As Americans suffer through the fourth year of Bidenflation, some attention must be paid to how the dollar became so vulnerable to overspending politicians like Biden and placating Federal Reserve Chairmen like Jerome Powell. It all began when the dollar’s link to gold was severed. President Richard Nixon made the final decision to eliminate the dollar’s gold convertibility, but the groundwork for the dollar-gold disconnect was laid long before by Lyndon Johnson, who sought to fund both a war in Vietnam and a massive expansion of social welfare with his “Great Society.” In a good history of the gold standard, the website Vaulted explains:
The US enjoyed the advantages that came with being the world’s undisputed military and economic power. Throughout the 1960s, the U.S. dished out dollars to fund the Vietnam War and Lyndon Johnson’s Great Society programs.
As the supply of dollars ballooned, other nations began to doubt the US government’s ability to exchange their dollars for gold at the agreed-upon exchange rate of $35 per ounce. In the mid-1960’s, France began aggressively exchanging their official dollar reserves for gold, quickly draining U.S. gold reserves. On August 15th, 1971, Richard Nixon suspended gold convertibility and struck the final nail into the coffin of the gold standard.
All major currencies transitioned to a floating exchange rate system. Governments could now print money to their hearts’ content.
The expensive war in Vietnam and Johnson’s Great Society programs quickly drained the equity America had saved after WWII, leading to the inevitable loss of faith in the dollar and then to its break with gold.
The break from gold hasn’t been good for American savers. Look at the decline in the value of their dollars since 1971’s break with gold.
At the end of the 1960s the dollar was worth 1/35th of an ounce of gold. Today’s worth only 1/2298th of an ounce of gold. The gold hasn’t changed, the dollar has gotten rusty.
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