Fifty Years of Fiat

Since its founding in 1776, the United States has had a variety of monetary systems including bimetallic systems where the dollar was backed by both gold and silver (1792-1862), a fiat monetary system (1862-1879), a full gold standard (1879-1933), and a partial gold standard (1933-1971). From 1971 to present the United States has been on a fiat monetary standard. https://gold-standard.procon.org/history-of-the-gold-standard/ https://www.uscurrency.gov/history

This ground-breaking speech ("The Challenge of Peace") by US president Richard Nixon was the prelude to the end of the Bretton Woods System from 1944. Before the 'Nixon shock', foreign currencies were comfortably put into a defined relation to the USD. US Congress set $35 to one ounce of gold. By declaring executive order No. 11615, USA unilaterally cancelled this international agreement; the gold standard was nullified and hence the US dollar became a fiat currency ('paper money' or 'debt money').
By the way, this is unlawful. (United States Constitution, Article I, section 10, clause 1)
"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."
Of course, this clause is older than the Greenbacks which became legal tender by law in 1861 (when civil war started) and which were not backed by gold or silver but just the 'credibility' of the U.S. government.

In modern terms, a fiat currency is one that has no real value to back up its status except the word of the national government that tells us it is worth whatever they say... the Federal Reserve had been playing fast and loose with gold requirements ever since its formation in 1913 but, after this move by Nixon, there was no longer any necessity in keeping up a pretense. They’ve been driving down the value of the dollar with uncontrolled printing and simultaneously increasing inflation ever since.

https://americanmonetaryassociation.org/2010/12/09/how-the-us-dollar-cam...

It is often stated that French president Charles de Gaulle (Pres. from 1959-69) forced Nixon to end the gold standard when in 1965, he announced his intent to convert US-dollars owned by his country into gold. The IMF (international money fund) stated that in 1966, foreign countries owned about 14 billion USD meanwhile USA held gold valued about 13.6 billion bucks in total, and only 3.2 billion of them were designated to convert to foreign currencies.
Indeed, the French called the Bretton Woods System "America's exorbitant privilege" and after de Gaulle sent a battle ship over the Atlantic Ocean to pick up some gold, other countries followed...

While the Bretton Woods system was agreed upon in 1944 and the IMF was founded in 1945, the system truly became operational in 1958. At that point, the conversion of currency became tied to the U.S. dollar, with the exchange rate around the world based on the figure of $35 per ounce of gold.

https://onlinebusiness.northeastern.edu/blog/what-is-the-bretton-woods-a...

War plays a big role in both the creation and weaponization of fiat dollars as the world currency standard. We all know that war is bipartisan and so was the creation of the fiat dollar. The US spent its wealth on Vietnam as well as (IMO, much justified) social spending. They no longer had sufficient gold to cover the international obligations.
https://nationalinterest.org/feature/who-really-killed-the-gold-standard...

The post-1965 increase in Federal Reserve Note liability (i.e., dollars) paralleled the rapid increases in both the U.S. federal budget and the U.S. Federal budget deficit associated with President Johnson’s “guns and butter” policies, otherwise known as the “Great Society” and the Vietnam War. LBJ’s focus on “guns and butter”, and his removal of the gold cover, ushered in a new paradigm in how the U.S. economy would be run. Free market capitalism was “out”; government controlled “creditism” was in … and has ruled us, and the rest of the world, ever since.

The country was overextended and tried some other approaches before leaving the Breton Woods agreement.

Paper currency has led to the collapse of almost every economy that has tried to institute a fiat currency to trade for goods and services. It’s not looking very well for the once mighty dollar, either.

http://www.goldtelegraph.com/fiat-currency-fails

https://history.state.gov/milestones/1969-1976/nixon-shock

...the United States did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued. Presidents John F. Kennedy and Lyndon B. Johnson adopted a series of measures to support the dollar and sustain Bretton Woods: foreign investment disincentives; restrictions on foreign lending; efforts to stem the official outflow of dollars; international monetary reform; and cooperation with other countries. Nothing worked. Meanwhile, traders in foreign exchange markets, believing that the dollar’s overvaluation would one day compel the U.S. government to devalue it, proved increasingly inclined to sell dollars. This resulted in periodic runs on the dollar.

