunderdog's picture

If you want to call the "start" of the financial crisis 30 years of declining wages, increased financialization, tremendous increase in asset valuation, and major profit growth, well then sure.

Otherwise that was kind of a silly way to word that.

Tue, 09/04/2012 - 13:18 | 2760958 AnAnonymous
AnAnonymous's picture

1970s: that is the US petroleum oil shock,when the oil extraction in the US peaked...

Much more relevant to the topic than some awkward financial manipulation as practiced by 'Americans'

But the narrative has its values:
'Americans' introduced themselves as being able to overcome the environment and a oil peak is a perfect situation to display the capacity.

Did not happen, 'Americans' exposed themselves and somehow, speaking of currency manipulation or stuff is more comforting than oil peak and the rest.

Currency manipulation, it is just a story of writing new bits of paper, new laws and stuff...'Americans' can change that. They have grip on that.

Making up for the loss of resources, well, that is a totally different story...

Tue, 09/04/2012 - 13:20 | 2760959 q99x2
q99x2's picture

It is unknown how high gold will go this time.

Silver +2.82% today.

Movin movin movin keep them doggies movin.

Head em up. Move em out.

Tue, 09/04/2012 - 13:31 | 2761003 OneTinSoldier66
OneTinSoldier66's picture

+1 Raw Hide!

Tue, 09/04/2012 - 13:22 | 2760968 Northeaster
Northeaster's picture

Weren't we on a "Gold Standard" in 1929?

Tue, 09/04/2012 - 13:29 | 2760989 Landotfree
Landotfree's picture

The amount of credit expanded past the amount of gold, no way that everyone could get gold in equal value.  Going back to the gold standard really does nothing at all as there is a credit system, which people use as money.   If the amount of credit was limited to the amount of gold in existence then you would have peak and then you would collapse.   The gold standard does nothing, as the root of the problem is never addressed.  

As you pointed out, the system was on a gold standard then, and there was gold standard during the other great depressions before 1929 basically going back 1000s of years.   As long as humans continue to con each other in believing you can get something for nothing, this cycle will continue.   

Tue, 09/04/2012 - 13:35 | 2761020 jimmyjames
jimmyjames's picture

The gold standard does nothing, as the root of the problem is never addressed. 


Gold standard works if it's allowed to-FRB is the problem and always has been-

Tue, 09/04/2012 - 13:46 | 2761034 Landotfree
Landotfree's picture

No it doesn't, as me and someone else can create "credit" which is then used as money.  Sorry as long as you charging interest it's doomed to fail.   Sorry.  

Peter lends Paul 100oz of gold, Peter charges Paul 10% compounded annually, let me know were the interest comes from when you have billions of people doing this.   You eventually hit max, end of story.  

It's the same system, whether you are using dirt, gold, silver or even federal reserve notes... you will peak and then collapse usually plus/minus 60-70 years.

There was no central bank during the great depression in 1872, oh you didn't know there has been other ones.  Rome went from population of 1 million to less than 50,000 due to their great depression... failure of the silver standard as the output of the mines were not great enough to sustain the unsustainable.  It's just basic math.



Tue, 09/04/2012 - 14:04 | 2761166 jimmyjames
jimmyjames's picture


No it doesn't, as me and someone else can create "credit" which is then used as money.  Sorry as long as you charging interest it's doomed to fail.   Sorry


Learn to read--that's what i just said-asshole-

Tue, 09/04/2012 - 14:13 | 2761208 Clowns on Acid
Clowns on Acid's picture must teach basic economics at a Ivy league university.

In your thumbnail sketch (presented as deep historical thought) you give no analysis to the difference between a gold standard and fractional reserve lending, nor the eco-sociological impact of each system.

A Gold standard does not have to be a 1:1 conversion, yes "credit" can be created on a gold standard.....oh master of the obvious...

The point is that a gold standard (whatever the conversion rate is to the fiat currency) provides a limit to Fed printing and a subsequent limit to Federal Spending, which limits their social engineering "projects". Projects which are really just money making, vote getting, projects for a particular political party.

It also provides a discipline for the CB in setting interest rates.

Money printing is just so much easier and makes the CB more powerful. So guess which system the "new" banksters prefer?

Wake the feck up....


Tue, 09/04/2012 - 14:51 | 2761371 Landotfree
Landotfree's picture

I am sorry but the $52T worth of total credit of the system was not created by the Fed.   You have no idea how the system functions.   

You have turned this into the government spending too much from one about how the system actually functions.   Let me see you are one that thinks money only comes into existence by the government spending.  Tell you what, have the government stop spending right now and the system collapse overnight.  You have no idea how the system work.   

