50 years ago today - The Nixon Shock

[Jvw]

 

It has been 50 years to this day that president Nixon suspended the Gold Standard *temporarily* in the best interest of the United States and to stabilize the US dollar.

I wonder what he ment with temporarily.

And what are your thoughts on this Nixon Shock? Was it wise what he did at that moment in time? How would they even re-link the gold price to the USD after the 'temporary' suspension? 

 

 

 

Edited August 15, 2021 by Jvw
title edit

[Lr103]

This is certainly interesting to ponder, but I do think your survey needs another option: “They’re not going to do it”, which would get my vote. 

This is purely looking at it from the standpoint of those in a position to decide. 

Given how indebted many governments are, it just wouldn’t be in their best interest to move away from fiat. In all all fairness, I would personally much prefer to pay a mortgage in future fiat than future gold or crypto!

[Jvw]

6 minutes ago, Lr103 said:

This is certainly interesting to ponder, but I do think your survey needs another option: “They’re not going to do it”, which would get my vote. 

This is purely looking at it from the standpoint of those in a position to decide. 

Given how indebted many governments are, it just wouldn’t be in their best interest to move away from fiat. In all all fairness, I would personally much prefer to pay a mortgage in future fiat than future gold or crypto!

I did think about that extra option, but i thought it would be interesting to see IF they re-instated the gold standard to what the good people of the forum would like to link it to. But you are absolutely right, they would never re-link it. I adjusted the question accordingly.

[Lr103]

1 minute ago, Jvw said:

I did think about that extra option, but i thought it would be interesting to see IF they re-instated the gold standard to what the good people of the forum would like to link it to. But you are absolutely right, they would never re-link it. I adjusted the question accordingly.

Makes sense, and voted with that in mind. 🙂

[sovereignsteve]

Why would it need to be linked to anything? Everything would be linked to gold.

[badar]

It will never be reinstated. However, assuming they did. Countries would need to buy massive amounts of gold.
 

Also the gold price would need to be adjusted by the governments to reflect the amounts of cash and money in circulation. (Just like the US did after confiscation; instant $10 profit on confiscated gold)
 

It’s not practical considering how complex our economies are now. 
 

BoE’s take on Fiat “One advantage of a system that uses fiat money is that the amount of money in circulation can be responsive to changing economic conditions. This can support the smooth functioning of the economy. By contrast, the total amount of money circulating in the economy during the Gold Standard was ultimately limited by the amount of gold that could be mined.”

Source: https://www.bankofengland.co.uk/knowledgebank/what-is-money

[ady]

1 hour ago, Jvw said:

I wonder what he ment with temporarily.

Nothing more permanent than a temporary government program.

[silenceissilver]

32 minutes ago, sovereignsteve said:

Why would it need to be linked to anything? Everything would be linked to gold.

My thoughts exactly. Wanted to ask the same question. Paper is linked to gold, not the other way round.

[silenceissilver]

38 minutes ago, badar said:

It will never be reinstated. However, assuming they did. Countries would need to buy massive amounts of gold.
 

Also the gold price would need to be adjusted by the governments to reflect the amounts of cash and money in circulation. (Just like the US did after confiscation; instant $10 profit on confiscated gold)
 

It’s not practical considering how complex our economies are now. 
 

BoE’s take on Fiat “One advantage of a system that uses fiat money is that the amount of money in circulation can be responsive to changing economic conditions. This can support the smooth functioning of the economy. By contrast, the total amount of money circulating in the economy during the Gold Standard was ultimately limited by the amount of gold that could be mined.”

Source: https://www.bankofengland.co.uk/knowledgebank/what-is-money

Governments can't adjust prices. They can only supress the true price  which leads to a black market.

That's also how the termination of the gold standard happened - they printed more money than the gold standard would allow - thus the official price of gold was too low, thus some people speculated on the too low gold price - it would rise, according to these speculators - and then this was provided as reason for the termination of the gold standard. So the government did A which caused B which the government used to justify C. That's how it always goes, with everything.

The abolishment of the gold standard was one of the worst things between 1945 and 2020 - maybe THE worst thing at all. It enabled the funding of many wars and a myriad of harmful government programs. 

Edited August 15, 2021 by silenceissilver

[Stu]

One day, in a decade or twos time, you will see China reveal how much gold she really holds by displaying her hoard in a venue such as the Olympic Stadium for the world to see. It will probably be a partial backing of their currency they will announce, however they will do it properly. The US totally abused their position of having reserve currency status and continue to do so to this day. 

[GoldenGriffin]

It maybe that gold will never be there to "back" anything, other than debt, which it currently does and I think it will cover a heck of a lot more debt within the next decade or so, when the majority of gold is mined and governments and financial institutions can feel confident that they have enough gold, and other countries also having their fair share (fair = driven by population? And could explain China's holdings on and off the record?) before a big reset.

If it does link to something else, it'll only be to add credibility and confidence in whatever it's backing and even then, it may only be temporary until the thing it's backing has gained enough confidence to go alone.

Unlike us, I don't think most people understand gold, so even if there is an idea to tempt a global audience to a concept, would gold be that carrot? 🤔

Edited August 16, 2021 by GoldenGriffin
.

[SidS]

In my experience, when a government says something's permanent and there's a firm deadline and no going back, there will invariably be a U-turn and a moving of goal posts. To quote George H W Bush, "Read my lips, no new taxes."

If a government says something is 'temporary' then you're stuck with it for the long haul. Bad news is only ever an emergency measure - 'just for now'. I heard somewhere that they are now refering to inflation in the US as 'transitory'... Hmmm well I'll let you decide what you think about that.

It may well have been that in 1971 it was intended to be a temp arrangement until another system could be put in place, however, once they realised that they could milk the system and massage the figures and extract profits from monetising debt, then well that genie won't be going back into the bottle I'm afraid.

Why would turkeys vote for Christmas?

Edited August 16, 2021 by SidS
Grammar errors

[Jvw]

On 16/08/2021 at 00:18, ady said:

Nothing more permanent than a temporary government program.

😂 Seems like that! 

Edited August 20, 2021 by Jvw