It was just such a run on the dollar, along with mounting evidence that the overvalued dollar was undermining the nation’s foreign trading position, which prompted President Richard M. Nixon to act. On August 13, 1971, Nixon convened a meeting of his top economic advisers... After two days of talks, on the evening of August 15, Nixon announced his New Economic Policy in an address to the nation on “The Challenge of Peace.” Asserting that progress in bringing an end to U.S. involvement in the war in Vietnam meant that it was time for Americans to turn their minds to the challenges of a post-Vietnam world, Nixon identified a three-fold task: “We must create more and better jobs; we must stop the rise in the cost of living; we must protect the dollar from the attacks of international money speculators.” To achieve the first two goals, he proposed tax cuts and a 90-day freeze on prices and wages; to achieve the third, Nixon directed the suspension of the dollar’s convertibility into gold. He also ordered that an extra 10 percent tariff be levied on all dutiable imports; like the suspension of the dollar’s gold convertibility, this measure was intended to induce the United States’ major trading partners to adjust the value of their currencies upward and the level of their trade barriers downward so as to allow for more imports from the United States.

Max and Stacy have been warning about fiat currency as long as I've watched them.

The entire 25 min show is good.

Aftermath of the Nixon Shock:
The official end of the Bretton Woods System came in 1973 when countries decided to let their money freely float and the gold price suddenly started to sky rocket. After all, USA managed to keep their currency up and connect it to the most important natural resources like oil. In that sense, the currency is mainly covered by petroleum (and the pressure USA can put onto OPEC countries and others) - the petrodollar was born which so far, could preserve the supremacy of the Unites States. Also prices for oil and gas exploded.
https://news.bitcoin.com/from-gold-to-greenbacks-a-look-at-the-us-dollar...

Like all "temporary" measures government has taken, leaving the gold standard was in fact a permanent change.

Transition from Gold to Petrodollar

After the dollar was withdrawn from the gold standard, Washington made an arrangement with Riyadh to price oil solely in dollars. In return, the Saudis received protection and were granted a free hand in the region. This decision forced the rest of the world to hold a high amount of US dollars in their currency reserves, requiring the purchase of US treasuries. The relationship between the US dollar and oil breathed new life to this currency, placing it at the centre of the global financial and economic system. This privileged role enjoyed by the dollar allowed the United States to finance its economy through the simple process of printing its fiat currency, relying on its credibility and supported by the petrodollar that required other countries to store reserves of US treasuries in their basket of currencies.
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as long as the US continues to maintain its dominance of the global financial and economic system, thanks to the dollar, its supremacy as a world superpower is hardly questioned. To maintain this influence on the currency markets and the special-drawing rights (SDR) basket, the pricing of oil in US dollars is crucial. This explains, at least partially, the impossibility of scaling down the relationship between Washington and Riyadh. Nobody should delude themselves into believing that this is the only reason why Saudi-US relations are important. Washington is swimming in the money showered by Saudi lobbies, and it is doubtful that those on the receiving end of such largesse will want to make the party stop.
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With the unprecedented move in 2012 to remove Iran from the SWIFT international banking system, a dangerous precedent had been set that acted as a warning to the rest of the world. The United States revealed itself as willing to abuse its dominant position by wielding the dollar as a weapon against geopolitical adversaries.

The consequences of that action continue to be felt today. Many within the Western elite have come to recognize this mistake and are regretting it. Russia and China understood that they were next on the chopping block and set about creating alternative payment systems like CIPS that would serve to act as a backup system in case Washington tried to exclude Moscow and Beijing from the SWIFT system.

http://www.renegadetribune.com/the-untold-story-of-the-us-saudi-petrodol...
https://www.investopedia.com/articles/forex/072915/how-petrodollars-affe...

