August 15, 1971 – August 15, 2023: it’s been 52 years since Richard Nixon ended dollar-gold convertibility. By this decision, the American president turned his back on the gold standard system, a century and a half old. And at the same time the bretton woods chords were shattered. Now, by the same decision, he thought address several ills affecting the United States: gold flight, inflation, etc. From there, the greenback reigned supreme globally. Except that its hegemony is increasingly contested 52 years later.
We have not forgotten the “Nixon shock”
At a time when countries like China, Russia and many others who will soon join the BRICS swear by dedollarizationa brief overview of the Nixon Shock is needed.
In this tweet, finance specialist Logan Ankenbrandt summarizes the situation Americans experienced during the Nixon era.
He notably mentioned the latter’s sudden television appearance where he declared that:
” …the United States was going temporarily suspend the conversion of dollars into goldthus devaluing the dollar “.
At the same time, Nixon also took steps to stop the hemorrhages associated with the astronomical expenses associated with the Vietnam War, tostem the galloping inflation of the time and also to restore the image of the “greenback”.
At the same time there had beenother crucial decisions taken by President Nixon: wage and price freezes for 90 days, tax cuts, surcharge on imported products, etc.
Consequences: the dollar has recovered. The United States has also been able to maintain a certain degree of financial transcendence on a planetary scale. This despite the rise of other powers like Japan and Europe…
At the same time, the country of Uncle Sam arrogated special drawing rights to correct any problems of excessive parity and disproportionality at the root of the country’s economic concerns.
Except that the end of the Bretton Woods agreements put the United States back on track. ” Inflation fell, as did unemployment “, continues Ankenbrandt.
Among the allies, this decision by Richard Nixon worries.
” The news stunned the whole world and caused global stock markets to tumble. Trading partners saw it as a violation of the Bretton Woods agreements that had stabilized currency and trade after the war. Major holders of foreign dollars are worried about the value of their holdings. Voices Rise Demanding Nixon’s Resignation “says Logan Ankenbrandt again
52 years later, what about the health of the dollar?
” 52 years ago today, President Nixon suspended the convertibility of the US dollar into gold. »
Logan Ankenbrandt concluded his tweet with this sentence:
” The Nixon shock revealed the power and independence of American fiscal policy. THE unilateral decisions worried the allies, but brought short term relief, at the cost of questioning the international monetary system. This event demonstrated theglobal economic interdependence. »
And he is right to mention this ” short term relief because the current US administration, led by Joe Biden, continues to move heaven and earth in its fight against inflation. Admittedly, there was slowing inflation in the countrywith a rate of more than 3% (source: The gallery), but the battle is likely to continue.
Besides, the frequent and unlimited recourse by the FED to printing money prove that the United States is struggling to manage its debts. The repetitive increases in US interest rates, which made the dollar powerful in the 1980s, will no longer be able to produce the expected effects. Lhe american system seems really sick.
The purchasing power of Americans has suffered, to the point of pushing the economist Peter Schiff to dictate an abandonment of the dollar. In those eyes, the government lied about the inflation figures. Also, he pointed out that the White House is downplaying the coming recession, and that ” going to be serious “.
THE successive bank collapses like Silicon Valley, Silvergate, PacWest… say a lot about these new ills affecting the American economy.
As a solution, this economist suggests turning to other alternatives such as gold.
Some analysts like Paul Rayan have already warned about thehuge US debt, as well as their impact on the world. Others, wiser, like Arthur Hayes and Robert Kiyosaki offer bitcoin as a solution.
Moreover, other cryptocurrencies complement this flagship asset created by Satoshi Nakamoto. Is it for this reason that Donald Trump and Robert F. Kennedy do not hesitate to buy them and seduce voters with them? Certainly, post-Joe Biden will see a rush into crypto-assets.
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