Today
The ghouls and fiends that have fettered America, and their incessant obligation to mass slaughters, given the current status of American finance and economics trace back to a single pivotal meeting on the afternoon of Friday, August 13, 1971:
On the afternoon of Friday, August 13, 1971, Nixon, Burns, Connally, Volcker, and twelve other high-ranking White House and Treasury advisors met secretly at Camp David to discuss policy solutions to the growing crisis. Nixon, relying heavily on the advice of Connally, ultimately decided to abandon the Bretton Woods system by announcing the following actions on August 15:[15][16][17]
- Nixon directed Connally to suspend the convertibility of the dollar into gold or other reserve assets (with certain exceptions), such that foreign governments could no longer exchange their dollars for gold, thereby ending the Bretton Woods system.
- Nixon issued Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices.
- Nixon instituted a 10 percent import surcharge in anticipation of the expected fluctuation in exchange rates.
On Sunday, August 15, when American financial markets were closed, Nixon explained the policy agenda in a national address:
We must protect the position of the American dollar as a pillar of monetary stability around the world. In the past 7 years, there has been an average of one international monetary crisis every year…
Let me lay to rest the bugaboo of what is called devaluation. If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. The effect of this action, in other words, will be to stabilize the dollar.
— Richard Nixon, Address to the Nation Outlining a New Economic Policy: “The Challenge of Peace”, The American Presidency Project[17]
Check out the instant upshot of this not so bugaboo devaluation! Look at the horizontal axis before 1970s when the price dollar vs. gold is nearly constant; after 1970s jumped from $200 to $4,400 Ounce and that is 22 times devaluation of dollar:
bugaboo(n.) “something to frighten a child, fancied object of terror,” by 1787 [“Freeman’s Journal” (North-American Intelligencer), April 4]. Why would a highly educated sitting US president use a funny sounding word like bugaboo often used for a giggle? He was belittling the American public as in “I am knowingly going to make some disastrous decisions and off you go to your idiot jobs and lives you peabrains… and that’s you all need to know.”
This was the first time the U.S. government had enacted wage and price controls since the Korean War.
Events that led to Nixon Shock [1]
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In February 1965, French president Charles de Gaulle announced his intention to redeem U.S. dollar reserves for gold at the official exchange rate.[8] By 1966, non-U.S. central banks held $14 billion in U.S. dollars, while the United States had only $13.2 billion in gold reserves, of which only $3.2 billion was available to cover foreign holdings.[9]
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In March 1968, the London Gold Pool collapsed.
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In May 1971, West Germany left the Bretton Woods system, unwilling to sell further Deutschmarks for U.S. dollars.[10] In the following three months, the U.S. dollar dropped 7.5% against the Deutschmark, and other nations began to demand redemption of their U.S. dollars for gold.[10]
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On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar in an effort to protect their currency against “foreign price-gougers”.[10] Also in August, French president Georges Pompidou sent a ship to New York City to retrieve French gold deposits.[11]
The French Warship and the Federal Reserve Vault
In early August, France sent a naval ship—reportedly a cruiser or destroyer, likely from the T47 or T53 class—to New York Harbor. The vessel moored discreetly, possibly near Fort Lee, New Jersey, while French officials oversaw the transfer of gold bars from the Federal Reserve Bank’s vault at 33 Liberty Street, located deep beneath Manhattan’s bedrock.
The French told the Americans, British, Germans and the rest of the world that no one can violate the sanctity of French Gold! Else massive firepower. Looking back in retrospect, the French did the right thing. We all should take that attitude when it comes to the wealth of our nations.
This was not the first time France had repatriated gold from the U.S.—in fact, much of the country’s holdings had been secretly moved in the 1960s through an operation known as “Vide-Gousset” (“empty pockets”). But this final naval pickup—carried out in the heart of New York’s financial district—was a powerful symbolic act. It made global headlines and put severe pressure on the already strained U.S. monetary system.
Imagine I go to a bank carrying a large machine gun and ask the bank teller to close my account and give me all my own money or else I start shooting! In America this is considered rubbery!
- On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.[10] Pressure intensified on the United States to leave the Bretton Woods system. On August 11, Britain requested $3 billion in gold be moved from Fort Knox to the Federal Reserve in New York.[11]
By August 15, there were only 10,000 metric tonnes (= 352740000 ounces) of gold remaining in the U.S. reserves, less than half of their peak amount.[11] At the time, the U.S. also had a monthly unemployment rate of 6.1%, as well as an annual inflation rate of 5.84%.[13][14]
Charles DeGaulle’s “Criterion” Speech
“No currency can compare, either by a direct or an indirect relationship, real or imagined, with gold”
by Charles DeGaulle
The currencies of the countries of Western Europe have today been restored, to such an extent that the total gold reserves of the Six is today equivalent to that of the Americans. They decided to convert all the dollars that they had in their account into precious metals. In other words, the convention that gives the dollar an over-riding value as an international currency no longer has its initial basis, namely the possession by America of the great majority of the gold in the world. But in addition, the fact that a large number of countries accept, out of principle, dollars in the same way as gold to compensate, when appropriate, any deficits that arise to their advantage from the American balance of payments, leads the United States to become voluntarily indebted to foreign countries. Indeed, what they owe them, they pay them at least in part, with dollars that they hold just for these payments, instead of paying them totally in gold, the value of which is real, that you can only possess if you have earned it and that you cannot transfer to others without risk and without sacrifice. This unilateral facility which America has been given contributes to the idea that the dollar is an impartial and international symbol of foreign exchanges being blurred, while it is an appropriate means of credit for a country.
Obviously, there are other consequences to this situation. There is, in particular, the fact that the United States, for want of having necessarily to pay in gold, at least totally, for their negative balances of payment in accordance with the old rules, that required countries to take the required steps, sometimes rigorously, to remedy their imbalance, is suffering year after year from a deficit balance. No less because the total of their commercial exchanges is to their disadvantage. Quite the opposite! Their material exports always exceed their imports. But that is also the case for dollars, exports of which are always in excess of imports. In other words, capital sums are being built up in America, by means of what should really be called inflation, which, in the form of dollar loans granted to countries or to private individuals, are being exported. As, in the United States itself, the increase in currency circulation that results from this makes investments within the country less remunerative, there is an increasing trend there to invest abroad.
This leads, for certain countries, to a sort of expropriation of some of their companies. Certainly, such a practice has greatly facilitated, and still encourages to a certain extent, the multiple and considerable aid that the United States is providing to a large number of countries, to be used for their development, and from which we, on other occasions, have ourselves widely benefited. But circumstances are such today that we can even wonder how far the problem would go if the countries that hold dollars wanted, sooner or later, to change them into gold? Although such a general movement would never take place, it is still the fact that there is an imbalance that is, to a certain extent, fundamental.
For all these reasons, France is in favor of the system being changed. We know that France said this, in particular, at the Tokyo Monetary Conference. Given the universal jolt that a crisis in this field would probably cause, we have every reason to hope that the steps to avoid it are taken in time. We therefore believe it to be necessary for international exchanges to be established, as was the case before the world’s great misfortunes, on an unquestionable monetary basis, that does not carry the mark of any particular country.
What basis? Indeed, we cannot see that, in this respect, there can be any other criterion, any other standard, than gold. Oh, yes! Gold, which never changes its nature, which can be shaped into bars, ingots or coins, which has no nationality and which is eternally and universally-accepted as the unalterable fiduciary value par excellence. Moreover, despite everything that could be imagined, said, written, done, as huge events happened, it is a fact that there is still today no currency that can compare, either by a direct or an indirect relationship, real or imagined, with gold. Without doubt, we could think of imposing on each country the way it should behave within its borders. But the supreme law, the golden rule — we can truly say — that should be reapplied, with honor, to international economic relationships, is an obligation to make up, between one monetary zone and the next, by effective deliveries and withdrawals of precious metals, the balance of payments resulting from their foreign exchanges.
Source: The World Gold Council; Charles De Gaulle, 1971, 4, pp. 325-342, esp. 330-334. The English translation of this excerpt is drawn from Lacoutre, 1991, p. 381; Excerpt from a press conference of French President Charles de Gaulle at the Palais de l’Élysée calling for the return of a ‘gold exchange standard’; February 4, 1965
What was before Nixon Shock
Bretton Woods system [5]
Main article: Bretton Woods system
See also: Bretton Woods Conference
In 1944, representatives from 44 nations met in Bretton Woods, New Hampshire, to develop a new international monetary system that came to be known as the Bretton Woods system. Conference attendees had hoped that this new system would “ensure exchange rate stability, prevent competitive devaluations, and promote economic growth”.[5] The Bretton Woods system became fully operational by 1958. Under the system, countries settled their international accounts in United States dollars, which could be converted to gold at a fixed exchange rate of $35 per ounce, which was redeemable by the U.S. government. Thus, the United States was committed to backing every U.S. dollar overseas with gold, and other currencies were pegged to the dollar.
For the first years after World War II, the Bretton Woods system worked well. Under the Marshall Plan, Japan and Europe were rebuilding from the war, and demand for American goods and dollars were high, and because the U.S. owned over half the world’s official gold reserves—574 million ounces at the end of World War II—the system appeared secure.[6]
However, as Germany and Japan recovered from 1950 to 1969, the U.S. share of global economic output dropped from 35% to 27%. Furthermore, a negative balance of payments, growing public debt incurred to fund U.S. involvement in the Vietnam War, and monetary inflation by the Federal Reserve caused the dollar to become increasingly overvalued in the 1960s.[6]
[2] Bretton Woods system - Wikipedia
[3] London Gold Pool - Wikipedia
[4] Humor in Word Embeddings:Cockamamie Gobbledegook for NincompoopsWARNING: This paper contains words that people rated humorous including many that are offensive in nature. (bugaboo reference)
[5] Creation of the Bretton Woods System | Federal Reserve History