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Today Is The 40th Anniversary Of Nixon Ending Gold Standard And Creating Modern Fiat Monetary System
From GoldCore
Today Is The 40th Anniversary Of Nixon Ending Gold Standard And Creating Modern Fiat Monetary System
Gold has fallen today in all major currencies except the Swiss franc which has fallen sharply again on continued talk of SNB intervention. Gold is trading at USD 1,742.70, EUR 1,220.10, GBP 1,068.70, CHF 1,375.60 per ounce and 133,820 JPY/oz. Gold’s London AM fix this morning was USD 1,738.00/oz, EUR 1,214.11/oz, GBP 1,065.88/oz.
Gold in Swiss Francs reached 1,393.24 an ounce this morning – the highest price so far in 2011. Gold in Swiss francs has climbed 7.7% so far in August, 3.7% in 2011 and 8.2% in the past 12 months as gold reasserts itself as the true safe haven.
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 (see video of Nixon’s dramatic announcement here).
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.
Cross Currency Rates
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.
Gold in Nominal USD – 1971 to Today (Weekly)
This is not the fault of “speculators”, rather it is the fault of profligate governments and central bankers debasing the U.S. dollar since 1971 (except for Federal Reserve Chairman Paul Volcker).
Today, U.S. dollars and all paper and digital money is declared by governments to be legal tender, despite the fact that it has no intrinsic value and is not backed by gold reserves.
Historically, currencies were based on precious metals such as gold or silver, but fiat money is based on faith and on the performance of politicians, bankers and central bankers.
Because today’s fiat money is not linked to physical reserves of gold and silver, it is becoming worth less with each passing month and risks becoming worthless should hyperinflation take hold.
If people lose faith in a nation's paper currency, the money will no longer hold value.
Throughout history most fiat currencies have not survived more than a few decades and have succumbed to hyperinflation.
The fiat currency or paper and digital based international monetary system has survived 40 years but is in terminal decline with many astute commentators now questioning whether it will survive the global debt crisis.
Gold’s role as a store of value and important monetary asset is being increasingly appreciated. Indeed, there are increasing calls for gold to again play a role in the global monetary system.
The President of the World Bank, Robert Zoellick, wrote in the Financial Times (‘The G20 must look beyond Bretton Woods II’ - November, 2010) that a new monetary system involving a basket of currencies “should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values”.
He also said that “although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
This was an important statement regarding gold especially as it came from the President of the World Bank, the head of one of the most powerful financial and monetary organizations in the world.
Jack Farchy wrote in the Financial Times today, “the return of gold as a prominent financial asset is without doubt the most important development in the bullion market today.”
It is also a very important development for currency markets and for the global financial and monetary system.
Ex Economics Editor of The Telegraph, Edmund Conway wrote over the weekend how “we've had the financial crisis that usually marks the beginning of the end of established monetary systems. And now we are seeing the debasement.”
He wrote that the rising gold price “reflects many factors . . . but chief among them is a diminishing faith in the ability of fiat currencies to maintain their value.”
“These bouts of debasement typically end in disaster, as faith is lost in the currency, inflation shoots through the roof and the economy collapses, after which politicians introduce a new, more credible system.”
Conway warned that the “next stage of the crisis represents a crisis of confidence in the very system which, founded as it is on trust rather than measurable yardsticks, has no reliable, inbuilt way of righting itself.”
We have for many months now been warning of the real risk of an international monetary crisis and this risk looks more likely by the day.
While hyperinflation remains a worst case scenario, stagflation and a virulent bout of inflation looks almost certain in the coming months.
For the latest news and commentary on gold and financial markets follow us on Twitter.
SILVER
Silver is trading at $39.14/oz, €27.35/oz and £23.99/oz.
PLATINUM GROUP METALS
Platinum is trading at $1,789.00/oz, palladium at $754/oz and rhodium at $1,775/oz.
NEWS
(Financial Times)
Central banks polish gold’s shine - System of fiat money is 40 years old today
(MarketWatch)
Gold edges higher amid weaker dollar
(Reuters)
Spot gold falls 1 percent in third session of losses
(Bloomberg)
Gold Declines for Third Straight Day as Equity Rebound Trims Haven Demand
COMMENTARY
(The Telegraph)
Abandoning the gold standard was a seminal moment, and one we're now all paying for
(MarketWatch)
Commentary: What are all those gold-bashers saying now?
(London Bullion Market Association)
Brian Lucey: What do Academics Think They Know About Gold?
(ZeroHedge)
At 50x Leverage And 2% Tier 1 Capital, Is SocGen Truly A Paragon Of Balance Sheet Invincibility?
(Got Gold Report)
Gene Arensberg: Comex swap dealers cover gold shorts like a big dog
»
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US oil production peaked 40 years ago, too. Ironic? I think not. Tricky Dick he was, as any liberal would note and call him- although no one can call Barry Obama anything but President or else be deemed ignant, less racist, but I digress. The Bushes favorite man for the job since '60, and yes, I am speaking of Presscott, took the gold away from the world for international trade settlement, putting the proverbial nail in the fiat ponzi's coffin.
