Era of Modern Economy

The modern economic era began in 1971 for our purposes. That year, president Richard Nixon abandoned the Bretton Woods Agreement, he also devaluated the dollar, he raised the fixed price of gold fictitiously to 37.50 dollars, and slammed the gold windows shut to stop an international run on the United States gold reserve. Before Richard Nixon’s actions, the United States had reduced its once prodigious gold hoard of over twenty thousand tons to slightly over eight thousand tons in an effort to uphold the thirty-five dollar international benchmark. Most of the United States hoard went abroad, especially to Europe. A couple of years later, the United States government raised its fixed gold price to 42.22 dollars. The dollar was liberated to float against the rest of the currencies of the world. Gold began to trade freely in gold markets around the world. Nixon’s actions also permitted uninhibited trade and budget deficits.

It is no longer required of the United States to deliver gold to any country that steps up to the gold window and imposes that he receive gold for dollars. In the following years, this would become the political equivalent to a license to inflate – something this country subscribes to with a revenge. To the present day, the United States gold reserve of roughly two hundred-sixty million ounces is ostensibly priced at 42.22 dollars per ounce, despite the fact that the free market price is closer to four hundred dollars per ounce. During that time, Richard Nixon proclaimed that we care all Keynesians. This was his way of saying that the forces of sound money were not going to be represented in American politics any longer, not even by the hard money and conservatively inclined Republican Party. The abrogation of the Bretton Woods Agreement – the international economic structure based on gold that had been in place since World War II – laid the foundation for the modern private gold market. When politicians took gold out of the national money, which is what Nixon did, the need for private gold ownership was enhanced as a means to protect wealth.

As price inflation gripped the nation in 1973, gold climbed to one hundred-twenty dollars. During that year, the federal debt stood at four hundred sixty-six billion dollars, it is little by present day standards and is only representing thirty-four percent of the gross domestic product. Double-digit inflation plagued the United States economy in 1974. The stock market was corrected significantly. In that year too, Richard Nixon resigned from office under the pale of the Watergate scandal. The price of gold hit two hundred dollars, 5.5 times the price targeted in the late 1960’s as the benchmark for gold.