Go ahead and stop credit expansion and see what happens, that is called a collapse in the system you have.   

Tue, 09/04/2012 - 14:54 | 2761391 jimmyjames
jimmyjames's picture

Tell you what, have the government stop spending right now and the system collapse overnight.


And of course being the assbackwards thinker that you show to be-you think that would be a bad thing-

Tue, 09/04/2012 - 15:01 | 2761407 Landotfree
Landotfree's picture

I never said if it were bad or good.... many people are going to die when it does happen.  

There is no way to avoid this as it was set in motion before you were born.   Good luck.  A gold standsrd isn't going to help anymore than a iron standard or a copper standard or a pencil standard.  Pick your so called standard and the equation will eventually eat it alive.  

Tue, 09/04/2012 - 14:51 | 2761377 jimmyjames
jimmyjames's picture


Clowns on Acid 

  has done his homework-

Tue, 09/04/2012 - 16:01 | 2761599 NewWorldOrange
NewWorldOrange's picture

LandotFree, your posts are so full of FAIL I hardly no where to begin. And what's the point? You're too simple minded to get it anyway.

""Peter lends Paul 100oz of gold, Peter charges Paul 10% compounded annually, let me know were the interest comes from when you have billions of people doing this.   You eventually hit max, end of story."

THAT is exactly the point simpleton. A medium of exchange that cannot be infinitely multiplied at warp speed prevents such credit expansion. And in a world with finite resources, a model based upon credit expansion must eventually "hit max" regardless. Speaking of hitting max, I think you've reached your level of incompetence.

Tue, 09/04/2012 - 13:57 | 2761131 gwiss
gwiss's picture

Yes, we actually have three problems that are intertwined in our current situation.  We have credit/debt money, but then we also have fiat money, and we have fractional reserve banking. Each one is a different beast, and each contributes its own flavor to the mix of our current economic environment.

Credit/debt money system is why shadow banking can exist, which has a significant effect on our money supply that is completely disconnected from the presumed monetary creation chain of high powered Fed money being expanded via fractional reserve banking and a series of deposits in turn funding more lending.  There is good reason to suspect that the credit money system in fact runs ahead of the Fed, rather than passively being towed along behind by high powered money.

Credit is indespensable for our globalized trade, but as Minsky noted in his financial instability hypothesis, the trend is to steadily trim reserves and take on more debt as fair weather conditions persist and lull the unwary into a falsely calm normalcy bias, until a Minsky moment of debt saturation is reached, at which point the positive feedback trend turns down and accelerates, because companies are forced to sell assets into a poorly bid market, which depresses prices, and asset price contraction leads to contraction of credit in a vicious downward spiral.  Austerity is not an option, but is merely the doorway to debt repudiation via bankrupcty rather than via inflation.  There are only two exits from this death spiral: debt repudiation via bankruptcy, and debt repudiation via inflation.

Fractional reserve is still capable of generating boom bust cycles even on a gold standard, as money supply is still allowed to outstrip resource growth and thus produce a wave of growth not capable of being supported by the actual resource base, and thus economic activity vibrates around the actual available resource base, with booms that surpass resources being paid for by busts that underperform resources.

And finally, fiat currency means that there is no link to reality, and thus the system can wander into a configuration far enough away from the actual resource reality that the economy can completely collapse rather than just being steered back into alignment with reality as would happen on a gold standard.

Those alive today have the misfortune or fortune, depending on whether you are the type who is frightened or invigorated by violent storms, to be able to watch as society goes over a waterfall of perfect storms.  We currently and simultaneously have peak energy, peak employment, and peak population that are all unsustainable, which will all begin to contract as our global monetary system is also failing.  Buckle up, kids.


Tue, 09/04/2012 - 15:02 | 2761421 Landotfree
Landotfree's picture

More or less agree.

Tue, 09/04/2012 - 18:06 | 2762096 SAT 800
SAT 800's picture


Wed, 09/05/2012 - 02:45 | 2763522 Radical Marijuana
Radical Marijuana's picture

I wish I had a seat belt to buckle up with!

"we really are venturing into the unknown"

During those times, the real weapons became astronomical! All of the real, and the threats of real violence, to back up the runaway frauds, existed!

That runaway fiat money fraud happened simultaneously with the development of weapons of mass destruction, and the Cold War, which prevented any kind of traditional redress from being possible. By 1971, it was plainly obvious that the real world had become TOTALLY INSANE, and there was no feasible way to bring it back into balance. No evidence, and no logical arguments, were going to make any difference to the existing systems based on lies backed by violence.