Charles DeGaul was so incensed he shipped his war fleet into the NY harbour to demand gold payment one last time (this is also the only time since the Revolution that a war fleet has been anchored off of the NY, let alone any US, harbour).
After FDR so trickily asked, or rather stole, all (or wanted all) the gold from Americans, there was a wait to finish the job globally. Once JFK was shot down, and his brother with him (for not being absolute war mongers like the rest of the establishment) the plan fell in line when Prescott "Big Brother Bonesman" Bush threw Nixon into the limelight. WHile George Herbert Walker Bush (now there is a Kingly name! Literally...) led the CIA into China, Nixon took up arms where Lyndon "Dumbo Ears" Johnson took off.
If it was at Bohemien Grove playing paddy cake with a bunch or rich white gay christian dudes, or playing house with Rockefeller, Kissinger, Rumsfeld, and Cheney, Nixon led the US off of a cliff.
No worries, nobody after him would attempt to fix it. The next few decades of Presidents would either be too senile, stupid, or too inside the establishment to care for the benefit of the American people.
So it was, Nixon ended the gold standard, the standard that traded product for REAL MONIE (look up the definition of monie and ask yourself how we ever let IOUs trade). Now people are chastised for wanting to trade silver, and gold, for goods and services, because that is so 19th century. Well, if a lie has been lived for a long time, that does not make it reality. That just makes someone who believes the lie stupid.
We have actually been able to rip off the rest of the world for the last forty years, trading paper for real goods and resources. The next forty years, not so much.
http://lee.org/blog/wp-content/uploads/2009/04/zimbabwe-100-trillion-dol...
"Gold for Bread":
http://www.youtube.com/watch?v=7ubJp6rmUYM
CHARLES DE GAULLE of France predicted the US monetary crisis in 1965http://www.youtube.com/watch?v=i-g2iGskFPE
charles de gaulle was right!
death begins at 40.
i think it's gonna take a damn longer period than peter schiff (etc) claims it will, but it's all going to end pretty nastily.
http://azizonomics.com/2011/08/15/why-qe-didnt-cause-hyperinflation-2/
Après moi, le déluge!
we're all afraid of turning forty and like most facelifts, there's no subsitute for the real thing.
All I have to say in response to this timely, never more relevant than present, and critical topic is:
http://blogs.fxstreet.com/forexhedge/files/2011/02/usdpp.jpg
Acapulco cliff dive from that ledge of 1971.
The private Federal Reserve Bank and our representatives "elected to represent us" [i.e. American Citizens] really do seem intent on destroying our standard of living.
Bitchez!
but that's just from the plateau on the way down from '33. fukin FDR man. if you ever read the book The Forgotten Man about the Depression, there's a story in there about the days & weeks before he signed the Executive Order where he was tinkering with the gold price from his bed. after seeing that graph, it's now clear to me that the impatient bastard couldn't even wait for the FRN to go out of balance. one would think that in a time of increasing unemployment, a public servant would want the currency his citizen bosses are using to buy more of the goods they need to survive. guess that was too simpleton of a thing to ask of such a Wise Man like Franklin Delano Roosevelt.
... really do seem intent on destroying our standard of living.
More like they don't care about our standard of living. Fed & congress only care about (a) pleasing their Wall Street banker bosses and (b) keeping the government operating and (c) getting rich.
That's it. That's all they care about.
Printing currency to fund those three things debases the currency making things more expensive for us, but they don't care. As long as they have the money they want, fuck the economy, fuck the American people.
Bernokio couldn't care less. He never talks about it except to say it's "transitory".
It's not "transitory". It's slow gradual currency debasement since 1971. And it's going to continue right on till the US dollar is worthless. It may stay slow and gradual or it may speed up into hyperinflation.
There's a third possibility. Some big geopolitical event may cause the rest of the world to suddenly lose confidence in the US dollar. Overnight almost.
That's the more likely scenario.
De Gaulle was listening to Jacques Rueff. And Rueff was always right.
That factual observation... hard under the belt blow for most permanent residents in here.
No, no, no.
Mantra here is that the decoupling from gold standard did not make the US richer, it makes it poorer.
What is happening now is not the result of the physical possibility of maintaining the current scheme waning away.
here is a better version:
During the last forty years, the US has exported wealth all over the world and has been ripped off by the rest of world, especially commodities rich countries, that fills their coffers with USD. Now, they have all the USD, they can buy the US if they want, the US got nothing in exchange, standards of life have been plummetting since the 1970s.
A USD in a US citizen's pocket is losing value day after day while in the pockets of a foreigner, it is gaining more and more value.
US citizens are victims by design, right? Any thing done, including when benefitial to the US citizens, should be depicted in a way pushing US citizens as victimized innocent creatures of god.
I like your version. I am not sure about the last 40 years, but indeed for the last 20 years I've traveled extensively and lived in Asia and Europe. What I see today, as I return to places known 15 or 20 years ago, is an enormous improvement in standard of living. While at home in USA things have become far worse, and continue to get worse at a faster pace.
