Posted on 12/06/2011 1:47:54 PM PST by appeal2
The United States has run up a cumulative $7.5 trillion Trade Deficit. The last time the country ran a trade surplus was in 1976. Nixon closed the Gold Window in 1971. Do you believe it's just a coincidence that the rise of an un-backed Fiat Dollar and the rise of the Trade Deficit haapened so close in time? The Country has been in a pronounced economic decline since the 1970's and when the Gold Window was closed. Since then the money supply has increased many times as has inflation.
While living standards have declined, so has domestic energy production. This has exacerbated the Trade Deficit and has cost consumers countless billions. The ability to print up currency and dump it on a willing world, in exchange for their production, has enabled the Government to present the illusion that things are alright. But look at the dying industrial cities in America. Detroit, once a paragon of industrial success, has fallen upon hard times. The average Detroit home is going for $6,000, only 25 percent of students graduate from high school and unemployment among men has reached nearly half of the work force.
Such trade imbalances were much less likely to occur under a Gold Standard. Countries were not likely to allow complete depletion of their gold reserves. Fiat currencies can keep being produced regardless how bad the imbalance becomes. Then it is up to the trading partners to decide whether or not to accept the currency. At some point enough will be enough and it will be game over.
(def. #2)
BUMP
There may be an good argument in favor of the writer’s point, but he has no clue how to make it.
Go read some history. We have had a fiat back currency since FDR.
FDR closed the gold window to US citizens. Non-citizens outside the US could still redeem paper for specie until 1971 when Nixon closed it to all.
Even US citizens could redeem their paper money for silver until the mid ‘60s.
However, the market price was $1.00 to $1.25/oz back then before inflation took off in the late ‘60s, and it would have been cheaper to just buy silver bars at market prices than to stockpile 90% silver coins even at $1.25/oz.
If one can redeem paper money for something of value, however, it’s not pure fiat.
Silver redemption was finally repudiated in 1968 even for paper money that explicitly stated that it was redeemable for silver. Since a government can negate a contract at will, all government money is fiat money regardless of its redemption promises.
The history of government money is a history of broken promises.
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