Today Marks 40th Anniversary of the Dollar’s Divorce from Gold
On Monday August 15, 2011, 12:33 pm EDT
Writing in the New York Times, [John Brooks] voiced “a suspicion that the president and his advisers, in making their Draconian move, did not understand what they were doing.”Robert Bartley, The Seven Fat Years, p. 33.
Today marks the 40th anniversary of President Richard M. Nixon’s decision to sever the dollar’s link to gold. Though private markets had begun to price in a floating dollar well before August of 1971, it was on August 15th forty years ago that Nixon committed this most colossal of blunders.
As is well known now, though the dollar bought roughly 1/35th of an ounce of gold in 1971, today it buys less than 1/1750th. It gets interesting, however, when we notice just how little some things have changed in the last forty years.
Of course, as has been explained with great regularity in this column through references to books by Benjamin Anderson (Austrian School), Liaquat Ahamad (Keynesian School) and Adam Fergusson (When Money Dies – ideology unknown), during periods of monetary debasement there’s often a reorientation of investment into the hard assets least vulnerable to currency devaluation.
Ever-enterprising individuals can thrive no matter the chaos foisted on them by feckless monetary authorities. But the question is how much more successful we’d all be if money had maintained its simple purpose as the facilitator of trade and investment. Floating money values, though not a policy of the past, will, if allowed, author our descent into it. To reverse a needless decline, it’s essential that we revert to the historical norm of stable, gold-defined money values that are so essential to a thriving, evolving economy.