The cabal is not surprising, it is just their scope. Wasn't Tyler Durden found dead from autroerotic-asphixialtion dressed in womans clothes? 2012
drunk junk
Too easy to blame Nixon, his hands were tied. Also recall that convertability was not the privilege of the masses.
Call it "Dickie's Choice"....
Take a look at the oil production and consumption curves of the US leading up to the default. While that is not all of the story, it is a key component.
Did I not show Nixon was manipulated by handlers (Bushes/Rockefellers. etc) the same way ALL Presidents are? Besides, he was a joke, to say the least.
We've gome through this before... My take is that Nixon did what he wanted to do, though he might be influenced by others. Exploiting the policy of others is not quite the same as pulling puppet strings.
As much as I despised the man at the time, I would have taken a Nixon Redux over the insanity of W any day.
Remember Nixon had a master strategist by his side : Kissinger. Like him or despise him, K was instrumental in US's Soviet, Far east, mid east and South american diplomacy. He played a very subtle game, his shuttle diplomacy, he took out of the loop the Baas Arabs and installed El Sadat at Cairo. Ruthless, but very efficient to get his realpolitik in place; on four continents.
And a war criminal to boot. Kissinger is a psychopath. His death will make me very sad as I watch his life celebrated.
"There are some pure psychopaths that you can spot just by looking at them. Donald Rumsfield is one, Ehud Barak and Olmert also. Henry Kissinger is one. Henry gives me the impression of a creature that burrows through the brains of dead serial killers in search of special nutrition; my doctor says I’m low on Sinisterium. Sinisterium is the protein that allows you to murder millions and not be depressed about having fallen short of your goals. Although the AMA says that this protein is not essential for rounded human health it does promote long life and it also combines with other proteins to create any number of unknown syntheses, of which there is not a great deal of documentation."
You give me the jitters...the frankenstein strain is a gene...which could be reproduced...Imagine the "dolly" effect..not the dolly parton effect; if they reproduced Kissinger/Dr Strangelove types in our labs based on lethal, transgenic experiments of Sinistrium...I wanna get high on Sinistrium...wow! the possibilities on facebook...
Cheney had a good tutor.....
Nixon didn't stpo at shutting the gold window and devaluing the dollar. His supposed "Big Triumph" was in setting up a deal with CHina whereby the US would relinquish it's manufacturing and industrial jewels in return for cheap goods paid for on credit. That's the Chimerica we know today. He accelerated America's decline all the way. Under him, the Federal reserve began to ride to the rescue every time corporate America came to Washington for a hand out. If you add in the criminal activity and the tarnished US image plus the Vietnam fiascos you got yourself one hell if a record of achievement
I think that in 1970 China becoming the manufacturer of the world was on nobodies radar. This hindsight is all too convienient...
Tipping point : Deng Xiao Ping in 1978, Lee Kwan Yew, first premier and Oligarchical patriarch of Singapore is on tape on Bloomberg where he divulges that he convinced Deng then to open China to the Japanese 'outsourcing' model that had worked so well. Singapore and HK became main transport and financial hubs due to the Japanese model being such a success in the 1970s.
In this domain the key tipping point was created when US oil imports really started to hurt its economy in terms of balance of trade. If I recall right in Oct. 1973 the US oil import scene was small if not slightly edged in favor of export. By 1978 it had turned around to complete mid-east oil reliance in big way. If this is true, it explains why the US did not come down hard on OPEC in October 1973 as the oil majors Shell and BP of Europe wanted them to. Europe was completely doped on Arab oil. Of course in 1979 when the second oil crisis occured we had Khomeiny in charge of Iran as chief OPEC hawk and Yamani, the key player from 1973-1978, had been side-lined. He lost his royal support when King Faisal his mentor was assassinated in 1975. He was there in interim brother's reign period of 1975-1980, but blacked listed in 1982, by King Fahd who was very pro Ronald Reagan; as he needed support in their joint mission they had given to Saddam of Irak, in 1979 onwards, to take out evil Khomeiny and Iran. He opened the tap of Saudi oil full blast, as WIDE as Linda Lovelace's mouth, against Yamani's persistent advice, to please RR's insistant telephone call. Oil price never recovered from that fall, until 2000.
I suggest you take a gander at
http://mazamascience.com/OilExport/
and select the US.... net imports started accelerating in late '60s...
The 1980s also heralded the full ramp up of Prudhoe Bay and the North Sea, US consumption fell dramatically starting in 1980 only to turn over in ~1985. It took almost 20 years to return to the 1980 level of consumption.
Nixon would have be fully aware of the sea-change in oil dynamics in the late '60s. He saw the writing on the wall vis-a-vis gold and oil.
Ty, Flak, great charts! Brings back memories...of the days that I once knew..that I didn't spend with you...I yammm strait like the detroit of Hormuzzzz...
hypothetical question for you guys: how much would the U.S. have to reduce consumption if it were only able to source its oil from US, Canada & Mexico?
