Today Is The 40th Anniversary Of Nixon Ending Gold Standard And Creating Modern Fiat Monetary System

Tyler Durden's picture

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 is trading at $39.14/oz, €27.35/oz and £23.99/oz. 

Platinum is trading at $1,789.00/oz, palladium at $754/oz and rhodium at $1,775/oz. 

(Financial Times)
Central banks polish gold’s shine - System of fiat money is 40 years old today

Gold edges higher amid weaker dollar

Spot gold falls 1 percent in third session of losses

Gold Declines for Third Straight Day as Equity Rebound Trims Haven Demand

(The Telegraph)  
Abandoning the gold standard was a seminal moment, and one we're now all paying for

Commentary: What are all those gold-bashers saying now?

(London Bullion Market Association)
Brian Lucey: What do Academics Think They Know About Gold?

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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Mr Lennon Hendrix's picture

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.

FEDbuster's picture

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.

"Gold for Bread":

flacon's picture


CHARLES DE GAULLE of France predicted the US monetary crisis in 1965


spiral_eyes's picture

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. 

DaveyJones's picture

we're all afraid of turning forty and like most facelifts, there's no subsitute for the real thing. 

TruthInSunshine's picture

All I have to say in response to this timely, never more relevant than present, and critical topic is:


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.


tip e. canoe's picture

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.

cranky-old-geezer's picture

... 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.  

HoofHearted's picture

De Gaulle was listening to Jacques Rueff. And Rueff was always right.

AnAnonymous's picture

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.

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.

Magnum's picture

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.

Dry Drunk's picture

The cabal is not surprising, it is just their scope. Wasn't Tyler Durden found dead from autroerotic-asphixialtion dressed in womans clothes? 2012

Flakmeister's picture

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.

Mr Lennon Hendrix's picture

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.

Flakmeister's picture

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.

falak pema's picture

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. 

kridkrid's picture

And a war criminal to boot.  Kissinger is a psychopath.  His death will make me very sad as I watch his life celebrated. 

DaveyJones's picture

"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."

falak pema's picture

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! the possibilities on facebook...

Flakmeister's picture

Cheney had a good tutor.....

Caviar Emptor's picture

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


Flakmeister's picture

I think that in 1970 China becoming the manufacturer of the world was on nobodies radar. This hindsight is all too convienient...  

falak pema's picture

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.

falak pema's picture

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.

Flakmeister's picture

I suggest you take a gander at

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.

falak pema's picture

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...

tip e. canoe's picture

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?

Flakmeister's picture

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... 

tip e. canoe's picture

...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)?

Flakmeister's picture

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....

DaveyJones's picture

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 

Flakmeister's picture

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....


DaveyJones's picture

a stripper can only produce so much before she drops from exhaustion. Better charge more for the cokes.

tip e. canoe's picture

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?

Flakmeister's picture

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.

DaveyJones's picture

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.

falak pema's picture

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.

Flakmeister's picture

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.

kridkrid's picture

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.

DaveyJones's picture

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" 

kridkrid's picture

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.

Flakmeister's picture

Matt Savinar..... lawyer and professional doomer. He may be proven right but he has unduly polarized the Peak Oil debate.

DaveyJones's picture

true, but being an early player (especially on the net) will land him somewhere in history

kridkrid's picture

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.

Flakmeister's picture

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.

kridkrid's picture

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. 

daxtonbrown's picture

It is interesting to note that Kennedy tried to put us on a silver standard, but LBJ put the kebash on that.

akak's picture

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".