There was the runaway triumph of fiat money frauds, that WERE backed up by atomic bombs, and therefore, there was nothing in the real world to respond to its own runaway insanity.  Somewhere into the late 1960s, or the early 1970s, the world had enough weapons of mass destruction to totally destroy global civilization, IF there was another real war. Therefore, the established systems were able to become runaway frauds, without anything that could be sanely done to resist that. 


Tue, 09/04/2012 - 13:27 | 2760991 jimmyjames
jimmyjames's picture

Weren't we on a "Gold Standard" in 1929?



Tue, 09/04/2012 - 13:35 | 2761023 redd_green
redd_green's picture

Yes we were.  In 1933 Roosevelt outlawed private gold ownership in the USA, and took the US off the gold standard for private citizens.   Foreigners and central banks could convert their dollars into gold until 1971 when Nixon closed the Gold WIndow. 


But 1929 had nothing to do with financial crisis. It was an invented crisis as very many were.

Tue, 09/04/2012 - 13:50 | 2761101 OneTinSoldier66
OneTinSoldier66's picture

Just my opinion from reading about history.


We went off the Gold Standard in 1913, and went onto a Federal Reserve and Income Tax Standard.


And the Bankers had been working on it for at least 20 years prior to 1913.

Tue, 09/04/2012 - 14:42 | 2761320 bank guy in Brussels
bank guy in Brussels's picture

Antal Fekete, the mathematician who become a leading figure in gold circles, has argued that the gold standard really did end in 1914, tho not because of the Federal Reserve -

Fekete says that what went wrong when the gold standard was theoretically 'restored' after World War I, was that they did not re-affirm the international 'Real Bills' policy that was described by Adam Smith

Term 'Real Bills' refers to the form of self-extinguishing credit backed by real gold that will be paid at the end of a short fixed term ... which Fekete says was optimally about 90 days.

You get a contract 'good as gold' for payment in gold in 90 days ... because this is 'good as gold' anyone can trade this for a small discount, to get short term cash to pay employees, materials suppliers, shippers etc. ...

Fekete describes how before 1914 this was centred in London, and 'Real Bills' were accepted from all over the world, and contracts in the Far East were written with 'payment in gold in London in 90 days'. In London, the 'good as gold' paper traded in the short term, with real gold at the end for anyone who wanted it ...

Without 'Real Bills' discounted for near-term payment in gold, Fekete says the whole world started choking for lack of short-term credit ... Germany was ravaged in particular, leading to the Weimar hyper-inflation ... in America they had a 'roaring 20s' boom on 'crazy credit' instead of the 'Real Bills' gold-backed credit that extinguishes itself in a few months ... That is Fekete's position on what happened

And in fact, it was not until the 1980s that global trade finally rose back to the levels it held in 1913 ...

Don't know what I think of Fekete's material but it is fascinating if a bit hard to follow

Tue, 09/04/2012 - 15:03 | 2761423 Ghordius
Ghordius's picture

it is fascinating, it is hard to follow, but he has a point, IMHO

look, Antal Fekete on ZH in the year 2010

with comments from Trav7777, RockyRacoon, Buckaroo Banzai, Dismal Scientist, bigdumbnugly, and Turd Ferguson

Tue, 09/04/2012 - 14:00 | 2761148 jimmyjames
jimmyjames's picture

Yes we were.  In 1933 Roosevelt outlawed private gold ownership in the USA, and took the US off the gold standard for private citizens.

But 1929 had nothing to do with financial crisis. It was an invented crisis as very many were.


You make the same mistake as Denninger and Bernanke-

There was no gold standard in 1929-there was a credit bubble-just like now-

Gold standard ended in 1922-



Tue, 09/04/2012 - 16:45 | 2761789 NewWorldOrange
NewWorldOrange's picture

A lot of semantics here. What is a "gold standard"? Even different economists who are pretty good at what they do differ on that. We were to a large degree on a gold standard prior to 1922, true. So I won't quibble there. But for LandotFree to say we were on a gold standard in 1929 and to argue that proves it is totally worthless to prevent major market disruptions is absurd.

Wed, 09/05/2012 - 09:37 | 2764150 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

When the student is ready, the teacher shall appear.  I think you will find this book interesting.

In the original coinage act of 1792 the Dollar (and it's fractions) was the unit of measure for Silver, The Eagle for Gold, and the Cent for copper.

An Gold Eagle was 'worth' ten dollars and it took one hundred cents to be worth a Dollar.

It was a really good system - with years of knowledge and invention from people like Issac Newton.

I am not sure it is a big conspiracy, I sometimes tihnk that no one bothered to read the instruction manuals before legislating.