By about ~8 million bpd.... or about 40%...
Edit: I underestimated it ... US is 6 mmbpd, Can/Mex net exports are about 2 mmbpd with Mexican all but in freefall. So the answer is closer to 12 mmbpd or about 60%... Gonna take a fuckload of plug in hybrids to make a dent in that...
...or shitloads of organic fertilizer...
thanks flak. it's actually not as big of a scaledown as i originally imagined. let's say for shits & giggles we could make it 50% if we include our buddies in Colombia & Brazil.
wonder how much of our usage is exhausted per day on wasteful consumption (including plastic crap & 15 trips to the store cuz we're too whacked on meds to make a grocery list)?
Columbia is about 500,000 bpd exports, Brazil is a net importer, their deep water plays probably will only lead to modest net exports...
The prizes for the States are NIgeria and Angola....
good stuff. Are you including tar sands? Don't we have big plans there and isn't the energy return oh, quite a bit less with about 250 gallons of of water per barrell? I read/heard somewhere that tar sands convert to about $200-250 a barrel. Thoughts
Yes, I have included it as what ever increase in Tar Sand production will be likely offset by declines in Mexican and other conventional production...
You are aware that the US gets about 2,000,000 bpd from stripper wells? This is unique in the world. Sort of like the steamroller squeezing out the last of a sponge. Mind you, this sponge can be squeezed for a long time. Saw a great analysis of using Wind to power the nodding-donkeys....
Hell, what I would give for a stripper well producing 4-5 bbl per day with minimum maintenance....
a stripper can only produce so much before she drops from exhaustion. Better charge more for the cokes.
hey flak, this is good stuff for sure. what i'm trying to figure out is the practical realities of a non-interventionist, non-militaristic foreign policy in a world of declining oil production and increasing global consumption. something would have to give, but the question is what and how much and is it worth it and is it possible?
Sorry missed this earlier....
Is it possible? Yes. Is it probable? No. It is worth it? Hell yes...
Think of what the trillions pissed away on housing, Iraq and what have you could have achieved if invested in the energy infrastructure of the US....
1 Trillion at $25,000 a pop could have produced 800,000 homes with full geo-thermal....
1 trillion is at least 1 Terawatt of solar at todays prices.... that is 25% of total US production capacity..
The problem is that we will not "give" unless it is kicking and screaming...remember that "The American way of life is not negotiable". In the words of Kissengers leading disciple.
This is exactly what some candidate for leadership should be saying. Morals aside, their strategy sucks and is our greatest terrorist. Exactly why we'll never hear it.
From a regional point of view, if you exclude the current Venezuelan/Us stand-off, the Orenoco tar sands can produce synthetic oil to match and even surpass Canada. So there is more EXPENSIVE OIL in the region...But then USA is not the only consumer on the American continent. If the total population of N/S America is on target in thirty years, we will still be in thirst for the very expensive oil of that age.
This is from an old thread.... China and US have to settle their oil spheres, Iran and Venezuala are at the forefront.I am waiting for a quid pro quo when the US invokes the Monroe Doctrine to secure V's oil...
Venezuala while having huge reserves is not amenable to ramping up production. The Orinoco makes the Tar Sands seem like childs play to produce.
I watched a documentary a few months back titled "A Crude Awakening"... A line that stuck with me (paraphrased)... the fact that we are so willing and eager to talk about oil from sand, as expensive as it is to extract, should tell everyone what they need to know about peak oil.
my favorite line comes from the author of the Peak Oil Life After the Oil Crash site, something like " I don't care what religion you claim to be, we all worship oil"
I'm pretty sure it's the same guy. It was amusing that the backdrop for his interview was a couple of boxes of food rations. I thought the movie was well made. Coldly mathmatical vs. some sort of hysteria. I felt the same way about the movie Blind Spot. Both good peak oil documentaries. It would be shocking to me that peak oil isn't more in our collective consciousness... but it is actually shockingly unshocking.
Matt Savinar..... lawyer and professional doomer. He may be proven right but he has unduly polarized the Peak Oil debate.
true, but being an early player (especially on the net) will land him somewhere in history
Polarized how? I don't know a great deal about the debate or the players in the debate. He was interviewed in both films. I didn't come away from either film feeling like there was or would be a great deal of acrimony between the various subjects. They may be in disagreement over the timing or the relatively level of optimism/pessimism with regards to alternate sources of energy being able to eventually pick up some of the slack, but I didn't come away with a sense of polarization. That said, these were admittedly documentaries not debates. The subjects were always interviewed alone, and of course the film maker can make the film say whatever they want it to say.
His apocalyptic vision of the post peak world has been used by PO deniers to discredit the whole PO issue... There are a few posters here guilty of that...
Matt knows his shit and is no fool but his is not the only partially functioning crystal ball out there.
Makes sense. Thanks for the response. I guess the crystal ball ends up being a function of ones relative level of optimism in man vs. cynicism of men. I myself can't make up my mind.
