President Nixon’s Decision to Abandon the Gold Standard

Franklin Delano Roosevelt called the Japanese “surprise” attack on the U.S. occupied territory of Hawaii and its naval base Pearl Harbor, “A Date Which Will Live in Infamy.”  Similar words should be used for President Nixon’s draconian decision 45 years ago this month that removed America from the last vestiges of the gold standard.

 

NIXONNixon points out where numerous evil speculators were suspected to be hiding. No, wait… actually, Nixon points to the black hole that has swallowed countless lives and a great deal of treasure under his and his predecessor’s watch – ultimately leading to the US default on the Bretton Woods gold exchange standard.

Photo credit: Richard Nixon Presidential Library

 

On August 15, 1971 in a televised address to the nation outlining a new economic policy entitled, “The Challenge of Peace,” Nixon instructed the Treasury Department “to take the action necessary to defend the dollar against  speculators.”*

Nixon continued:

 

“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interests of monetary stability and in the best interests of the United States.”**

 

Of course, any objective student of history knows that this was a lie and that it was not “speculators” which were causing monetary instability, but the U.S.’s own crazed inflationary policy which attempted to fund its imperialistic endeavor in Vietnam while expanding the welfare state at home.

This resulted in the Treasury losing an alarmingly amount of gold reserves to other central banks who rightly sought real value in exchange for depreciated American greenbacks.

 

The televised announcement of the gold default, with Nixon telling blatant lies to defend the decision, in addition to lying about its “temporary” status while revealing his economic illiteracy at the same time, all in the space of a mere four minutes.

 

In essence, Nixon’s decision ended gold redemption and placed the U.S. and the rest of the world on a purely fiat paper standard for the first time in recorded history.  By doing so, the U.S., in effect, became a deadbeat nation which no longer honored its obligations and was set on the road to its current banana republic status.

Instead of impeachment proceedings and his ultimate resignation for the juvenile break in at the headquarters of the nation’s other ruling crime syndicate, Nixon should have been imprisoned for this deliberate and destructive act which has led, in large measure, to the nation’s crushing and insurmountable debt burden, reoccurring booms and busts, and now economic stagnation.

 

Monetary Infamy Precedent

Nixon’s disastrous decision had precedent. FDR had his own day of monetary infamy in 1933 when, by Executive Order 6102, he outlawed the private ownership of the precious metal while eliminating  gold redemption by banks for dollars.

 

PF-gold-confiscati_2525827bFDR’s infamous gold confiscation decree of April 5, 1933. This was soon revealed as a blatant act of theft; people were paid $ 20.67 per ounce they delivered – shortly thereafter, FDR decreed that the paper dollar was to be devalued to $35 per ounce (a number he reportedly pulled out of his hat).

 

Ostensibly, the order was instituted as an emergency measure to combat the Depression, but in reality, it was done to allow the Federal Reserve greater “flexibility” in inflating the money supply.

While Roosevelt and Nixon’s decisions would backfire economically, their actions highlighted the totalitarian direction that the federal government and its executive branch were heading throughout the 20th century.

Moreover, the lack of opposition or protest to blatant executive dictatorial decrees by either the legislative or judicial wings of the federal government demonstrates again the flawed and frankly naive argument put forth by Constitutionalists of every ideological persuasion on how the celebrated “separation of powers” theory checks tyranny.

Nixon’s final abandonment of the gold standard had far greater ramifications than simply bad economics.  Without the discipline of hard money, central banks could, and did, create massive quantities of paper money and credit, which enriched the politically connected financial elites and the governments which they were aligned.

 

TMS-2 fast versionAnd they have indeed created massive amounts of funny money in record time. The above chart shows the most important components of the broad true US money supply TMS-2 since 1975 (including various memorandum items, TMS-2 is currently approx. $400 bn. higher, but these three components represent the bulk of the true money supply; we have combined only these because the data are going further back, allowing us to show a longer term chart). An interesting aside are the enormous jumps in the money supply under supposed “inflation fighter” Paul Volcker in the early 1980s – click to enlarge.

 

Such power was used, in time, to control, spy on, and regulate the subject populations to a degree never seen before.  The power of the state has swelled mostly through bank credit expansion without worry of gold redemption.