Tue, 09/04/2012 - 16:47 | 2761603 NewWorldOrange
NewWorldOrange's picture

LandotFree, we were not even FULLY on a gold standard in 1912, and certainly not in 1929 so to say that proves it is worthless to help prevent major market distortions/malinvestment is beyond absurd. Sheesh, some of you fucks spout off a lot on shit on which you know nothing and could easily research. Ever heard of GOOGLE?

Tue, 09/04/2012 - 13:39 | 2761039 redd_green
redd_green's picture

Most certainly we were. But ,what doe 1929 have to do with today's financial crisis? 

Tue, 09/04/2012 - 13:49 | 2761092 Landotfree
Landotfree's picture

What happened in 1929 is the same thing you see happening today, although the details might be different.  The system hit peak and collapsed, as the system was not able to generate the amount of new credit to sustain the old.   It's a recycled ponzi scheme that has been going on for 1000s of years, apparently humans still don't understand basic math.  

Tue, 09/04/2012 - 16:13 | 2761631 NewWorldOrange
NewWorldOrange's picture

LandotFree, are you really this simple-minded or are you just trolling? Incredible.

"The system hit peak and collapsed, as the system was not able to generate the amount of new credit to sustain the old. "

So the system hit peak credit. Wow. And if only it had been able to "generate more credit", it could have sustained the system. Amazing. Idiot, what happened, as is always the case, is that TOO MUCH EASY CREDIT encouraged a lot of MALINVESTMENT. Businesses invested in all sorts of endeavors for which there was limited or no demand. MORE CREDIT would have done nothing but aggravate that or "bail it out" for a while. Had the Fed wanted to, it could have "generated more credit" by CNTRL-P, like our illustrious Fed is doing today. But that only "sustains" it for so long, and then the inescapable law of diminishing returns and unintended consequences checks that. Otherwise, they could just print ad infinitum and we'd all be living in shiny palaces on private islands floating in the clouds, with you;)

You're going to have to learn a LOT more than just "basic math" to comprehend this little fella. You're going to have to actually study and think a lot. Rhetoric and sophistry spiced with poorly used and misapplied terms that happen to be popular on zh (ponzi, etc) will get you a few green arrows from other simpletons but you won't do anything else but reinforce your own foolishness in your own mind by doing so. Type less, study more, THINK more, then get back to us.

Tue, 09/04/2012 - 13:23 | 2760969 Landotfree
Landotfree's picture

The financial crisis is not a crisis at all.  As soon as humans went to using interest as the basis of financial system it was doomed to fail.   You can have any standard you want and evenutally you will not be able to supply the amount that is needed to sustain itself.  This is basic math.  

The equation has hit it's max peak, it will have to hit it's lowest point.  I figure 1-3 billion will have to go, eventually.  All I see is unfunded liabilities walking around in a maxed out system.  

Tue, 09/04/2012 - 13:46 | 2761077's picture


You can have any standard you want and evenutally you will not be able to supply the amount that is needed to sustain itself.


How about through a slow process of deflation as was seen during the 19th century? Gold and silver money became worth more because the Industrial Revolution allowed more goods to be provided more efficiently.

Tue, 09/04/2012 - 13:53 | 2761119 Landotfree
Landotfree's picture

Gold and silver is not a limitation on the system, as I can create "credit" that people will use as money.   A small deflation does nothing as it's working against the need of the system to expand exponentially.   

At the end of the day you are either expanding at an exponential rate or the system is either going down or in a flat-spin until you hit your lowest point.  I see nothing that a gold standard does to stop the size of your system, as I can create credit at will with another and charge interest on top.   

Tue, 09/04/2012 - 14:09 | 2761188's picture

You can create credit but you can't force those who offer tangible goods and services to accept debt backed money as payment. A tiered system would evolve where gold gave highest confidence and debt backed money would be valued according to the reputation of the issuer.

Fiat money must continue to inflate by design. Fiat was adopted specifically because it can be printed at will. Gold does the opposite -- it can deflate at a rate determined by the level of economic advances and the resulting increase in availability of goods and services.

Tue, 09/04/2012 - 16:41 | 2761755 NewWorldOrange
NewWorldOrange's picture

"Gold and silver is not a limitation on the system, as I can create "credit" that people will use as money."

Yes you can, and it will be used, and priced, directly in accordance with how people value your unbacked paper vs how much they value paper backed by a rare metal that people everywhere have valued highly at all times everywhere in the world. It's called COMPETITION dumbass.

The gold standard isn't perfect, but it's the best system we've got. It greatly slows market distorting credit expansion and malinvestment. I realize that's hard for your either/or black/white brain to comprehend. I realize that leads you to pronounce that the solution is to depopulate the world of "useless eaters" (already forgot your equivalent term.) I also realize that makes you very simple-minded pond scum.

