Exactly 50 years has passed since the US Government famously suspended the convertibility of US dollars into gold on 15 August 1971 in a speech announced by then US president Richard Nixon.
This convertibility of US dollars into gold applied to US dollars held by foreign governments and foreign central banks, which based on the rules of the Bretton Woods monetary system, allowed them to legally show up anytime at the ‘gold window’ of the US Treasury and exchange their excess US dollars for physical US Treasury gold.
There will be much written this month about the 50th anniversary of the closure of the US gold window, but less so about what exactly triggered it and why the timing had to be 15 August.
h/t Adrian
I read this this morning.
Excellent article on the US overstretched their dollar printing and countries wanting the accumulated it back in GOLD like the banks used to do until there was a run on the banks to go bust.
How much GOLD is actually in Fort Knox?
Is it the real stuff or tampered bricks like some banks and countries like to do?
Heard that the newer crap was tampered with when borrowed out…
Why doesn’t anyone want an audit?
How much good quality gold is in Fort Knox? Yes, good question, JoJo.
This was a key passage in the article:
it’s also possible that the US Treasury did not have all the gold at claimed to have in Fort Knox or at the New York Fed vault in Manhattan (at least not in Good Delivery gold bars), and that the Americans balked at a demand for 2,666 tonnes simply because they did not have enough gold to sell.
The Bank of England knew back in March 1968 when the London Gold Pool collapsed that the Americans had run out of Good Delivery gold, as is clear from a Bank of England memo from 14 March 1968 which said:
“It has emerged in conversations with the Federal Reserve Bank that the majority of the gold held at Fort Knox is in the form of coin bars, and that in certain cases these bars have a gold content of less than 350 fine ounces. If the drain on U.S. stocks continues it is inevitable that the Federal Reserve Bank will be forced to deliver what bars they have.”
“It would appear that the circumstances might well be such that very few bars of the current acceptable fineness could be found“
As for an audit…Ron Paul was able to obtain a *partial* audit, (sort of a contradiction in terms, but never mind), of the Federal Reserve….even that small investigation uncovered the blatant mendacity of the central bankers. For instance, the Fed had at the time denied collusion with other central banks, but the partial audit revealed massive “currency swaps” with BOJ, BOE, BOC, European Central Bank, et al. It’s planet ponzi.
The predator class even changed accounting standards so that publicly traded companies can report “non-GAAP” financials.
A financial regime that is founded upon debt-based, fractional-reserve fiat currency is a system founded upon a big lie. It is systemically corrupt, and corrupts the values of people subject to it. No one would have believed an idiotic statement like “the budget will balance itself” pre-1913. Or even pre-August 15, 1971.
The post-1933, post-Bretton Woods gold standard had gone badly off the rails by 1971 thanks to the explosive growth of government borrowing throughout the 60s. The sensible thing would have been to slash borrowing and start rewinding the welfare state and allow interest rates to be determined by markets through the mechanism of redemption (for gold) by individual savers. But no. The welfare state won out.
The cost of the money commodity, (i.e. “interest rates”), used to be determined by market forces.
Banks used to have to compete with each other to secure capital from savers/depositors in order to lend it out to borrowers, making a profit from the difference between the saver’s rate and the borrower’s rate of interest. Nowadays, of course, banks really don’t need depositors at all, apart from the “user fee” revenue stream.
Banks can conjure “money”, i.e. bank credit, out of thin air leveraging a small percentage of “bank reserves” based on whatever the central bank deems is a sufficient reserve-ratio. As can be seen with the current reverse repo “facility” at the Fed, the major banks in the US are drowning in “excess liquidity”.
When real money, (money according to the Aristotelian definition), is perverted, everything else in a society eventually corrupts. We are in a stage of social development where the stench of putrefaction is decidedly noticeable.
Bingo Dennis …. if only gov’t could behave like adults and the populace wasn’t endlessly clamouring for “free stuff”.
Tide pods and baby formula holding steady.
THE MAIN REASON America went off the gold standard is very straightforward …. there was simply not enough physical gold in the world to back up the all the printed money our booming society required.
When you talk to oldtimers from the 1930’s they would say … “there was no money” …. they meant physical paper dollars …. they did not mean they could not earn dollars …. so back then everything was done by debit and credit …. charge up groceries and supplies and when payment checks for wheat (etc) came in they were endorsed to the merchant …. (again , very little actual cash was used). (it didnt exist)
The governments then came up with a very good solution …. the 9 to 1 banking system ….. if a bank had $10k actual cash it could lend out 9 times that amount ($90k) …… and that $90k was created out of thin air and forwarded to the borrower.
Now here is the thing …. the $90k iS BACKED UP BY THE BORROWERS SIGNATURE pledging to repay the money plus interest .
Most people repay their loans and it is a good system …. the borrower has built a house or business or bought a car and the economy thrives even more because of all the jobs created by this “new money” ….. those workers then can get their own loans and it keeps the economy and money supply expanding.
But markets and speculation gets carried away and “appraised values” far exceed “true value” and the bubble bursts and a huge correction — recession occurs …. usually about every 7-10 years. Then it starts all over again ….. now you know why banks and government encourage people to borrow money to buy things during a recession …. it is the only way to recover.
In many ways it is a good system ….. and even if the whole monetary system should collapse tomorrow all is not lost …. everything still exists …. the houses , highways , hospitals , streets , airports , bridges , machinery etc.
Most bankers and accountants do not even know this is how the money system works …. but now you do because I told you..
I repeat it is a good system …. lets say compared to saving your own money for 15 years to pay cash for your house while you live in a tent in your in-laws back yard.
It’s been 30 years since the “money supply” or money in “circulation” was made to shrink as a result of extremely high interest rates.
This resulted in the loss of many of those houses and properties to the banks.
If you were starving and the only thing you were offered was gold or wheat….what would you choose?
Bill Gates has chosen land. Becoming one if not the biggest farm land owners in the states so I hear.
ivbinconned …… you are correct about the interest rates …. when inflation or markets overheat is when the Feds raise interest rates trying to subdue excessive borrowing … it sometimes works but causes its own problems .
And yes …. a sack of potatoes is more valuable than a bag of gold if you are starving.