This week 45 years ago, August 15th 1971 to be exact, President Nixon
suddenly declared the end of the Gold Standard. He ushered in the modern
monetary system based on fiat paper and digital currency that works so poorly
for us today and led to the global financial crisis.
The dramatic announcement by ‘Tricky Dicky’ is a must watch and you can
see it here:
“Your dollar will be worth just as much tomorrow as it is today… ”
This was one of the most important events in modern financial,
economic and monetary history and is a seminal moment in the creation of the
global debt crisis which has confronted the U.S., Europe and the world
in recent years and continues to this day.
Nixon ushered in an era of floating fiat currencies not backed by gold or
silver but rather deriving value through government “fiat,” diktat or order
of the government.
While Nixon justified the “technical” and “temporary”
move as necessary to combat malign “international money speculators”
who were “waging an all out war on the American dollar.” The
real reason for the move was that the U.S. , then as today, was living way
beyond its means with the Vietnam war and rapidly escalating military
spending leading to large budget deficits and inflation.
Imperial overstretch had begun…
Governments internationally including the French and their President
Charles de Gaulle were concerned about the debasement of the dollar and began
to exchange their dollar reserves for gold bullion bars.
Nixon tried to reassure the American public about the “bugaboo of
devaluation” and the value of their currency by declaring incorrectly and
comically to us today:
“Your dollar will be worth just as much tomorrow as it is today… “
Subsequent to Nixon’s decision 45 years ago, the U.S. dollar fell very
sharply. Gold surged in the coming 9 years and rose from $35/oz to $850/oz by
January 1980. Since 1971, gold has fallen from 1/35th of an ounce of gold to
1/1350th of an ounce of gold today.
This is not the fault of “speculators”, rather it is the fault of
irresponsible governments and central bankers debasing the U.S. dollar
since 1913 and indeed since 1971. With the notable exception of Federal
Reserve Chairman Paul Volcker.
Today, U.S. dollars and all paper and digital money is declared by
governments to be legal tender, despite the fact that neither paper nor
digital currency has any intrinsic value and is not backed by gold reserves.
Historically, currencies were based on precious metals such as gold or
silver, but fiat money is based on faith and on the performance of politicians,
bankers and central bankers.
Because today’s fiat money is not linked to physical reserves of gold and
silver, it is becoming worth less with each passing month and risks becoming
worthless should hyperinflation take hold as has been seen in many nations in
recent years including Zimbabwe and as being seen in Venezuela today. Indeed,
Nigeria appears to be in the early stages of an inflationary spiral.
If people lose faith in a nation’s paper currency, they exchange it
rapidly for real things and hard assets. Their ‘money’ no longer holds value.
People who own real assets are protected. Those who are dependent solely on
income and wages see their income and their standard of living fall. We
appear to be in the end phase of this cycle:
Source: VisualizingEconomics.com via ZeroHedge.com
Throughout history most fiat currencies have not survived more than a few
decades and have succumbed to hyperinflation.
The fiat currency or paper and digital based international monetary system
has survived 45 years but is in terminal decline with many astute
commentators now questioning whether it will survive the coming
global financial crisis.
Gold’s role as a store of value and important monetary asset is being
increasingly appreciated. Although some less informed commentators still view
gold as a “barbaric relic,” the biggest market participants are again using
gold as an alternative monetary asset today.
These include the largest central banks in the world, the largest
banks in the world, the largest insurance companies in the world, the
largest hedge funds in the world, the largest pension funds in the world
and indeed the wealthiest investors in the world.
Currency debasement has without fail ended in disaster throughout
history and in recent years. As faith is lost in the debased currency,
inflation surges and the economy collapses.
We have been warning of the real risk of an international monetary crisis
and a currency reset which sees all fiat currencies devalued against
gold. While hyperinflation remains a worst case scenario, stagflation
and a virulent bout of inflation looks almost certain in the coming months in
debt laden economies globally.
Gold and silver will protect against currency devaluations as is being
seen in the UK
since Brexit.
Gold and Silver Bullion – News and Commentary
Gold
treads water on U.S. Fed rate views; awaits July minutes (Reuters)
Gold
Holds Advance Even as Fed Officials Flag Possible Rate Rise (Reuters)
Gold’s
Popularity Dims In Short Term as ETFs Shrink by Most This Year (Bloomberg)
Gold
cuts gains after mixed U.S. economic data (Reuters)
Banks
to keep piles of cash in high security vaults (FT)
Billionaire
Crispin Odey “Is Betting Everything On Gold” (Zerohedge)
Odey
Still Bearish, Explains Massive Long Gold Bull Position (ValueWalk.com)
DB
discloses $2 billion mining share portfolio (Smaulgd)
Labour
opposition wants to increase the national debt by £270 billion (Telegraph)
Gold:
Fresh Upside Breakout Is Imminent (Goldseek)
Gold Prices (LBMA AM)
17Aug: USD 1,342.75, GBP 1,031.23 & EUR 1,191.96 per ounce
16Aug: USD 1,349.10, GBP 1,039.89 & EUR 1,197.33 per ounce
15Aug: USD 1,339.20, GBP 1,037.21 & EUR 1,198.85 per ounce
12Aug: USD 1,336.70, GBP 1,032.60 & EUR 1,199.02 per ounce
11Aug: USD 1,344.55, GBP 1,037.05 & EUR 1,206.06 per ounce
10Aug: USD 1,351.85, GBP 1,035.11 & EUR 1,209.23 per ounce
09Aug: USD 1,332.90, GBP 1,025.80 & EUR 1,201.74 per ounce
Silver Prices (LBMA)
17Aug: USD 19.57, GBP 15.04 & EUR 17.37 per ounce
16Aug: USD 20.04, GBP 15.43 & EUR 17.77 per ounce
15Aug: USD 19.90, GBP 15.40 & EUR 17.81 per ounce
12Aug: USD 19.87, GBP 15.33 & EUR 17.81 per ounce
11Aug: USD 20.21, GBP 15.56 & EUR 18.13 per ounce
10Aug: USD 20.34, GBP 15.55 & EUR 18.19 per ounce
09Aug: USD 19.70, GBP 15.18 & EUR 17.77 per ounce
Recent Market Updates
– Gold
In UK Pounds Collapses 38% Versus Gold and 56% Versus Silver Year To Date
– Will
Ireland Be First Country In World To See Bail-in Regime?
– Money
“Madness” Negative Interest Rates Sees Gold Buying Surge
– Gold
Investment Demand Reaches Record In First Half 2016 On “Perfect Storm”
– Peak
Gold – Did Gold Production Peak in 2015?
– Financial
Times: “Victory For Gold Bulls Is Only Just Beginning”
– Irish
Banks Most Vulnerable In Stress Tests – Banking Contagion In EU Cometh
– Gold
In Sterling 2.2% Higher After Bank Of England Cuts To 0.25% and Expands QE
– Silver
Kangaroo Coins – Sales Surge To Over 10 Million
– Trump,
Clinton, “Ugliest” Election Coming – Gold’s “Summer Doldrums” Prior To
Resumption of Bull Market
– Marc
Faber: Invest 25% Of Investment Portfolios In Gold Bullion
– “Could
Not Invent A More Bullish Story For Gold Bullion”
– Gold
In Bull Market – “Every Reason For It To Continue” – Frisby In Money