The US has weaponized the use of the petrodollar as a world standard. We have more countries under sanctions than I can name. Literally killing civilians to collapse governments like Venezuela, Iran, and Cuba just to name a few. And we can't forget hot wars used to prop up US dollar dominance.

Attempts by Saddam Hussein (former president of Iraq) to exchange petroleum with 'petroeuro' or 'petroyen' failed like attempts by Muammar Gaddafi (Libya) to install a gold dinar system. In 2011, Russian president Putin declared in public that from now on, Russia and China will exclusively trade their goods in rubel and renminbi (aka yuan, which is its basic unit). Now they are the enemy.

Here's American economist Professor, Jeffrey Sachs exposing how America, its Western allies, the CIA and the defense industry have rigged the system to keep Africa from being prosperous. It is a stunning expose and rebuke to the present world order.

Despite the dominance there is a...

Weaknesses of the U.S. Dollar

The fundamental weakness of the U.S. dollar is that it is only valuable through government fiat. This weakness is shared by every other major national currency in the world and is perceived as normal in the modern age. However, as recently as the 1970s, it was considered a somewhat radical proposition. Without the discipline imposed by a commodity-based currency standard (such as gold), the worry is that governments might print too much money for political purposes or to conduct wars.

In fact, one reason the IMF was formed was to monitor the Federal Reserve and its commitment to Bretton Woods.12 Today, the IMF uses the other reserves as a discipline on Fed activity.10

 If foreign governments or investors decided to switch away from the U.S. dollar en masse, the flood of short positions could significantly hurt anyone with assets denominated in dollars.

If the Federal Reserve creates money and the U.S. government assumes and monetizes debt faster than the U.S. economy grows, the future value of the currency could fall in absolute terms. Fortunately for the United States, virtually every alternative currency is backed by similar economic policies. Even if the dollar faltered in absolute terms, it may still be stronger globally, due to its strength relative to the alternatives.

https://www.investopedia.com/articles/forex-currencies/091416/what-would...

Basically among all the fiat currencies the USD is the cleanest dirty shirt and continues as the world trading standard. However, the IMF is accelerating the creation of Special Drawing Rights (SDR's). I think they are preparing for the dollar to lose its domination.

The Board of Governors of the IMF has approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) on August 2, 2021, to boost global liquidity. [1]

“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis. The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” IMF Managing Director Kristalina Georgieva said.

https://www.imf.org/en/News/Articles/2021/07/30/pr21235-imf-governors-ap...

So since we left a gold standard, how stable has the dollar been? Well, according to CPI figures, the dollar has lost over 80% of its value since the gold window was closed. And gold? It went from $35 an ounce to about $1800 an ounce today.

Daniela Cambone speaks with best-selling author Jim Rickards about the U.S. economy post the gold standard to answer the most important question: are we better off?

So as we discussed last week the Fed is creating currency (generating a profit for the banks which are the Fed), and "loan" those dollars (at essentially zero percent interest) to the central banks (like BlackRock) to purchase toxic debt and bonds which they in turn sell back to the Fed (at a profit). Additionally they are buying their own stock with their "free" money to boost stock value, CEO bonuses, and stockholder dividends.

What we keep seeing is the corporatization not just of the US, but the world...
https://www.youtube.com/watch?v=1n4zkdfKUAE (17 min)

During the 2008 Meltdown when the government bailed out too-big-to-fail giants like Bear Stearns, AIG, Fannie Mae, Freddie Mac - who did they hire to analyze and clean up the mess?
Another giant financial firm by the name of BlackRock, lead by a very well connected billionaire by the name of Larry Fink.
BlackRock was award these key government contracts to help with the meltdown with no competitive bidding while being enveloped in secrecy. Basically, Larry Fink was hired to be the manager of Washington’s bailout of Wall Street, even though BlackRock is one of the biggest shareholders in the same banks that they were helping to bail out.

In 2020, who did the money printer of the US, the Federal Reserve, hire to manage their scheme to buy corporate bonds? (Basically, they were bailing out corporations that had too much debt or needed to borrow money) You guessed it, they went right back to BlackRock.
Again, the same corporations BlackRock was helping to bail out were the very corporations in which they were primary owners.

