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To: patriot_wes

Note... the US hasn't had gold backing its money supply for close to 50 years.


2 posted on 04/14/2006 5:32:38 AM PDT by The Great RJ ("Mir wölle bleiwen wat mir sin" or "We want to remain what we are." ..Luxembourg motto)
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To: The Great RJ; patriot_wes
Note... the US hasn't had gold backing its money supply for close to 50 years.

Of possible relevance:

. . . What did break down was the rules of cooperation for the convertibility of the dollar into gold and the exchange rates regime. After the war, the US dollar became the international reserve currency. The US also went from being in surplus to running trade deficits. States at first wanted US dollars to meet their trade obligations. They were also happy to let the US run deficits since this provided liquidity in the international monetary system. This situation led, however, to a crisis first anticipated by the economist Triffin in 1960 (R. Triffin, Gold and the Dollar Crisis, New Haven CT, 1960). The problem was that if the US attempted to correct its balance of payments deficit it would cause a liquidity crisis. If it allowed its deficit to continue, other states would lose confidence in the dollar as a reserve currency and seek to convert their dollars into gold. US deficits continued to increase, partly because the US had to pay for its war in Vietnam. Confidence in the dollar started to slide. States began to seek, as the gold standard allowed them to, the conversion of their dollars into gold. The US reacted by announcing in August 1971 that it was going to abandon the convertibility of the dollar.

This unilateral action ended the exchange rates regime that had been negotiated by states at Bretton Woods. Other states were more or less forced to float their own currencies. . . .

Bretton Woods: Birth and Breakdown


7 posted on 04/14/2006 5:57:59 AM PDT by Racehorse (Where your treasure is, there will your heart be also.)
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To: The Great RJ

True, not since Nixon.


21 posted on 04/14/2006 7:48:35 AM PDT by edcoil (Reality doesn't say much - doesn't need too)
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To: The Great RJ
"Note... the US hasn't had gold backing its money supply for close to 50 years"

With the Bretton Woods Conference (July 1944 New Hampshire) the US established a "gold exchange standard" for foreign goods and services.

A dollar crisis erupted in 1970-1971 when foreign central banks, who had been flooded with dollars funding U.S. deficits, began to demand payment for their dollars in gold according to the Bretton Woods agreement. The U.S. had printed so many dollars and borrowed so much money from foreign banks that U.S. gold reserves were rendered insufficient (by a ratio of over five to one!), making full payment in gold impossible. The crisis required an immediate solution to save America from default and bankruptcy. The U.S. resorted to immediately severing the link between the dollar and gold, making it abundantly clear to all its creditors that America would never repay any of the billions of dollars it had borrowed with physical gold, so the depreciating paper dollars were then backed by nothing but the ''reputation'' of the U.S. Government.

23 posted on 04/14/2006 9:21:17 AM PDT by patriot_wes
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