NIXON'S THOUTHLESS UNPEGGING OF THE GOLD STANDARD IN 1971, IS TODAY'S UPSIDE-DOWN-WORLD. THE FED RACKETED PONZI FED NOTES UNDER MANIPULATED BENCHMARK RATES AND EMIL WONTA (GEORGE SOROS) RACKETED CURRENCY MANIPULATIONS WORLD-WIDE.
Nixon Shock, the Reserve Currency Curse, and a Pending Dollar Crisis
Nixon Shock, the Reserve Currency Curse, and a Pending Dollar Crisis
Nixon Shock
A reader asks "What Forced Nixon to Close the Gold Window in 1971?"
The answer is called "Nixon Shock".
Nixon wanted to fight the war in Vietnam, not raise taxes, and not hike interest rates to finance it.
Arthur Burns, not Volcker was at the Fed.
American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one".
Vietnam War and the Dollar Exodus Beginning
The dollar exodus had its beginnings way back in February 1965 when President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate of $35 per ounce.
Lyndon Baines Johnson was president. The War in Vietnam and Johnson's "War on Poverty" accelerated the US deficit and inflation.
On a campaign that promised to restore law and order to the nation's cities and provide new leadership in the Vietnam War, Richard Nixon won the election in 1968.
Arthur Burns was Fed chair.
In 1971 President Nixon appointed the then Democrat John Connally as Treasury Secretary. That's when things started rolling.
Our Currency But Your Problem
Shortly after taking the Treasury post, Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar "is our currency, but your problem."
By 1971, US money supply had increased by 10%. In May 1971, West Germany left the Bretton Woods system, unwilling to revalue the Deutsche Mark. Switzerland also started redeeming dollars for gold.
On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar to protect the dollar against "foreign price-gougers".
On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.
On August 15, 1971 Nixon directed Connally to suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold. He also issued Executive Order 11615, imposing a 90-day freeze on wages and prices in order to counter inflation. This was the first time the U.S. government had enacted wage and price controls since World War II.
The American public believed the government was rescuing them from price gougers and from a foreign-caused exchange crisis. Politically, Nixon's actions were a great success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, "We unhesitatingly applaud the boldness with which the President has moved."
So Much for Temporary
The move was not temporary. There have not been any restraints on deficit spending since.
Wars became easy to finance. Deficits? No problem.
In 2011, Paul Volcker, who replaced William Miller as Fed Chair in 1979, expressed regret over the abandonment of Bretton Woods.
"Nobody's in charge," said P'
No comments:
Post a Comment