Tue, 09/04/2012 - 14:46 | 2761353 bank guy in Brussels
bank guy in Brussels's picture

You are making the argument for Islamic Finance, totally interest-free (tho not actually practiced in full by Muslim countries)

Without interest, the way 'lending' is done for consumer goods (cars, houses) is by leasing or rent-to-own

And otherwise people take equity stakes in business, for a percentage of profit or loss ... but no rent-seeking via interest payments

Early ZH commenter Cheeky Bastard once said that after the coming collapse, we will probably go to something like Muslim finance ...

Tue, 09/04/2012 - 16:32 | 2761727 NewWorldOrange
NewWorldOrange's picture

"The financial crisis is not a crisis at all."

Pure sophistry.

"As soon as humans went to using interest as the basis of financial system it was doomed to fail."

Interest is merely a price, paid for money. Money is a commodity. What you just said is like saying, "once humans chose to use a price mechanism, it was doomed to fail." It's not that simple. What dooms it to failure is massive and artificial distortions to the price mechanism wrought by other than market forces.

"You can have any standard you want and evenutally you will not be able to supply the amount that is needed to sustain itself.  This is basic math."

Okay, "basic math." Sheesh. Too bad all the people of the world didn't have you around over the centuries to tell them how simple it all is or all the recessions could have been avoided. Are you really this simple minded and naive or do you just troll? Simple question. The whole point of a STANDARD IS TO LIMIT CREDIT EXPANSION THAT DOES NOT REFLECT MARKET FORCES REALISTICALLY. The gold standard is not perfect and not even Mises or Rothbard ever said it was. But your arguments are absurd, and to what they boil down to is, "the gold standard is not perfect so it should not be used." It's far better than any other way. And it leaves the door open (in fact, IT OPENS THE DOOR) to adding additional mediums like silver, other metals, oil, and much more to be used as mediums of exchange while also putting a damper on the use of market-distorting paper "assets" that can be counterfeited to infinity and have no inherent value.

"The equation has hit it's max peak"

Child-like in its redundancy, and as such means nada.

"The equation has hit it's max peak, it will have to hit it's lowest point."

An utterly nonsensical statement that could mean anything and in this case means all of nothing. It just sounds good to your own ears.

"I figure 1-3 billion will have to go, eventually.  All I see is unfunded liabilities walking around in a maxed out system."

Right... because labor can't possibly produce enough or even more than enough to meet it's own needs, even with the leverage of technology and industry. Even if they work a full work week. All that excess stuff they create in excess of their own personal consumption can't even be SAVED for as REAL capital to fund further just vaporizes a al John Corzine...

Get the fuck out of here with your pompous depopulation agenda you fucking globalist fascist piece of shit.

Tue, 09/04/2012 - 13:25 | 2760977 UGrev
UGrev's picture

Wait.. someone actually asked this question? there is even a discussion on it? Does there NEED to be a discussion? DUH!!

Tue, 09/04/2012 - 13:26 | 2760985 Joebloinvestor
Joebloinvestor's picture

I suggest referring to Nixon's famous declaration that the Fed would NEVER print more money after dropping the gold standard.


Tue, 09/04/2012 - 13:28 | 2760994 UGrev
UGrev's picture

C'mere.. i'm not gonna hurt you..  *BAM to the nuts*.. That is the essence of politics right there. 

Tue, 09/04/2012 - 14:51 | 2761375 bank guy in Brussels
bank guy in Brussels's picture

Funny clip there of US President Richard Nixon

Watergate and Nixon's resignation turn out to have been another USA coup, like with Kennedy. Another American fraud so deep it is astonishing

The 'brave Watergate reporters' story is bullsh*t.

Fake 'brave reporter' Bob Woodward working for the US military and elite in a coup, is the real story of the US Watergate scandal and Richard Nixon

In the late 1960s Bob Woodward was in the US Navy working for Naval Intelligence under Admiral Thomas Moorer. In 1970 Admiral Moorer became head of the US Joint Chiefs of Staff, and Woodward left the US Navy to become Washington Post 'reporter'. -

Also in 1970, Admiral Moorer started running a spy ring against the Nixon White House, with the US military thinking Nixon and Kissinger were getting 'soft on Communists' etc. Yeoman Charles Redford stole many White House documents and so on for the joint chiefs, US Admiral Elmo Zumwalt getting some of the documents.

