by Jeff Berwick, The Dollar Vigilante:
The US government, bankrupt yet again after another disastrous war of aggression, had its back pushed to the wall in 1971.
Up until that point, foreign central banks could redeem US dollars directly with the US Treasury in exchange for gold. And, recognizing that the US was essentially bankrupt, foreign central banks, especially France, began to demand gold instead of the dollar.
And then, on August 15, 1971, Richard “I’m Not A Crook” Nixon announced the monetary shot heard around the world.
He announced that due to the shadowy and intangible “money speculators” he would “defend” the dollar by removing its convertibility into gold “temporarily”.
It was, unquestionably, the most destructive event in modern monetary history… yet hardly anyone remembers it or knows about it.
Prior to 1971, the US government and Federal Reserve were restricted in the amount of debt they could go into and the amount of money it could print.
Afterwards, everything changed.
When discussing how massive of an event it was I often show long term historical charts on the market and the economy. Notice, EVERYTHING changed in 1971… and not for the better.
US GOVERNMENT DEBT
In 1970 the total US debt was $370 billion. On the chart below it seemed fairly tame up until 1971.
As of today it stands at $19.4 trillion.
Back in 1971, government spending roughly rose at the same rate as median household income.
Quickly, after 1971, that link was broken as government spending has since grown nearly 300% in inflation-adjusted dollars while median household income has only risen 24%.
Since the US dollar has been rapidly falling since 1971 it is best to compare long term price charts to gold, rather than the dollar.
In gold terms, US wages have fallen dramatically since that ignominious year, 1971.
And the US is embroiled in a constant “minimum wage” debate as people in the US have found that they can barely survive at today’s minimum.
Little do many know, but if the US dollar was never taken off the gold standard, it would have been worth more than five times higher than today. That’s right. Today’s $7 minimum wage would be closer to $35/hour.
But, thanks to this one event, that has been buried by time and determined avoidance (certainly it’s not referred to in government indoctrination camps – schools – nor in the media), your average American has been massively impoverished.
US stock markets are currently hitting all-time nominal highs and the media and government trumpets it as a victory. But it’s not.
When compared to gold, again, the US market went down dramatically after 1971.
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