The author of this article argues that Nixon was not the only one responsible for the closing of the gold window and in fact it started way before the 1971 announcement that the dollar will no longer be tied to gold.
By Mark Lundeen
Published: August 24, 2011
Recently I listened to Jim Rickards’ 15 August 2011 interview on King World Radiowhere he addressed the US Treasury’s termination of the US dollar gold peg in August 1971. It was frustrating to hear his portrayal of what happened. Mr. Rickards is very influential. For good reasons, his opinions are widely respected. So, when he focused on the obvious fact that it was Nixon who put an end to the Bretton Woods $35 paper dollar peg for each ounce of US Treasury gold, he omitted decades of monetary history prior to August 1971, as all commentators on this subject do. Sure, President Nixon stopped exchanging gold for paper dollars, but that is NOT the entire story, or even the main point we should be focusing on. What would that point be? Simple: gold held under armed guard by a monetary authority is no guarantee against more money being printed than can be backed by that gold. Only gold coinage in circulation and a currency freely redeemable in gold coin can guarantee that.
If I could accomplish one thing in my work, something I would really be proud of, it would be changing the general perception that President Nixon is exclusively responsible for “closing the gold window” at the US Treasury in August 1971. Rather, everyone should know that Presidents:
were all scofflaws of domestic and international monetary laws, just as President Obama, and Congress are today, because Bretton Woods has never been repealed. For most of the 20th century, the American-political class refused to take council from economic advisors who believed that the law of supply-and-demand also applies to the American dollar. In fact, today “inflation” is the primary tool of Doctor Bernanke’s “monetary policy.”
So these chief American administrators all contributed to the US Treasury’s *SECOND* gold default in the 20th century, by allowing the Federal Reserve to increase US Currency in Circulation (CinC or paper dollars), beyond the ability of the US Treasury to redeem those paper dollars in gold at the statutory rate of $35 paper dollars per ounce. The only post-Bretton Woods (1945 - 2011) chief executive who showed any respect for the concept of a sound dollar, was President Truman. In the charts that follow, it’s clear that Truman did not allow the monetary printing presses to run wild. Still, there were indications that even the Truman administration was creating a crisis-in-confidence in the US dollar.
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