The spy ring - US military against the White House - was discovered at the end of 1971. But just like with the military 'business plot' planned coup in the 1930s against US President Franklin Roosevelt, exposed by US Marine General Smedley Butler ('War is a Racket'), and Roosevelt's agreement not to prosecute the American elite (including grand-pappy Bush) ... Nixon agreed to cover-up the military spy ring.

Perhaps fearing to end up dead like JFK, Nixon always feared to publicly denounce it for the rest of his life.

Despite Nixon's agreement to shut up and not prosecute, the military remained unhappy, along with the American elite, who wanted Nixon out  ... Nixon had come to the same conclusions as Jack Kennedy ... in other words, make some peace with the commies, and try to build a better life for Americans ... Nixon even tried to give everyone in the US European-style health insurance (His 'CHIP' programme.)

So Watergate was magnified into a scandal for a coup, the Washington Post brave 'reporters' Woodward and Bernstein - with Woodward still loyal to his old boss Admiral Moorer ... they took Nixon down. A major ally was the manipulative John Dean, Nixon's lawyer in the White House, working his own angles, and betraying Nixon to the coup plotters, and made a 'media darling' from among the Nixon gang, tho Dean maybe was the worst snake among the bunch.

And ever since, the fake Washington Post - John Dean version of the Watergate 'story' has dominated. 'Brave reporters' it wasn't. It was like the killing of JFK in 1963, another American coup, more American government bullsh*t ... and the truth still basically squashed today, by the dominant media framework

A lot of the Watergate facts has come out from investigators Len Colodny and Robert Gettlin, a book 'Silent Coup' ... more detail on this on a website associated with them

Tue, 09/04/2012 - 15:08 | 2761444 Ghordius
Ghordius's picture

now you've done it. mentioning that Nixon had an European-style health insurance program in mind.

what's next? That during Isenhower/Nixon the super-rich paid over 90% taxes on their income?

can't you wait until the November Elections are over? ;-)

Tue, 09/04/2012 - 18:14 | 2762126 SAT 800
SAT 800's picture

LOL. thanks for the giggle.

Tue, 09/04/2012 - 13:27 | 2760992 galtgulch9
galtgulch9's picture

The book to read is the well researched The Creature From Jekyll Island by G. Edward Griffin which tells the rich history of central banking in America beginning with the fiat paper Continental created to pay those who stepped forward to fight the Redcoats with the never kept promise to redeem the paper with gold in the future.

Also be sure to go to see the second installment of the trilogy of Atlas Shrugged in theaters October 1, 2012.

AYn Rand's The Objectivist Newsletter 1962-1965 is filled with thought provoking articles which provide a unique and rational perspective. She identifies the premises underlying the policies which are rarely mentioned or challenged.

Like it or not we are experiencing a philosophical crisis which requires that we all do some homework if we don't want to bad guys or the well intentioned misguided to win.

In addition to reading Ayn Rand's non fiction I suggest and she suggested the works of Ludwig von Mises all now available online for free at



Tue, 09/04/2012 - 13:37 | 2761029 redd_green
redd_green's picture

Watch Bill Still's documentary "The Money Masters".  It covers all relevant issues as well.

Tue, 09/04/2012 - 16:45 | 2761786 Karl von Bahnhof
Karl von Bahnhof's picture

Hmmm, I will wait until Jim Cramer tell me in telly that gold is better than Fuckbook

Tue, 09/04/2012 - 13:33 | 2761011 Jason T
Jason T's picture

unknown because it's dark .. and that's why they are called Dark Ages. 


Tue, 09/04/2012 - 13:34 | 2761017 chances
chances's picture

hahhahahahaahh love a good laugh!

Tue, 09/04/2012 - 14:02 | 2761031 OneTinSoldier66
OneTinSoldier66's picture

Even with a Gold Standard there has to be rules where people actually get prosecuted for breaking the rules... no matter how wealthy the person is or what kind of 'connections' they might have.



Signed: Jon 'I can't find the Money' Corzine


Tue, 09/04/2012 - 13:46 | 2761076 Flakmeister
Flakmeister's picture

Before indulging in a gold-standard circle jerk, you really should ponder the graph of world oil production....

Tue, 09/04/2012 - 13:46 | 2761079 johny2
johny2's picture

Well, it looks like the silver and gold are going up, no matter what happens in stock markets.

Next stop: Interesting times.

Tue, 09/04/2012 - 14:13 | 2761209 Flakmeister
Flakmeister's picture

You must have fallen asleep, the train has already left "Interesting Times", next stop is "End of Days".....

Tue, 09/04/2012 - 14:26 | 2761254 johny2
johny2's picture

isn't "end of days" a terminal?

Tue, 09/04/2012 - 14:29 | 2761274 Flakmeister
Flakmeister's picture

It might very well be....

