Gold’s Nasty Divorce

Gold’s nasty divorce from the U.S. dollar was finalized in August 1971 when President Richard Nixon suspended any further convertibility of U.S. dollars into gold by non-U.S. citizens. That action removed any remaining links between the dollar and gold.

Without convertibility, any official price for gold became meaningless. At that time, the official U.S. dollar price of gold was raised from $40.00 oz to $42.50; but nobody paid much attention.

The U.S. dollar price of gold began a decade-long march that saw a twenty-fold increase culminating in an intra-day high of $843 oz. in January 1980. Gold had finally broken free of its tether.

teth·er (noun)

   “a rope or chain with which an animal is tied to restrict its movement.

Gold is certainly not an ‘animal’, but the definition seems reasonably applicable otherwise. Most would probably agree that the price of gold was understated and had been for several decades.

A better explanation, though, is that the overwhelmingly huge increase in gold’s price represented not a revaluation of gold, but, rather, a devaluation of the U.S. dollar.

The devaluation was not official as far as the U.S. government was concerned. They had tried that in the past, and it hadn’t worked.

PURPOSE AND INTENT 

A first glance it might seem that the U.S. government was admitting defeat, and that the pretense of gold convertibility at a fixed price was a desirable goal that had become  unworkable.

In other words,  aside from stiffing your international neighbors, who were characterized with having the intent of undermining the U.S. dollar and “taking/stealing all our gold”,  the government was appealing to its citizens in a semi-patriotic way.

There was no other alternative, or so they said. Rather than argue about the merits of the decision, though, we need to consider the possibility (evidence) that there were other forces at work.

This means allowing for consideration that the decision was not a response to specific events but the end result of a plan set in motion many years earlier.

BRETTON WOODS CONFERENCE JULY 1944

The United Nations Monetary and Financial Conference was held in July 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire. It is now referred to as the Bretton Woods Conference.

Two international agencies were granted life at this occasion: The International Monetary Fund (IMF) and The World Bank. Both of these organizations were presented publicly with admirable goals, such as helping war-torn nations to rebuild and promoting monetary cooperation among nations.

The course of action called for maintaining fixed exchange rates and terminating the use of gold as the basis of international currency exchange. Doing so removes the primary restraint on government which keeps them from inflating and destroying their own currencies. The politicians and bankers loved the idea.

There was a lesser known ulterior motive for the removal of gold as the basis of international currency exchange, though.

Organizers of the conference envisioned the IMF in the role of a world central bank that would issue a single international currency (in unlimited amounts) that would free all governments from the discipline of gold. In their eyes, the first step in the plan was to the eliminate any gold backing of the U.S. dollar. (see The Creature From Jekyll Island)

BEFORE BRETTON WOODS 

As late as the early twentieth century, U.S. paper currency was issued with a clear statement specifying that it was redeemable for specific amounts of gold at fixed rates.  In addition, gold circulated concurrently with U.S. paper currency and both were interchangeable.  One was as good as the other. Supposedly.

In 1933 President Roosevelt issued an executive order “forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States”.

Characterizing the ownership of gold as a criminal act was intentional. Disparaging gold helps in the efforts to minimize its function and importance.

The reasons for Roosevelt’s order should be obvious. Under a gold standard accompanied by convertibility, gold acts as a restraint on a free spending government.

The reason all nations have abandoned a gold standard is because they do not want to be limited in their desire to create limitless amounts of fiat money. With the help of central banks and politicians, they no longer are. (also see Gold And US dollar Hegemony)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!