Despite what is taught in social science courses, a true gold standard is a greater protector of individuals’ economic well being and, ultimately, their political liberty than any legislation or “rights” document ever penned.  Hard money limits state power!

 

img-5IndianHeadGoldHalfEagleA five dollar “Indian Head” half-eagle from 1909. As long as gold was the nation’s money, government spending in peacetime never exceeded approx. 4% of GDP. Government was but a footnote in most people’s lives, which is precisely as it should be.

Image via houstoncoins.com

 

While it is painful to quote from an ardent opponent of sound money, the international bankster Baron Rothschild said it best when he described the relationship of money and power: “Permit me to issue and control the money of a nation, and I care not who makes its laws.

Richard Nixon’s elimination of the last remnant of the gold standard over four decades ago combined with FDR’s earlier decree has fulfilled to the detriment of the American and world economies Baron Rothschild’s adage to a T.  The return of prosperity and individual liberty will only come about when both of these heinous acts are eradicated.

 

Footnotes:

 

*Richard M. Nixon.  “Address to the Nation Outlining a New Economic Policy: ‘The Challenge of Peace.’”  The American Presidency Project.  15 August 1971. http://www.presidency.ucsb.edu/ws/?pid=311

**Ibid.

 

Chart by: St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

Antonius Aquinas is an author, lecturer, a contributor to Acting Man, SGT Report, The Burning Platform, Dollar Collapse, The Daily Coin and Zero Hedge. Contact him at antoniusaquinas[at]gmail[dot]com https://antoniusaquinas.com/.

 

 

 

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4 Responses to “A Date Which Will Live in Infamy”

  • Triffin Dilemma was to blame

    Definition of Triffin dilemma
    This is where incessant foreign demand for a reserve currency would force its issuing country to run persistent current account deficits. [1]
    A reserve currency is a foreign currency that is traditionally held in countries’ official reserves because of its global importance as a medium of exchange and its inherent stability.

    The reserve-currency country enjoys the consumption benefit of running a trade deficit, while the rest of the world benefits from the additional liquidity, which helps facilitate trade.

    The cost comes from the declining value and credibility of any currency which runs a persistent trade deficit – eventually leading to a reluctance of creditors to hold the reserve currency.

    Example
    As Francis Warnock (professor at the University of Virginia’s Darden School of Business) points out in a paper for the Council On Foreign Relations, in 2010, the US confronted a dilemma first identified in 1960 by the Belgian-born Yale economist Robert Triffin.

    To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.

    The Triffin Dilemma
    http://dailyreckoning.com/the-triffin-dilemma/

  • DismalScienceMonitor:

    “Best move Nixon made outside of going to China. Why? We were bleeding gold as we pegged it at $35/oz. forever which made no economic sense.” It makes economic sense to steal pencils from a blind man, too, but the best people don’t do it.

  • John Galt III:

    1971 – I remember when this was done.

    Best move Nixon made outside of going to China. Why? We were bleeding gold as we pegged it at $35/oz. forever which made no economic sense. Same mistake was made after WWI. The price was “set” too low. The author seems to like price controls. That’s Marxist nonsense as everyone but Obama and Hillary types know.

    Due to Bretton Woods and the Keynes idiots who came up this plan we went from 25,000 tons of gold to 9,000 tons in 27 years.. We sold another 1,000 tons after 1971, but now thanks to Nixon’s move we still have the largest amount of gold of any country. China will tie or pass this but we at least we have something to back the dollar when it all goes south with the currency reset that is coming.

    A lot better than Canada and the UK that have none or little (300 tons). If the FED had any employees with brains, they would be buying gold these last ten years instead of mortgages and Treasuries (and keep their mouth shut about it like the Chinese)

    • Au79:

      John Galt III:

      What Nixon should have done is fix the problem by stopping the government from issuing more “money” than it had gold to back it with. Instead, chose to aid the crime in progress by defaulting on the government’s obligations – like any deadbeat.

      Nixon issued Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices in order to counter inflation. This was the first time the U.S. government enacted wage and price controls since World War II.

      https://en.wikipedia.org/wiki/Nixon_shock

      Nixon was a meddlesome price-fixing Keynesian who was the conduit for far more harm than good.

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