I've been looking for a copy of the pocket map and have not had much success....

Tue, 09/04/2012 - 14:41 | 2761328 johny2
johny2's picture

I plan on continuing the journey on foot.

Tue, 09/04/2012 - 13:47 | 2761083 ebworthen
ebworthen's picture

And now we are moving away from coin and paper currency into digital only transactions.

Imagine what losing the last tangible connection to money will do psychologically to people.

We just need to align the intangibility of money with showing up for work and paying taxes.


Tue, 09/04/2012 - 13:47 | 2761084 LongSilverJohn
LongSilverJohn's picture

Calls for the government to reinstate the gold standard behind their currency doesn't seem that necessary. For example, people could just start using to transact business. That is, we (the people) can create our own de facto gold standard. You just need a groundswell of movement to and begin transacting business through that parallel "private" gold standard... In the U.S. it is now legal to require payment in gold (gold clauses are once again legal in contracts)....

Tue, 09/04/2012 - 14:04 | 2761170 chubbar
chubbar's picture

As I understand it, has discontinued the ability to do inter-account transfers. They said because of lack of interest but I think it was probably pressure from you know who.

Tue, 09/04/2012 - 13:51 | 2761104 francis_sawyer
francis_sawyer's picture

The financial crisis started when someone thought it was a good idea to hand over control of the money supply to jew bankers...

Tue, 09/04/2012 - 14:08 | 2761151 earleflorida
earleflorida's picture

It won't be long before gold is reclassified/ confiscated as a 'WMD' ---   indeed, being as volatile and destructive as processed [plutonium] uranium it will become... thus, guarded by the MIC's Blackwater Brigade too shoot to kill any trespassers within a 100 mile-radius of [an]y FRB's outpost --- yes, many a lead-lined vaulted mile-deep silos wil appear under the guise of a unannounced nuclear toxicity waste? dump?... once again, used for freedoms`sake... democracies neo-ICBM's of financial destruction --- And all the while not a sheeple will know the better for their marvelously tarnished stolen glitter,...


thankyou tyler 

Tue, 09/04/2012 - 14:10 | 2761189 masterinchancery
masterinchancery's picture

Answer: yes, except that JFK and LBJ kicked it off by running deficits in peacetime for the first time in US history.

Tue, 09/04/2012 - 14:12 | 2761203 Inthemix96
Inthemix96's picture

Look on the bright side folks.  One day, ben berank will have to stand in front of a group of folk like us and ask us not to kill him.

Then we can give him and his ilk a fair and biased trial and then hang them from trees and lamposts they so richly deserve.

Relax, time is on our side.  We just need a few more good men.

Tue, 09/04/2012 - 15:01 | 2761415 bank guy in Brussels
bank guy in Brussels's picture

The slow death of hanging is very inhumane ... without a long drop to break the neck and put the person into a coma (not reliably achieved) the person will be conscious and in agony for much of the 15 minutes up to an hour it takes to die ...

We West Europeans are horrified at the death penalty ... BUT

But if you feel you have to use it after the New American Revolution (like we did in Europe after World War II) ... then use the firing squad (backed up by pistol for coup de grace) or the guillotine ... more humane than other forms (including lethal injection) ... the mercy element, will help your future, and help put the past behind more quickly

Tue, 09/04/2012 - 14:14 | 2761211 Yardfarmer
Yardfarmer's picture

on the chart notice the critical inflection point marking the establishment of Bretton Woods July 22, 1944 and the extablishment of the IMF and the future World Bank. the international economy, by establishing the USD as the reserve currency, thus positioned itself for control of the exchange rate. of course the 800 pound gorilla of the IMF was wheeled on stage to implement the process by which laid the foundation for the new global economy and of course the Novus Ordo Mundi.

Tue, 09/04/2012 - 14:28 | 2761272 Ghordius
Ghordius's picture

I note that nobody wrote here the little detail that Nixon said 1971 to the French: "so long, suckers!", coupled with "it's our currency and your problem" and a "it used to be your gold, now it's ours".

Tue, 09/04/2012 - 14:30 | 2761288 halodoc
halodoc's picture

This isn't unknown territory. History of money shows that fiat currencies are by design designed to fail. The only unknown in the equation is the time factor. It is true however that our fiat currency seems to be an anomaly because it is the longest running one of these schemes known. If I'm not mistaken, historically 20 years is about its limit. The goal of fiat currencies? Rob the treasury before the empire collaspes.