It is interesting to note that Kennedy tried to put us on a silver standard, but LBJ put the kebash on that.
Kennedy did no such fucking thing!
This is a wild and utterly absurd urban legend of recent origin, which has NO substantiation in history or fact. Kennedy was as pro-Fed and pro-central banking as any US president of the last century. His executive order authorizing the (continued) printing of silver certificates and United States Notes was a rote formality mandated by the law at that time, and was preceded by similar actions by most of his predecessors.
Please learn a little monetary history before repeating the retarded theory that Kennedy in any way "took on the Fed".
here come the baptists to smear the name of Kennedy..
so..
why are there silver notes from his time as President and not before since ALL the Presidents signed the same docs?
why did they end when Kennedy was murdered?
never mind..
try buying some PM's and while you are at the shop take a history lesson in paper money (fiat).
exhibit A to jonjimi's Americon History XX lesson can be found here:
http://politicalmetals.com/financial-repression-what-is-it-and-how-does-...
debt to GDP ratio of advanced economies
And of course the parabolic ascent of US govt debt coincides nicely with the removal of metal backing.
Here for chart: http://goo.gl/WmaOp
Where can i read more about this; "Charles DeGaul was so incensed he shipped his war fleet into the NY harbour to demand gold payment one last time (this is also the only time since the Revolution that a war fleet has been anchored off of the NY, let alone any US, harbour)."
Nixxon had no choice...the die was cast before he entered office. At least he got the fuck out of Vietnam, something Blama lacked the stones to do
Happy Birthday unfettered Fiat, Happy Birthday to you. XOXOXO
Happy birthday cash trash.
7K Gold - J. Rickards on CNBC last night.
Don't worry, I'm sure the drop in the dollar is just transitory.
"It took the Federal Reserve almost 100 years to devalue the dollar 97%, the next 97% drop won't take as long." Dr. Marc Faber 2010
The FED was only to be around for 100 years....time is up!
Nixon did say this was all temporary.
And all the pols and central banks promised to self regulate no devaluation of the fiat back then. Ha ha ha. Self regulation as a model does not work. As I wrote yesterday http://bit.ly/quG9tk
Nixon achieved his goal... kicking the can far enough down the road that he died before he saw the debacle that resulted.
That is success to a Pol!
Indeed SW. But he was no lone actor eh?
ORI
Correct you are O... In fact, he has been receiving help since then... much of it posthumously...
Wasn't something "magical" supposed to happen today, according to you?
american presidents have no power. i am sure you know this. he just did what he was told. when he got in trouble was when he concocted the plan to arrest a certain group of dual citizen individuals who he considered to be traitors(and they were of course). so it was decided that since the assassination of JFK was still somewhat fresh on the minds of the sheep, they had to get rid of him, in some other way. so he was watergated. end of story. problem removed. just like that.
That is correct. Watergate was a setup. Amazing how much "history" is just bankster bullshit fed down the throats of the stupid sheeple.
correct. heck the whole situation is pretty well layed out on his tapes that are available for anyone to hear. at one point he is even talking with the evangelist billy graham about it and there is some very rare straight talk about these issues,
He offered hush money that he had in cash on hand in exchange for the silence of the Watergate burglers. That's on tape.
the problem with nixon was that he found out that the patriotism of certain dual citizen type "j" people who were thick as thieves in government, could be called into question, from time to time, if it served their best interest. another words, nixon realized that "j" people are a state within a state, no matter where they are, therefore they cannot be trusted. so that was his downfall when he started talking about this all the time. naturally, other individuals were listening in as well, perhaps that he didn't even know about.....after all, i wonder just how long communications around the white house have been compromised....
Oh I see. There's a conspiracy that trumps the other conspiracy. Nothing to do with the US paying the bills for a trade deficit, Vitenam and other government spending.
conspiracies within other conspiracies? hmmm, could be. we have problems however with the stata within a state concept, as have all western nations ever since rome invaded judea.........
Don't fool yourself. Nixon was the last "Imperial President". All of his criminal activity was outside the law. He had a netwrok of cronies who shook down contributors. Under him, the White House was open for business (he made exceptions to price controls in return for huge bribes, for example). He harrassed enemies. His operatives forged a letter that took down his main Democratic oponenet. All your conspiracy ideas are just a cartoon, the reality was much more gritty and less high minded.
it has always amazed me that he was impeached for politics, not for destroying our financial system.
It is not "your" or "our" financial system. It is "their" financial system and we are the indentured servants at best and more accurately wage slaves.
just like when the nurse says "let's take our shot now"
What Nixon was impeached for would pass for business as usual today... not that I am a fan of Nixon...
Look it up: in return for bribes he allowed exceptions to his "Wage and Price Controls", most notably the price of a gallon of milk for every American.
http://www.washingtonpost.com/wp-srv/politics/herblock/essay3.htm
Scarey, eh?
the natural devolution of empires, empires with exhausting resources
And today is a momentous day again. At least that is the way I've been shown it. A sign I saw in Bangalore said (FRN 8+15 END FED)
Even with an innocuous enough beginning, today seems loaded. So many things could go wrong. The signs are everywhere, the general instability is Epic.
