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Echoes of 1776: Is a Monetary Revolution Coming? nixon 1971/

http://schiffgold.com/news/

POSTED ON DECEMBER 29, 2015 - POSTED IN GUEST COMMENTARIES


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This article was written by Stefan Gleason and originally published at the Tenth Amendment Center. Find it here.

Is America on the cusp of a revolution that will usher in a new monetary order?

The lessons of history tell us that no fiat currency retains its value for long or lasts forever. And as Shakespeare noted, “what’s past is prologue.”

Major episodes in monetary history often stem from political revolutions. Just as there are boom-bust economic cycles, there are cycles of optimism pessimism that drive cultural, geopolitical, and war cycles.

American history reflects the ebbs and flows in social sentiment.

The Founders wrote gold and silver into the Constitution as legal tender. They did so not because the Ame

American Revolution was financed with sound money – quite the opposite. The Founders were keenly aware of the dangers of unbacked paper money because the Continental Congress printed huge volumes of it to pay for the Revolutionary war.

answer nixon makes history/ took dollar of gold standard.
http://www.foxnews.com/opinion/2011/08/15/forty-years-ago-today-nixon-took-us-off-gold-standard/.html

Why did President Nixon take the U.S. Dollar off the gold standard in 1971?
Federal Reserve & there desire to print more money charged at interest when borrowed by the Government & abandoning Gold Standard guarantees inflation.

Under the gold standard, a government is limited – both legally and practically – as to how much paper money it can print. As recently as the Lyndon Johnson administration, the U.S. could print paper dollars equal only to four times the value of the nation’s gold reserves.

Under the gold standard, governments that print too much paper money risk runs on their gold reserves. Runs occur as holders of the paper seek to convert to gold before the vaults are empty. A run on the dollar is what happened in the late 1960s, which culminated in President Richard Nixon closing the gold window in 1971.

"Closing the gold window" is a euphemism for the U.S. defaulting on its promise to other countries to redeem dollars for gold. As an alternative, Nixon could have devalued the dollar and continued to redeem. In effect, he chose a one hundred percent devaluation, a de facto default on the promise to redeem.

In the 34 years before Nixon closed the gold window, the money supply in the U.S. grew less than two fold. In the 34 years after Nixon’s action, the money supply expanded 13 fold and the Fed Reserve has taken the US gold.

President Richard Nixon is blamed for taking us off the gold standard when in fact, the United States was taken off the gold standard thirty-eight years earlier by President Franklin D. Roosevelt.

On April 5, 1933, Roosevelt ordered all gold coins and gold certificates in denominations of more than $100 to be turned in for other money.

It required all persons to deliver all gold coin,
gold bullion and gold certificates owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce.

And on June 5, 1933 the United States was officially of the gold standard.

Fast-forward to August 15, 1971, when President Richard Nixon
announced that the United States would no longer convert
dollars to gold at a fixed value,
thus completely abandoning the gold standard.

Thanks to President Gerald Ford, when in 1974 he signed legislation that permitted Americans again to own gold bullion.

because the U.S. had run up such enormous deficits in the late 1960s, especially because of the Vietnam War
but to a lesser extent because of Lyndon Johnson's introduction of Medicare and Medicaid,
that the value of the U.S. dollar was sliding.

As long as the value of the U.S. dollar remained relatively constant the U.S. was able to defend the
price of gold at $37 something/ounce (or thereabouts) and there was little difference between this price,
i.e. the price the U.S. Treasury was willing to redeem foreign
(not domestic!) central banks' dollars with, and the market price of gold.

So there was no problem.


Then when the U.S. government began running up massive deficits in the late 1960s it of course had the effect of downward pressure on the dollar's value,

which opened up a widening gap between the ~$37/ounce gold the U.S. was committed to redeeming foreign dollar holdings at versus the growing market price of gold.

Here's why it was a problem: a foreign central bank comes to the U.S. Treasury and says
"Here, redeem these $5 million in greenbacks for gold" and the U.S. Treasury counts them out $5 million in gold AT $37 something PER OUNCE.

The foreign central bank then takes this gold they obtained at the
rate of $37/ounce and turns around and resells it on the open market
at the going rate for gold which by that time has increased to $40 something or $50 something per ounce, making a large profit.

Because the U.S. government was committed to approximately 37 greenbacks equaling one ounce of gold it had set itself up for being a sucker and that's exactly what happened.

Foreign central banks came in with dollars, traded them in for gold at $37/ounce and resold them at the steadily climbing market price for gold, making a huge profit which they could then come back with to the U.S. Treasury and trade in for MORE gold, repeating the process.

It's easy to see how this creates insurmountable problems when a
large and growing gap opened up between the price the U.S. was
willing to redeem foreign dollar holdings for gold at versus the
actual (then-)current market price for gold.

Specie (gold bullion) could not have been flying out of the country faster if it had wings.

Nixon quickly saw he had two choices, neither of them attractive: either fight for gold at $37/ounce,
meaning cut the U.S. federal government's budget with a meat axe
in order to reduce the deficit enough to bring the value of the
dollar back up enough to take the upward pressure off the market price for gold,
thereby shrinking the gap between that and the $37/ounce price enough to make it not worth anyone's while to try to profit from the "gap" I described.

Or he could close the gold window, take the U.S. off the last vestiges of the gold standard and be done with it.

He chose the latter and ever since then the market price of gold has grown by leaps and bounds and the value of the dollar has steadily declined,
most noticeable in the form of inflation. Sometimes worse than others, for example in the early-mid 1970s then again in the late 1970s-early 1980s inflation was terrible.