He was impeached for Watergate, he should have been shot for this. I AM NOT A CROOK, INDEED!! This demonstrates what happens when you allow "crisis management" ie: "never let a good crisis go to waste" dictate policy. It overrides and overruns common-sense and leads to insane policy decisions, the ramifications of which take many years / decades to play out.
The ‘Fatal Error’ of 1971 - August 15, 2011 - The New York Sun:
"In the short term, the closing of the gold window precipitated what Lewis Lehrman, writing in today’s Wall Street Journal, describes as “a decade of one of the worst inflations of American history and the most stagnant economy since the Great Depression.” The situation was righted by the combination of President Reagan’s supply-side fiscal policies and the tight money regime of Paul Volcker at the Federal Reserve. Yet there was no permanent repair of the world monetary system, no restoration of the legal checks of government over-reach.
The absence of any legal connection between the dollar and gold permitted the combination of fiscal and monetary over-reach that has, today, delivered us a dollar with a value of barely more than a 1,800th of an ounce of gold, less than a percent of the value of the constitutional dollar. It is noteworthy that the top contenders for the Republican nomination for president, Michele Bachmann, has said she’s prepared to look at a gold standard and that the close runner up, Ron Paul, has made sound money his central issue throughout his entire long career in the Congress."
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Jim Rickards analysis of the announcement puts things in perspective rather nicely. He also provides perhaps a silver lining (if I might mix metaphors a bit) for policy makers in dealing with the debt and how it relates to fiscal and monetary issues.
from King World News:
Rickards - KWN Special Release, US Will Revalue Gold to $7,000
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/15_Rickards_-_KWN_Special_Release%2C_US_Will_Revalue_Gold_to_%247%2C000.html
Nixon goes on the air and he interrupts Bonanza, again it would be like the President coming on with a special announcement nobody was prepared for in the middle of American Idol, he’s (Nixon is) sitting at his desk and there is an American flag in the background and he says three things:
He said first of all I am imposing national price controls because there was an inflation problem in the United States at the time. The second thing he said was I am putting a 10% surtax of imports on all imported goods coming into the United States. Then about 10 minutes into the speech, very much en passant, he said, ‘Oh by the way we are suspending the convertibility of dollars into gold’ and he immediately went into this Nixonian rant about speculators.
He acted like the wounded party, he said, ‘I refuse to let the American dollar be held hostage by speculators and we are going to make sure these speculators never do our economy harm. So we are going to make it impossible for the speculators to profit by shutting the gold window’. He made it sound like he was doing everyone a big favor.
So it was very interesting, there were three earth-shaking announcements. Can you imagine any one of those three things going on today? President Obama or any President saying he was going to impose nationwide price controls, or all Chinese goods would have a 10% surcharge. It would be cataclysmic, yet Nixon did both of those things. Plus (Nixon) took us off the gold standard, so it was quite a dramatic speech.
In a strange way he did us all a favor by making sure we (the US) held on to the gold. So I do think the United States is in a position to revalue the currency using gold to that $7,000 level. That will obviously be a huge benefit to all of the people who invested in gold because they are going to be along for the ride, along with the United States when that gold goes to $7,000.”
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Rickards on CNBC describing how the banks should be handled:
Sure seems like we have this debt thing under control, don't you think?
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from Business Week: The Nixon Shock
http://www.businessweek.com/magazine/the-nixon-shock-08042011.html
How Nixon stopped backing the dollar with gold and changed global finance, a 40-year-old decision that still echoes in Greece, Ireland, and the U.S.
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