August 15 – A Red Letter Day

This is August 15. Perhaps you know the historical importance of this very date more than a generation ago.

Well, it marks the beginning of Woodstock, “three days of peace, love, and music,” in 1969. The music festival drew 400,000 people – and many more who would later claim to have been there!

But it is also a red letter day in our country’s economic history. On August 15, 1971 events were set in motion that are driving to an unhappy finish.

It was on this date 46 year ago that President Nixon severed the last remaining link of the U.S. dollar to gold, the preferred money of the ages. Nixon introduced a number of other destructive measures at the same time, including his wage and price control program, a harebrained scheme that played such an important role in ushering in the stagflation – economic stagnation accompanied by double-digit inflation – of the 1970s.

Since the dollar is no longer redeemable in anything and anchored to nothing, there is no discipline on the extent of dollar creation by the politicians and the monetary authorities.

And create money, they have. By the governments own calculations, figures that woefully understate the real loss of the dollar’s purchasing power, it would take $6.00 today to buy what $1.00 would purchase when Nixon closed the gold window.

For the last thirty-five years the monetary authorities have been using the privilege of a currency freed from the restraint of gold to buy down interest rates and transfer wealth from Main Street to Wall Street. But from its beginnings the Fed has been in the business of funding wars that the American people would never have willingly taxed themselves to pay for.

The monetary madness reached a frenzy of ferocity with Ben Bernanke and his madcap “Quantitative Easing.”

Except for the Christian doctrine of the forgiveness of sin, I know of no serious world view in which a monumental malfeasance like the creation of trillions of dollars out of nothing can have been allowed to proceed without eventually producing the most grave consequences.

Off the stage and mostly unobserved is the quickening of monetary events that were set in motion 46 years ago today.


3:16 pm on August 15, 2017