When Gold and the Dollar Parted Ways

13 Aug

When Gold and the Dollar Parted Ways

50 Years Ago this Week!

Gold moved out 50 years ago this week.  

That is when the paper dollar moved front and center in the US economy on August 15, 1971.  

Of course, Americans had paper dollars before that date.  But nobody assumed that some fancy linen stock, engraved scrollwork, and official signatures gave that paper its value.  The paper dollars were only warehouse receipts or claim checks for gold. The value was in gold. The paper claim notes were only a convenience.

America’s gold standard had been under attack before 1971. President Franklin Roosevelt had made American’s ownership of monetary gold a felony decades before.  Imagine that:  you could be imprisoned for owning gold.

But at least foreigners could redeem their paper dollars for gold. Well, at least there was a pretense that they could, although in practical terms they really could not.  They would wait in long lines to press their claims, often in vain.  A few days before August 15, fifty years ago, the British ambassador showed up at the Treasury Department to convert $3 billion in paper to gold. Of course, it was a futile effort. There was not enough gold to redeem all the dollars that the US had printed.

Days later, on August 15, President Nixon slammed the gold window shut, severing the last link of the dollar to gold.

That means that there was not even any remaining pretense that paper dollars had any objective value.  The dollar, quips James Grant, is now as good as paper.

As crazed as was the money-printing and deficit spending that followed in the 1970s, it is nothing compared to today’s money printing and deficit spending.  

Over the fifty years since Nixon’s act, the value of the dollar is down precipitously.  The US national debt was less than a half-trillion dollars.  In fact, it was only $400 billion. Today it is closing in on $29 trillion.  The national debt under the gold standard was only about a third of US GDP. Today it is 120 percent of GDP.  

Freed from the enforced discipline of the gold standard, dollars will eventually be printed into worthlessness. That is the fate of paper money.  When asked how many paper currencies have failed throughout history, we like to answer all of them.  Those that are still in circulation today are zombies, the living dead.

The dollar and its value have been unwinding for fifty years. As Hemingway wrote, about going bankrupt, it starts out gradually and then happens suddenly.  We think it is important for you to protect yourself as the dollar – in its present incarnation – races to its grave.

The debt skyrockets. The digital dollar printing screams ahead. And inflation is rearing its ugly head. Do not wait for higher prices.  Speak with a Republic Monetary Exchange gold and silver professional and take advantage of today’s precious metals buying opportunity.

> > Continue to Read Part II of “When Gold and the Dollar Parted Ways”