Gold Standard

Finally, in 1971 President Richard Nixon closed the window, which severed the dollar's last link to gold. At that point, the global economic system became completely based on worthless money. Over the next decade, the United States experienced the nastiest outbreak of inflation in our history and gold headed towards $800 per ounce.

— Peter Schiff; How an Economy Grows and Why It Crashes

In 1971, President Richard Nixon changed the rules of money: Without the approval of Congress, he severed the U.S. dollar's relationship with gold. He made this unilateral decision during a quietly held two-day meeting on Minot Island in Maine, without consulting his State Department or the international monetary system.

President Nixon changed the rules because foreign countries being paid in U.S. dollars grew skeptical because the U.S. Treasury was printing more and more money to cover our debts, and they began exchanging their dollars directly for gold in earnest, depleting most of the U.S. gold reserves. The vault was being emptied because the government was importing more than it was exporting and because of the costly Vietnam War. As our economy grew, we were also importing more and more oil.

In everyday terms, America was going bankrupt. We were spending more than we earned. The United States could not pay its bills—as long as our bills were to be paid in gold. By freeing the dollar from gold, and making it illegal to directly exchange dollars for gold, Nixon created a way for the U.S. to print its way out of debt.

In 1971, the world's rules of money were changed and the biggest economic boom in the history of the world began. The boom continued as long as the world accepted our funny money, money backed by nothing but a promise by U.S. taxpayers to pay the bills of the United States.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

So while the classical gold standard of the nineteenth century was not perfect, and allowed for relatively minor booms and busts, it still provided us with by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange, and investment.

— Murray Rothbard; What Has Government Done to Our Money?

If the classical gold standard worked so well, why did it break down? It broke down because governments were entrusted with the task of keeping their monetary promises, of seeing to it that pounds, dollars, francs, etc., were always redeemable in gold as they and their controlled banking system had pledged. It was not gold that failed; it was the folly of trusting government to keep its promises. To wage the catastrophic war of World War I, each government had to inflate its own supply of paper and bank currency. So severe was this inflation that it was impossible for the warring governments to keep their pledges, and so they went “off the gold standard,” i.e., declared their own bankruptcy, shortly after entering the war.

— Murray Rothbard; What Has Government Done to Our Money?

The United States remained on the gold standard for two years, and then, in 1933–34, went off the classical gold standard in a vain attempt to get out of the depression. American citizens could no longer redeem dollars in gold, and were even prohibited from owning any gold, either here or abroad. But the United States remained, after 1934, on a peculiar new form of gold standard, in which the dollar, now redefined to 1/35 of a gold ounce, was redeemable in gold to foreign governments and Central Banks. A lingering tie to gold remained. Furthermore, the monetary chaos in Europe led to gold flowing into the only relatively safe monetary haven, the United States.

— Murray Rothbard; What Has Government Done to Our Money?

On August 15, 1971, at the same time that President Nixon imposed a price-wage freeze in a vain attempt to check bounding inflation, Mr. Nixon also brought the postwar Bretton Woods system to a crashing end. As European Central Banks at last threatened to redeem much of their swollen stock of dollars for gold, President Nixon went totally off gold. For the first time in American history, the dollar was totally fiat, totally without backing in gold. Even the tenuous link with gold maintained since 1933 was now severed. The world was plunged into the fiat system of the thirties—and worse, since now even the dollar was no longer linked to gold. Ahead loomed the dread spectre of currency blocs, competing devaluations, economic warfare, and the breakdown of international trade and investment, with the worldwide depression that would then ensue.

— Murray Rothbard; What Has Government Done to Our Money?

As we face the future, the prognosis for the dollar and for the international monetary system is grim indeed. Until and unless we return to the classical gold standard at a realistic gold price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rates with each system posing unsolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of dollars and hence of American prices which show no sign of abating. The prospect for the future is accelerating and eventually runaway inflation at home, accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as gold, and by removing government totally from the monetary scene.

— Murray Rothbard; What Has Government Done to Our Money?

In 1971, when the dollar was severed from gold, the IMF and the World Bank required the rest of the world to separate from the gold standard, as well, or be excluded from their club. Today's global crisis spread because the world economy is floating on Monopoly money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

1971: President Nixon, without permission from Congress, took the U.S. dollar off the gold standard. When this happened, the U.S. dollar became a derivative of debt - not of gold. After 1971, the U.S. economy could only increase by increasing debt,and that's when the bailouts started. In the 1980s, the bailouts were in the millions; in the 1990s, they were in the billions; and today they are in the trillions and growing. This change in the rules of money, one of the biggest financial events in world history, allowed the United States to print money at will by creating more and more debt, known as U.S. bonds. Never in the history of the world had all the world's money been backed by one nation's debt, an IOU from U.S. taxpayers.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

In 1971, the dollar stopped being money and became a currency. The word currency comes from the word current, like an electrical current or an ocean current. In other words, a currency must keep moving or it loses value. To retain value, a monetary currency must move from one asset to another. After 1971, people who parked their money in a savings bank or in the stock market lost money because their currency stopped moving. Savers became losers and debtors became winners as the U.S. government printed more and more money, increasing debt and inflation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich