Nixon and Exchanging Dollars for Gold

Reddit

The month of August 1971 is significant in that this is the month when Richard Nixon told the world, “Kiss my Fat American But (FAB), world, because although we Americans promised to maintain the purchasing power of the dollar against which all other currencies can maintain their value, too, we lied when we said that we would exchange gold for dollars to insure that we did what we said we would! Hahaha!

“So, from now on, no exchanging dollars for gold for you either! Hahaha! You believed us when we guaranteed our promise about the value of the dollar in terms of gold, and then let us keep the gold at our house? Hahaha! Morons! So just come and try to get it, chumps!”

The problem was that the government was being bankrupted by maintaining the foolish Leftist stupidities of Johnson’s “Great Society” and the sheer stupidity of the Vietnam war (among other governmental stupidities), and lots of dollars were being created by the Federal Reserve and multiplied by technology increasing the velocity of money through the banking system, resulting in a lot of inflation and a lot of dollars piling up overseas.

Fortunately, it was France making all the noise, and real Americans – who hate the French for their snotty attitudes – were smart enough to be alarmed, since the French knew that the buying power of the dollars that they held – and would be getting in the future – would all be losing valuable purchasing power. Naturally, they wanted to exercise their option to exchange the dollars for gold!

This was okay for a while, but pretty soon there was a torrent of gold leaving the country, causing Nixon to reveal just what kind of country does this kind of lowlife deal breaking.

Then Nixon said, “No more exchanging stupid paper dollars for real gold!” The reason Nixon was forced to act like a lying, thieving little creep is partly because he WAS a lying, thieving little creep, but mostly because he mirrored America perfectly since Congress allowed it, nobody at the Federal Reserve was hung, imprisoned or even received a stern lecture, and there were no street riots at the sheer shame of it all.

This is not about how I am glad that Roy Rogers and Hopalong Cassidy are dead so that they would not see the kind of embarrassing, black- hat, bad-boy bunch of dad-burn, sidewinding, backstabbing, ornery, polecat bushwhackers we have become, but to show you how good the French were in predicting the fall in the value of the dollar.

And for that we only have to look at the essay titled “The Day the Dollar Died – and the Day Gold was Reborn” by Bill Downey of technicalcommoditytrader.com, who has researched a handy comparison between then and now.

He compares “How Much things cost on Aug 15th, 1971” to what they cost today.

Dow Jones Industrial Average 890 or 25 oz. gold in 1971, versus 9,000 or 10 oz. gold today.

Average Cost of new house $25,250 or 721 oz. gold in 1971, versus 250,000 or 277 oz. gold today.

Average Income per year $10,600 or 302 oz. gold in 1971, versus $70,000 or 77 oz. gold today.

Average Monthly Rent $150 or 4.3 oz. of gold in 1971, versus $824 or 1 oz. of gold today.

Datsun 1200 Sports Coupe $1,866 or 53 oz. gold in 1971, versus $28,400 or 31 oz. gold today.

Naturally, I am looking over this little chart with some puzzlement, and I am thinking to myself, “It seems that there should be a message in there somewhere, but what?”

Fortunately, before I could think about it some more, and wonder some more about what the “message” was, and then get a headache from all the thinking and the frustrations of failure, and then decide to go out for a drink to clear my head, or maybe take an afternoon off to play a round of golf, both of which get me in trouble with my boss, Mr. Downey reveals it as, “Conclusion: If your money is dollars, you live in an inflationary world. If your money is denominated in gold, you live in a deflationary world.”

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

Mogambo Guru
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Reddit

Comments

  1. There is a message here and it is “we don’t trust the banks”.

    As a factory worker in the 70’s, I remember how we were virtually forced to allow our pay packets to be automatically deposited into our bank accounts. The Armoured van delivery people were suddenly afraid to trundle around our cities with large amounts of cash on board as they spent all of each Wednesday and Thursday delivering to every employer.

    Suddenly, our fat little pay envelopes stuffed with cash disappeared to be replaced by a cheque or a payslip telling how much money had been automatically deposited into our account. Of course, being the hard workers we were, we normally didn’t find time to make it to the bank the following day, Friday. Conveniently, however, banks only opened 10am till 4pm Monday to Friday. There were no ATM’s, there was no EFTPOS, and a cheque took five days to clear.

    So there was all this cash swilling around in each bank’s coffers that no one could access over the weekend. What a waste, someone had to use it the banks thought; so they did, flipping it all around the world in loans and transfers and a myriad other undisclosed shady transactions.

    Such a convenient little slush fund making so much money for itself was a brilliant way to invest. So they did; with our cash that we couldn’t access. Thus began the first of many inflationary cycles artificially created by the bankers as they strictly adhered to government policies.

    Sure they did, and you can bet your last brass razoo, they weren’t going to let us in on the secret world of banking. Soon we applauded the “greed is good” mantra of the 80’s, unaware of the real evil lurking beneath. Plastic money, imaginary money, stocks and bonds and hedge funds, superannuation funds, mandatory percentages held in inaccessible accounts for decades until we retired.

    Undisclosed investments,commissions and shares and amounts of money written in air, transferred all over the globe, daily, nightly, constantly behind our backs.

    Now WE pay the price with the so so called Recession. No, say it loud and say it clear – Depression. “We was conned, we’re as mad as hell and we won’t take it any more”. If the banks have an image problem it’s because some of us who don’t have Degrees in Economics or Business are older now and we haven’t forgot.

    Reply
  2. “Average Cost of new house $25,250 or 721 oz. gold in 1971, versus $250,000 or 277 oz. gold today.”

    Yet you’d be expected to pay tax on CAPITAL GAINS of $225,000 even though you really took a net loss of 61%.

    And that’s their scam. Americans are Freaking Morons!

    Reply
  3. While many of your points are valid, Goblinono, it’s hardly a depression (yet). Travelling through two NH continents so far, we see signs of _recession_ in many counties, countries, states and provinces… but nothing at all to indicate a depression. Much of the western world seems to be coping pretty well, so far. That may change, of course… .

    Biker Pete, New Brunswick, Canada
    August 6, 2009
    Reply
  4. Bingo Porkulus.
    That is a huge tax scam.
    Just one of the many ways to impoverish citizens through inflation.
    Others on the list are: Income tax bracket creep, reduction in real welfare payments, punish lenders/depositors.

    There are lots of others. Anybody?

    Reply
  5. http://www.youtube.com/watch?v=iRzr1QU6K1o

    Nixon on TV announcing that he’ll be dropping the gold standard

    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au