In no mean feat of calendrics, 15th August 1971 was a Monday and so is today. More interesting stuff via Wkipedia:
To stabilize the economy and combat the 1970 inflation rate of 5.84%,[3] on August 15, 1971, President Nixon uimposed a 90-day wage and price freeze, a 10 percent import surcharge, and, most importantly, "closed the gold window", ending convertibility between US dollars and gold.
I think a major tarrif on imports was also imposed and the only thing that was lifted/reversed.
Last but not least, France had a huge hand in thar decision, when DGaulle began asking for gold for dollars in 1969.
Peerhaps today is the day for France's second great humiliation and a downgrade? That would be a massive spanner in the works...
ORI
http://aadivaahan.wordpress.com/2011/08/12/crop-circle-craziness-and-thoughts/
August 15 1971, is the day globalization started. As you mentioned tariff barriers were put up and Japan told to piss off by USA as its imports hurt US car/electronic sales. Japan then created the outsourced model because of this decision, relying on DIRECT japanese investment to kick start Taiwan, Korea and the rest of SE Asia. The new tigers were born. They took away jobs in the 70s from Europe in textiles and synthetic fibres and petrochemicals; as well as in electronics and cars from Japan.
We normally consider the first Oil crisis in 1973 as the start point of globalization when crude oil went to 12 $/barrel. But it was the reaction of the Mid East to world inflation turmoil started by Nixon and depegging the $. If you also recall the euro dollar market started up in 1971, by Citi/BofA, Chemical and Chase, along with Warburg. That really took off when it became petrodollars in 1973! No holds barred for these $ created by Pds outside jurisdiction of FED, with no ceiling to debt/equity ratio. That fed the third world petrodollar bonanza and Mexico and Brazil bubbles. Inflation went wild. The rest is history.
Excellent re-cap and history lesson Falak. Much appreciated. :-)
ORI
Several of you are barking up the right tree.
the dirty dogs that we be....
Actually, globalization can be dated more accurately to April 6-17, 1971: the start of Ping Pong Diplomacy which, for those of you ignorant, was the first overture of the US to the CHinese that there was interest in establishing full diplomatic ties as a prelude to full trading status after over 20 years of a complete standoff.
This was the start of the famous Nixon In CHina. It's billed by Nixon supporters and neocons as "the opening up of China". But we now know it was the start of Chimerica and globalization. For America it meant a deal to offshore industry and jobs so as to control inflation which was set off by the start of Nixon's reckless money printing. He would later have to shut the gold window as a result because other countries no longer wanted those worthless dollars (Engalnd and France). He had to pay for the follies of Vietnam and the US government no longer could cover it without either massive tax increases or massive money printing.
Globalization starting in 1971?
Maybe one wave in the globalization process but certainly not globalization itself.
US is a product of globalization. US started in 1776 so...
you wanna go back to Alexander the Great and the great syncretism experiment?
I thought the whole thing can be traced to back to syphylis. Maybe that's why our guys seem insane
Why so? That would be utterly stupid.
Alexander the Great might have known that the Earth was round but had no means to achieve circumnavigation of the world.
Without these two bits, the world could not go global.
As Magellan and Elcano achieved the first circumnavigation of the world in 1522, claiming that nothing towards globalizing of the world happened between 1522 and 1971 is somehow very US citizenish.
Texas oil is their real money in the bank under the ranch. The Bush-Saudi Oil arbitrage really began in late 1963 in the Dallas, Texas coup. Fiat money made the walnut shells move so fast!
The dollar has gone cliff jumping. Got parachute? Got...green chute??
It brings new meaning to the term golden parachute. Mine's mostly silver however and a mix of other metallic colors. ;-)
Forty years of US debt as the store of value.
Good WSJ editorial on this too: http://online.wsj.com/article/SB10001424053111904007304576494073418802358.html?mod=googlenews_wsj
I was always under the impression that Nixon was sort of buffaloed into this but it seems that he was eager to make a big splash in this area even though he was obviously out of his depth.
In the future this may be the only thing he's remembered for. Who gives a crap about Watergate anymore?...(other than as a suffix)..and bombing Cambodia seems like 1000 wars ago...
The gold window was so that he could persue reckless money printing. There was already spooky inflation as a result of it. He needed the cash to pay for the massive war in Vietnam and the resulting huge deficits. WHen the British and French no longer would accept those printed dollars and demanded gold to pay for the US trade-deficit, he shut the window.
It's of extreme interest that the deal with the Chinese was set up BEFORE (April 1971). In ther words, part of the trade deals with China involved China extending endless credit to the US as we see today, in return for the US "sending" it jobs, factories and industries
Bretton Woods was simply untenable in the face of US Peak Oil. Period.
The clever powers replaced a FRN collapse underway in the 70s (THIS is what a reserve currency death looks like) with a petrodollar standard. Backed by gold, now backed by oil.
