Gold Standard: Forty Years Gone — And Good Riddance (WSJ)

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Gold Standard: Forty Years Gone — And Good Riddance

On this day 40 years ago, President Nixon announced the end of the gold standard for the US dollar, ushering in an era of fiat currency and ending the “Bretton Woods” international monetary system that had made the dollar the world’s reserve currency, backed by gold.

Depending on your perspective, this was either an inevitable concession to economic reality or an epic catastrophe. A 35-year-old Ron Paul took the latter view, according to an interview he gave to Texas Monthly 10 years ago:

“I remember the day very clearly,” he says. “Nixon closed the gold window, which meant admitting that we could no longer meet our commitments and that there would be no more backing of the dollar. After that day, all money would be political money rather than money of real value. I was astounded.”

Mr. Paul entered politics shortly thereafter and has been railing against fiat currency, the Fed, and other modern economic institutions ever since.


http://blogs.wsj.com/marketbeat/2011/08/15/gold-standard-forty-years-gone-and-good-riddance/




"Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."

- Alan Greenspan - Congressional Testimony, May 20, 1999

The euro (€), the US dollar ($), and the Japanese yen (¥) comprise the three currencies used in international trade today. The relative value of these currencies is influenced by global foreign exchange markets, the supply and demand for bonds and other securities denominated in them, and demand for currency used to settle trade in goods and services between countries. Currency values are also influenced by the monetary policies of governments.

A global financial crisis that started in 2007 in the US and evolved into an economic crisis in 2008 will develop into a currency crisis over the coming years. A fourth currency, one that is not so politically vulnerable as the three primary currencies in use today, survives as a reserve asset in the central banks of every country: gold. Gold is available to act as a fall-back currency for international trade should the floating exchange rate and government bond-backed currency system fail. This site is devoted to the discussion of this possible development and how it will impact investors throughout the world.


A return to the Bretton Woods international gold standard created in 1944 is inevitable

Thirty-seven years ago the world’s economies started on the circular track back to Bretton Woods. We will sooner or later be back where we started, with international transactions guided by a fixed gold price.

http://fourthcurrency.com/


Super Imperialism
The Economic Strategy of American Empire
Michael Hudson
2nd edition 2003

In sum, the United States is able to rule not through its position as world creditor,
but as world debtor. Rather than being the world banker, it makes all other countries the
lenders to itself. Thus, rather than its debtor position being an element of weakness,
America’s seeming weakness has become the foundation of the world’s monetary and
financial system. To change this system in a way adverse to the United States would bring
down the system’s creditors to America.
Widespread European and Asian fears of such a breakdown has enabled the United
States to dominate the world economy through just the reverse process from that by which
Britain ruled in the 19th century. Britain governed its Empire not only through its position as
world banker, but because as world banker it took responsibility for insuring an international
payments mechanism that worked on long-understood lines that were deemed to be
equitable to its users. As central banker to the world, Britain took responsibility for keeping
the international financial system in working order.
It would have been against what had become a political economy elevated to the
status of a veritable civic religion for Britain to have threatened its fellow Commonwealth
members that, “If you do not let sterling IOUs be issued simply as paper, with no solid
assets or willingness to pay to back up these IOUs, your economies will collapse.” Other
countries would have broken away, perhaps even risking war to become independent of
so financially aggressive an economy.
What a contrast the modus operandi of Britain’s empire provides to that of the
United States today! Unwilling to relinquish their nation’s position as food exporter to the
rest of the world, U.S. officials demand food-dependency on U.S. exports on the part of
Asia, the former Soviet Union and third world countries (having lost the fight against
Europe’s Common Agricultural Policy). Military dependency also is demanded, while the
sectors of U.S. industrial dominance are based mainly on electronics and military-related
technology which it puts forth as a post-industrial economy as heavy industry and bluecollar
employment is being downsized throughout the U.S. economy.

http://michael-hudson.com/wp-content/uploads/2010/03/superimperialism.pdf

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