And yet, despite all his considerable power, the general public has practically never heard of Larry Fink. With BlackRock barely coming into the public eye during the recent claims that they’re buying up single-family homes.
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Today, BlackRock’s clients include the retirement accounts of average everyday people in the form of pension funds, they also have sovereign wealth funds as their clients, other central banks, college endowments, “Fortune 500 companies”, and millions of individual investors. They’re the one of the top shareholders of many of the biggest stocks like Apple, Microsoft, Facebook, and even other major banks like Wells Fargo and Chase
Some call Blackrock "the most influential financial institution in the world,"
The world's largest shadow bank. And perhaps… it is the company that owns the world.

As Max's guest in the earlier clip says, "You can't tapper a Ponzi", and sadly the US economic system is a Ponzi for big corporations and the oligarchs. So is economic collapse inevitable?

We have entered a period the likes of which we have never seen before. The collapse of the dollar and dollar assets is growing increasingly certain by the day. The money-printing of the dollar designed to inflate assets will end up destroying the dollar.

https://kingworldnews.com/get-prepared-we-are-near-the-end-of-fiat-money/

For paper currency, there is always a boom-bust cycle. It often begins with the healing of a country’s economic woes and promises of prosperity for all. To better illustrate how the boom-bust cycle works, one can draw reference to the . In the late nineties, US technology stocks formed a huge bubble mainly because of over leveraging of debt through low interest rates. Start-up technology companies with mediocre or even negative earnings were valued in the millions. After the crash, which coincided with the terrorist attack on New York, interest rates were lowered again to spur economic growth, forming another bubble in housing. When the housing bubble burst, it almost took down the whole world's banking system with credit facilities drying up, thus triggering the global financial crisis in 2008. With interest rates kept near zero, special measures in the form of money printing were needed to boost the economy and create jobs.
...There is strong possibility that the global monetary system may collapse in the near future due to a crisis of confidence in the paper money system. Individuals must realise that the current debt-based model for the monetary system is not sustainable and there will come a breaking point when the government debts become uncontrollable.

https://www.bullionstar.com/article/thehistorybetweengoldandpapercurrencies

Are we about to experience an economic and social collapse? It is sad because we could do better. Rick Wolff explains...(10 min)

It isn't just economic collapse, but ecological collapse that we can see all around us...from heat waves and fires, to floods and hail storms, to species extinction, and more.

Are we headed into dystopia?

Though I don't share it, I like this young man's optimism. I do think he is correct in the notion that we need to create community no matter where we live. We are going to need each other as the degradation accelerates. I'll say again it might be a good idea to get to know your area farmers... just enter your location in these two sites to find local producers.
https://www.localharvest.org/about.jsp
and state by state meat producers
http://www.eatwild.com/products/farmsthatship.html#CA

Which dystopian novel best predicted our current condition? 7 min

Author Walter Kirn picks the dystopian novel that best predicted the world in 2021. And now the question is: how did these 20th century writers know how fucked up we would become?

I'm no economist but it is easy to see the currency system is being manipulated to funnel money upwards to the already extravagantly rich. This is ultimately unsustainable. How will it resolve? I don't know. Perhaps your crystal ball is better than mine and you can offer insights below. Many people are investing in gold and silver. Others are buying bitcoin as a hedge against the dollar. Me? I'm investing in my homestead...

Wealth means different things to different people. Most think money, but...

Real wealth is good health, friends and companions, and happiness amid the insanity of our end of empire times. This is the green I value...

I planted a bag of $1 black-eyed peas as a green manure crop and it worked great and now need cutting and laying down in the bed.

This bed of sweet potatoes is "money in the bank". They are the golden nugget variety.

But what happens when the green...

goes into the red?

You make tomato sauce and save a taste of summer for the winter to come.

Have a lovely fiat anniversary and a great Sunday. As always, I look forward to your comments below...