Follow Us
Become a Fan
Nixon’s the One!
That was one of Richard Nixon’s successful 1968 presidential campaign slogans. out the video here). It was coupled with: “This time vote as if your life depends on it – because it does.”
As you might imagine, this slogan lent itself to parody and worse.
Democrats who supported Nixon’s opponent Lyndon Johnson’s vice president, the loquacious liberal, Hubert Humphrey of Minnesota, circulated an anti-Nixon poster showing a very pregnant woman in full side view with the legend under it: “Nixon’s the One!”
RMN Dumps the Dollar
It was 40 years ago this very today that President Richard Milhous Nixon screwed America, the once almighty dollar and the nation’s economy.
On August 15, 1971 Nixon canceled the direct convertibility of dollars into gold, scraped the postwar Bretton Woods monetary agreement system, devalued the dollar, raised tariffs, and imposed the first peacetime wage and price controls in American history – a multi-disaster from which America and the world has yet to recover.
Lew Lehrman correctly summed it up in the Wall Street Journal today: “By severing the dollar’s convertibility to gold in 1971, the president ushered in a decade of inflation and economic stagnation.”
Nixon closed the “gold window” under which foreign nations had the right to exchange U.S. dollars for U.S. gold, an exchange guaranteed under the Bretton Woods monetary system set up under American leadership in July 1944. Recently the 1971 markets had panicked. Great Britain had tried to redeem $3 billion for U.S. gold. So large were the official foreign dollar debts that U.S. gold stocks would be unable to meet the official demands for American gold at the convertibility price of $35 per ounce.
Following FDR’s Default
As I told you last month President Nixon was following the terrible example of the president who set American on the road to socialism, Franklin Delano Roosevelt.
To help finance U.S. participation in World War I, the U.S. Congress had issued a series of debentures known as “Liberty Bonds” starting in 1917 payable in gold at a rate of $20.67 per troy ounce.
By 1933 the Treasury had only $4.2 billion in gold and the total Liberty Bond debt was $22 billion, not even enough to pay in gold the interest owed to bond holders.
As Nixon would do 28 years later, FDR ordered a default on the domestic-held debt by refusing to redeem the Bonds in gold to American bond holders and by devaluing the dollar by 40% against foreign currency exchange. This allowed the U.S. Treasury to make a partial payment in gold and maintain foreign exchange with U.S. trade partners.
If we price gold at the present-day value of $1,750 per troy ounce, the total loss to investors by the devaluation was approximately $700 billion in 2011 dollars. The overall result of this blatant default was to intensify the Great Depression, call into serious question U.S. government financial reliability and reduce international trade, which contributed to fomenting World War II.
The Nixon Aftermath
What followed Nixon’s gold default was not unalike the results of Roosevelt’s gold bond default. For the first time in human history Nixon had created a global system of unconstrained fiat paper money under full control of the politicians that run government.
After the “Nixon shock,” gold backed money everywhere became nothing more than paper money.
Today “money” has become electronic cash created practically without limit by the privileged money producers; the bailed-out big banks and the welfare state central banks like Bernanke’s Federal Reserve whose “quantitative easing” has benefited foreign banks more than the American people.
Lehrman described the tangible effects of Nixon’s 1971 action: “The purchasing power of a dollar saved in 1971 under Nixon has today fallen to 18 pennies (see the graph). Nixon’s new economic policy sowed chaos for a decade. The nation and the world reaped the whirlwind.”
History Repeats
Today the debate over a possible return to the gold standard is back in a way America hasn’t seen in the four decades since Nixon’s action. It echoes the debate in America over gold and silver in the late 19th and early 20th century. But in those olden days advocates of today’s phony paper money would have been seen as insane.
I have long supported a return to at least a partial gold standard for the dollar. Thirty years ago as a U.S. Representative I introduced legislation that would have accomplished this. Those who oppose a return to gold blindly trust debtor governments and refuse to see that the Federal Reserve has devalued the dollar into irrelevance.
Thank you, Richard Nixon, (and FDR) — wherever you are.
Other Posts from the Author
- Are You Among the 23% Entitled to a Second Passport? - May 14th, 2012
- The Real Problem With the French Elections - May 4th, 2012
- The Life of a “Sovereign Individual” - April 24th, 2012
Interested in More Articles Like This? Sign up for The Sovereign Investor today! (It's FREE!)
Tags: breton woods, fiat currencies, Nixon
[...] blog column yesterday castigating my former political associate, (he was president when I was in the U.S. House), Richard [...]