Monday, August 22, 2011

40th Anniversary "Celebration"

I didn't pay attention one week ago today on the actual anniversary.

So let us "celebrate," today, only one in several US government failures to demonstrate good "full faith" on its promises with respect to its financial obligations. (The government speaks of its "full faith and credit.")

Few besides supposed nut-cases like Ron Paul will use the word "default" when it comes to US policies with respect to the dollar. But what do you call it when the US government refuses to honor its promises to pay? Was this historical event not a default?

Nixon Ends Bretton Woods International Monetary Accord

The Bretton Woods system was created towards the end of World War II and involved fixed exchange rates with the U.S. dollar as the key currency - but also a role for gold linked to the dollar at $35/ounce. The system began to falter in the 1960s because of an excess of dollars flowing out of the U.S. which foreign central banks had to absorb. A run on gold in 1968 was stemmed by a patch on Bretton Woods known as the two-tier gold system. All of this was ended unilaterally on August 15, 1971, when President Nixon announced on TV three dramatic changes in economic policy.
  • He imposed a wage-price freeze.
  • He ended the Bretton Woods international monetary system.
  • He imposed a temporary surcharge (tariff) on all imports.
It's worth listening to what he said back then . . . and then compare his statements to what has occurred during the intervening 40 years.

. . . A single crisis a year was "big news" back then? --Where are we today?

. . . Is the U.S. dollar stronger than it was back then? More stable? . . .
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