From whom did they get the idea which would cause them, as they're shifting from the paradigm of MAD to MAED, to prepare to put in place a fiat currency and that our empire would collaspe probably within 20 or so years? That is a wicked and deep rabbit hole, young Alice. Malthusian fanatics Paul R Ehrlich and Margaret Mead disciples John Holdren or George Woodwell could tell you. Steven Schneider could have too, but that p o s is thankfully dead and buried, and hopefully rotting in hell with Mead. I wonder, how many people know who the Brit, Julian Huxley was and what society he belonged to back in WWII days?

Anyway, whatever. This is anything but unknown territory. What it is, is predictable consequences.

Tue, 09/04/2012 - 14:35 | 2761308 Gimleteye
Gimleteye's picture

how would a return to the GS work? would the amount of dollars be divided by the amount of gold ounces or what?

Tue, 09/04/2012 - 15:01 | 2761412 ArrestBobRubin
ArrestBobRubin's picture

Going off the gold standard + repeal of Glass-Steagall = Ponziworld

Tue, 09/04/2012 - 15:10 | 2761454 johnnymustardseed
johnnymustardseed's picture

After Nixon chose to go off the gold standard, foreign countries increased their currency reserves in anticipation of currency fluctuation, which caused deflation of the dollar and other world currencies. Since oil was paid for in dollars, OPEC was receiving less value for their product. They cut production and announced price hikes and an embargo targeted at the United States......another fine mess a Republican caused

Tue, 09/04/2012 - 15:29 | 2761505 RiskAverseAlertBlog
RiskAverseAlertBlog's picture

The "unknown" ... a.k.a. Wiemar 1923

Tue, 09/04/2012 - 15:39 | 2761515 Zero Govt
Zero Govt's picture

"Did The Great Financial Crisis Start With The End Of The Gold Standard?"

Nope, it begins with the formation of a parasitical cabal called Govt, in the case of America when railway lawyer thug, Abraham Lincoln, began a murderous bloody war to force a national Govt

Every rotten fruit hangs from the core parasite, Govt. Put this cancerous institution at your centre and it'll spread with 100% certainty to infect and wreck every facet of both a free society and its markets/economy

Govt is Anarchy (a small group running riot across society) by definition and by all historical evidence


Tue, 09/04/2012 - 17:08 | 2761863 bunnyswanson
bunnyswanson's picture

Jekyll Island

Abuse of power across the board.  Wars  Live clock - Cost of wars since 2001. -  Cost of Iraq war.

“We are free today, substantially, but the day will come when our Republic
will be an impossibility. It will be an impossibility because wealth will
be concentrated in the hands of few. A Republic cannot stand upon
bayonets, and when the day comes…we must rely upon the wisdom of the best
elements in the country to readjust the laws of the nation to the changed
~James Madison

Read more:
Follow us: classwarfareexists on Facebook


Tue, 09/04/2012 - 15:34 | 2761525 Venerability
Venerability's picture

No, the Gold Standard had nothing to do with it.

The watershed moment in Market history occurred with Michael Wolff's and Jim Cramer's first "advocacy" market columns at New York Magazine, when it was clear all Chinese Walls were going to be torn down, and the distinction between financial market activity and financial media activity no longer applied.

No longer would logic, reason, or calm be able to prevail.

Markets became casinos, where the loudest and furthest-reaching voices would dominate, backed by dark pools of capital which took full advantage of the sea change.

Only now is the situation becoming mature enough - it's a given, and everyone astute can see all the strings being pulled - that we can move into a financial media world - and therefore a financial markets world - with many more voices consistently being heard.

If the Scripts with the most money behind them want to continue to dominate, they have to convert themselves into Scripts more people are satisfied with and actually want to hear.



Tue, 09/04/2012 - 16:47 | 2761791 GreatUncle
GreatUncle's picture

Venturing into the unknown?

More like venturing into the realm of what is known ...

How to keep borrowing vast amounts of money without the asset value to get even close to back it all up then make the numbers all add up so 1 + 1 = 3 every time.

Tue, 09/04/2012 - 17:28 | 2761945 LouisHill
LouisHill's picture

I to have noticed the 1971 coincidence in the Fed charts.  There is another event that may be important.  In Nixon's attempt to save his presidency; he gave in to the congress on "Baseline" budgeting.  And for the government's part in all this; you can see the miracle of compounding at work.  But there are many other factors, it was not just one gun and one bullet.

Tue, 09/04/2012 - 18:20 | 2762143 BrettFavre
BrettFavre's picture

unfortunately the contributor, like so many others on ZH, understands neither the mechanics of fiat monetary system nor the Gold standard. BUT, what else to expect in an BTFD and 'instand economic analysis' world...

Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! Buy Gold ! 

Do NOT follow this link or you will be banned from the site!