Everyone knows that 1971 was the year that President Nixon “closed the gold window”.
Up until this point any nation inn the world could swap their dollar holdings for real gold. This was important because it means a paper currency that had no intrinsic value could be swapped for a precious metal. It meant that a currency that could be printed by the central bank was actually backed by something of recognisable value.
What is gold really worth?
As gold poured out of America Nixon took the step of closing the gold window and essentially said to the rest of the world “The dollar is no longer backed by anything other than our promise not to print it of existence. Trust us”.
And ever since the Americans have been able to print the dollar out of existence for one reason and one reason alone; there really was no alternative. Trillions of dollars have been printed out of thin air enabling the American people to have a quality of life that other nations could only dream of. Why were other countries forced to buy dollars when they didn’t want them? Simple. Thanks to a very cosy agreement with Saudi Arabia, oil is priced in dollars. If you want oil – and everyone wants oil – you will have to buy dollars.
Gold, to many, became of little or even no importance. Fiat currencies, paper money of zero intrinsic value, and backed by nothing at all was the weapon of choice for central banks who roamed the earth creating wealth for their cosy banking cartels. Fiat currencies faced no opposition whatsoever.
Gold, like silver, became a barbaric relic. It’s place in the digital world was lost to a generation who could not understand why it was a store of value for thousands of years.
The Dollar; 1971 to 2015 RIP
In the history of money, 54 years is but a blink of an eye and the year 2015 may be remembered as the turning point for the dollar, the latest in a long line of doomed reserve currencies. Since 2008 the US has increased the money base by 400%. This is unprecendented in the history of fiat currencies. The consequences of such ruthless forays into unchartered waters will soon be known by all. i expect a bloodbath.
Many of the barricades that have protected the dollars unique position are now being challenged. many of these I have discussed in previous blogs but this this week we hear about the latest nail in the coffin for dollar supremacy.
China has established a new Asian bank, the Asian Infrastructure Investment Bank – or AIIB. Expect to hear more about this in the coming weeks and months. The purpose of the bank is to fund infrastructure projects in the Asian region one cannot be surprised at the number of non-Asian countries that have rushed to get involved including many European countries as well as Brazil.
Naturally the dollar will not be the currency of choice for this new banking super-power.
In isolation this latest development would not be a major threat to the power of the almighty dollar. But it is not in isolation. the world is turning against the dollar and the monstrous advantage it gives to the USA.
2015 may well be the year that historians name as the turning point for the latest in a long line of failed fiat reserve currencies.
It is for this reason we hold physical gold and silver to protect us from the lunatics in the central banks who run the printing presses day and night and have been allowed to run amok for 54 years. maybe it still has few years left to run but for those looking to protect their wealth in the future, they will probably need even more time if they are to get their share of gold and silver before the run on the dollar begins in earnest. By the time you read about it in the newspaper the gold window will have closed once again.