As the world has peaked, the FRN is again called into question.
Good analogy. I agree. You encapsulated it well.
Yes, US had peaked in terms of oil and in terms of trade at that juncture. However Nixon could have pursued a different course: encouraging energy efficiency rather than waste for example. While the country still had the resources, lots could have been done besides offshoring industrial resources and other mission critical items to China and elsewhere. It was a moment of cowardice. It was a decision that has and will cast a long shadow
Yes, he could have. He was too good of a politician to make the same mistake Carter made. And we know how the Peanut farmer is loved to this day...
As a reminder, at the time there was no China or BRICS. Even Japan was trying to follow the US model (oil intensive heavy industry). Japan Inc. figured it out that electronics was the way.....That was the first big bite out of the US apple... The hubris and folly of the car makers was instrumental.... ever drive a Vega?
Succinct and pithy.... well put Trav
In a nutshell. The problem is of course bigger than fiat. The whole debt system and much of its economics presumes this fictional everlasting growth and fungability. It's over. The public sytems can only print with one hand and buy bad debt with another for so long
Waddaya know, its my birthday too.
You're so fiat and you don't even know it! http://www.youtube.com/watch?v=UTN54Gd_wDo
i noticed Nixon said "temporarily suspending the convertibility of dollars into gold"
40 years is quite a long period for "temporary" maybe Nixon knew that all fiat currencies are inevitably transitory?
He just wanted to be re-elected and was drunk on power which is the most dangerous drug known to humans.
40 years the biggest bubble in the history of the world has been inflating
The rope snapped and the Wizard of Oz went up and away in his green hot air ballon. "Oh no", Doarathy cried, "Now I will never get home to Knsas!"
Of course she did not know at that point that all it took was three clicks of her silver slippers.
Just imagine BB, it'll takes 9 months to have a baby, then forty years to watch it grow and become a monster...Richard Nixon's true legacy before he stole the Watergate.
"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."
Unexpectedly, of course...lol.
Long Live King Petrodollar
you think the Saudis were paid for all that oil in FRNs or maybe just maybe there were a few oil-for-gold swaps in there somewhere?
Gold production hadn't even close to peaked at that point so they could have bought all the gold they wanted with the dollars
true trav, but they would have been buying in the open market which would have hampered the ability of {insert name here} to keep the gold price suppressed.
have you read this one?
http://fofoa.blogspot.com/2010/03/us-mints-gold-disks-for-oil-payments-t...
this was back in the 40s/50s of course. just wondering if this was part of the reason why "Nixon" chose to do what "he" did. or if maybe the practice continued after '71.
definitely don't have a handle of the particulars as much as others here, but the links between $/oil/gold (especially the one that is discussed the least -- oil <-> gold) is an interesting subject to say the least.
Ah, oil and gold, two sides of the same coin. Think of it them as consumption and savings, closely tied in their relative value...
how about the nose rub when he said trust us....just say'in
As a small business owner in retail, I can attest that inflation is really starting to rear its ugly head. I'm seeing 10-15% increases all over the place not to mention the rising freight, fuel surcharges, etc. When I consider how fatigued the American consumer is, I'm terrified at where this is heading . . .
Austerity and balancing of trade until alternative energy sources can replace oil ... the question is, can the austerity transition be made with present wealth inequality? Austerity is a far easier sell in a highly egalitarian society than in one with austentious wealth and poverty.
nothing will ever "replace" oil. The only thing that will be "replaced" is our standard of living.
Nixon didnt end the gold standard, he just made official what was already implicitly known, the banking system is always short of gold reserves. The necessity of gold backing of paper money has always been the tool used by bankers to convince the uninformed masses of the soundness of their credit and the weakness of public currency. But the gold never has, and never will support the inflationary needs of private bank credit. This is why there was always a need to evangelize metal as the only "honest currency" when in fact it is fiat money just like anything else that humans decided to use as a medium of exchange. In those societies that accepted this as undeniable truth, then those who held the gold can monoplize the supply of money and credit, there by controlling inflation and deflation. Nixon did us a favor by officially doing away with the myth of convertibility of bank paper into gold. By 1971 this myth was no longer needed, as the world was sufficiently conditioned to the convertibility of promise to pay money into reserves of promise to pay money. Now its just a matter of who we as a society entrust with control over our currency, a small group of private monopolists or the community as a whole.
A major difference between fiat and gold-backed dollars is that the physicality of gold limited the leverage which has gotten out of control and led to many/most of the problems today IMO
Gold has no counter party risk, gold cannot be printed, gold has never gone to zero, gold has been used as money for thousands of years, people use fiat because of gov mandate not by choice...
A few very important differences between gold and fiat.
Gold is returning to it's rightful place as the real store of value.
Saudi Arabia and China are not accepting paper for goods because of any government mandate ... the former wants US protection from Iran, the latter wants technology/knowhow outsourcing from the US. Neither could be bought outright, it's only fiat currency which allows the trade to be made under the table.
As long as they want to keep making that trade the standard of living in the US can be massively higher than under a gold standard (which will very quickly enforce balanced trade between countries with similar economic growth). The amount of wage deflation Americans would need to face to reach balanced trade is massive.
Gold is the best standard meter stick for currency confidence. The golden bar might as well be kept in the International Institue of Standards and Measures in Paris. There would be an absurdly low standard of living if we could not grow Intellectual Property creations without digging up enough gold to properly value them.
Gold is transitorily noticed only when currency confidence comes up short. Its importance in this regard is as a derivative.
'The necessity of gold backing of paper money has always been the tool used by bankers to convince the uninformed masses of the soundness of their credit and the weakness of public currency'
'Nixon did us a favor by officially doing away with the myth of convertibility of bank paper into gold. By 1971 this myth was no longer needed, as the world was sufficiently conditioned to the convertibility of promise to pay money into reserves of promise to pay money. Now its just a matter of who we as a society entrust with control over our currency, a small group of private monopolists or the community as a whole'.
Good stuff all around. But as you know, "community as a whole" path has been tried already by USSR, Cuba, PRK.
The fact of the matter is that every time communities/countries get abused by the TPTB.
How can a conditioned/uninformed/careless community become vigilant and pro-active in terms of economy, politics, science, world in general?...... It really looks like a worst kind of conspiracy come true. A whole few generation of people around the world have been constantly dumbed down and mellowed out. The amount of apathy today is mind-numbing. People want to hide at the island of their life from everything that's important. Nobody cares about anything untill it's too late.
Once again, how can a conditioned/uninformed/careless community become vigilant and pro-active in terms of economy, politics, science, world in general?......
Great question. But isn't it on mankind to seek to improve its own destiny? I believe that in the end, its self correcting. Look at Egypt for example. You can't have a parasitic society where a small group of people are feeding off of the host forever. Ultimately the host dies and with it the parasite. Unfortunately, large global conflicts have resulted in the past. Not sure I have any clue how it ends this time around.
the parasite has most certainly not left the Land of Pharoahs & Pyramids. it may have shapeshifted into a Supreme Council, but make no mistake, it's still running shit.
"No one knows for sure how many resort hotels or other businesses in Egypt are run by the military, which controls somewhere between 5 percent and 40 percent of the nation's economy, according to various estimates. Whatever the number, Springborg says, officers in the Egyptian military are making "billions and billions and billions" of dollars."
http://www.npr.org/blogs/money/2011/02/10/133501837/why-egypts-military-...
Survivors are vigilant and pro-active, victims, even when they number in the billions, are remembered only as a statistic.
And that would be a sadistic as well as a statistic.
also forgot to mention that no difference between private banking cartel and the 'socialist' experiments you mention...both are oligarchies, one financial sits on top of the political, the other the political atop the financial...China today is a good example of the later...both systems are the same just sold with different tag lines: "free market" all for one vs "socialist" one for all
I am not interested in over intellectualized arguments about what gold standards are or are not.
The inescapable facts that decide the argument for me are:
A gold standard isn't a panacea, but it worked to some extent, whereas fiat has always been a disaster. When measured in the cost to human lives, fiat is immoral.
There are people who knew exactly what they were doing to mankind:
"Inflationism ... is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.” Ludwig von Mises (1881-1973), Austrian economist, On the Manipulation of Money and Credit, p. 48
nightmare world, bitchez
The price of gold comes down every time the bankers need to buy more.
so now Bama's fuck ups are NIXXON's fault???
"I leave you gentleman now and you will write it. You will interpret it. That's your right. But as I leave you I want you to know — just think how much you're going to be missing. You don't have Nixon to kick around any more"
Thank you tip e. At least Nixon tried. All we have today is the Teleprompter’s golf game and armchair quarterbacks to tell us how awful RN was.
One clarification. FRN's are not strictly fiat, FRN's are backed by debt. It's doubly insidious.
Double your pleasure, double your fun.
I bet you are fiat green with envy over the double mint twins.
Thank CG for the relief, I'm smiling big time lolol
almost a trifecta
http://farm1.static.flickr.com/206/489730083_3ef3c7b9e7.jpg
Oil isn't. Will someone say, 'finite supply' or 'production peak'?
@Cog Dis
Deliciously wholesome. The good ole days. May they return again.
The selling using sex was just a bit more subtle back in the good ole days.
I can't think of a more suggestive sales slogan than two pretty girls in dresses on bikes informing me that I can double my pleasure and double my fun. Of course in my case my mind is always in the gutter. But I just blame Madison Avenue for my moral decline.
Mmmmmm, doublemint twins. :)
On a tandem bike in dresses, no less! Whatever could they be trying to communicate?
I bet they aren't wearing panties....
Wonder if their bike seats smell like juicy fruit???
Doubt it.... they look like minty fresh Massengill girls....
You can bet how delicious they will feel leading you around by your little heads for objectifying them.
You screw them; they screw you.
Is this why we have two wars? or has marketing moved on to triplets?