Category Archives: President Nixon

Donald & the Dollar

donald-dollar

John Connally, President Nixon’s Secretary of the Treasury, once remarked to the consternation of Europe’s financial elites over America’s inflationary monetary policy, that the dollar “is our currency, but your problem.”  Times have certainly changed and it now appears that the dollar has become an American problem.

In a recent interview with the Wall Street Journal, the soon to be 45th President of the United States believes that the greenback’s strength – up some 25% against a broad basket of currencies since 2014 – is now “too strong,” “killing us,” and has hurt companies trying to compete overseas.* A top Trump economics advisor, Anthony Scaramucci, reinforced his boss’ sentiment adding that “we must be careful of a rising dollar.”

Apparently, making America great again does not include the nation’s monetary standard.  Trump’s belief that the dollar is too strong also shows a distinct lack of historical understanding.  Every great nation and empire (which Trump promises to restore America to) had a sound monetary system.  It is no coincidence that the pound sterling was the world’s “reserve currency” at the time when the British Empire was at its height.  Debasement of it to finance Britain’s insane decision to enter World War I led, in large part, to the eventual loss of its empire.  If Trump truly seeks to restore American greatness at home and its prestige throughout the world, devaluating the currency is not the way to go.

Nor does a weakened dollar benefit the middle class whom the president elect throughout the campaign has pledged to help.  In fact, it has been the fall in the purchasing power of the dollar due to the inflationary policies of the Federal Reserve which have decimated the living standard of the middle class.  And, while the proposed Trumpian middle class tax cuts will help, just as important is a sound monetary system if Middle America is to become a creditor class once again.

Pensioners and retirees, another group that Trump has promised to help, would continue to see their financial condition decline under a policy to weaken the dollar. A fall in the purchasing power of money would devastate the income stream of pensions and social security payments.

While a weaker dollar policy would hurt the middle class, retirees, and savers, it would benefit the most responsible for the continued economic doldrums of America – banksters and the government.  A weaker dollar would allow the government to continue to borrow and maintain its profligate spending.  Financial houses and the banksters would receive credit at nearly zero cost which would allow them to continue to blow bubbles in the asset markets.  Export firms, too, would benefit at least for a while, but would more than likely face retribution from foreign governments and central banks which would retaliate with their own devaluations sparking potential currency wars.

Talk of “currency manipulation,” “weakening the dollar,” “trade deals,” and the like do not address what lies at the heart of not only America, but the Western world’s economic problem – too much debt.  The reason why the West has been able to incur its current gargantuan level of debt is not because of a “weak” or a “strong” dollar, but because the dollar is a fiat currency not backed by any commodity.  A true gold standard, where each currency unit represents either gold or silver, provides monetary discipline which prevents politicians and banksters from incurring ruinous levels of debt.

Since money is the lifeblood of an economy, any hope that one can be turned around without a stable monetary order is, to say the least, delusional.  If president-elect Trump and his policy makers do not realize this, they will be severely disappointed in the years to come.  Sound money allows for the accumulation of savings and capital formation, the essential elements of the market economy and the only basis upon which real economic growth can occur.  More savings and capital are needed to boost production and create employment, not supposedly wiser and more competent international trade negotiators.

Talk of currency devaluation is what is typically heard from banana republics, it should not be advocated by those who have aspirations of making their country great again.

*Tyler Durden, “Dollar Tumbles After Trump Calls Currency ‘Too Strong,’ Slams Border-Adjustment Tax.”  Zero Hedge.  17 January 2017.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

“A Date Which Will Live in Infamy:” President Nixon’s Decision to Abandon the Gold Standard

Nixon-Gold

Franklin Delano Roosevelt called the Japanese “surprise” attack on the U.S. occupied territory of Hawaii and its naval base Pearl Harbor, “A Date Which Will Live in Infamy.”  Similar words should be used for President Nixon’s draconian decision 45 years ago this month that removed America from the last vestiges of the gold standard.

On August 15, 1971 in a televised address to the nation outlining a new economic policy entitled, “The Challenge of Peace,” Nixon instructed the Treasury Department “to take the action necessary to defend the dollar against the speculators.”*

Nixon continued:

I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interests of monetary stability and in the best interests of the United States.**

Of course, any objective student of history knows that this was a lie and that it was not “speculators” which were causing monetary instability, but the U.S.’s own crazed inflationary policy which attempted to fund its imperialistic endeavor in Vietnam while expanding the welfare state at home.  This resulted in the Treasury losing an alarmingly amount of gold reserves to other central banks who rightly sought real value in exchange for depreciated American greenbacks.

In essence, Nixon’s decision ended gold redemption and placed the U.S. and the rest of the world on a purely fiat paper standard for the first time in recorded time.  By doing so, the U.S., in effect, became a deadbeat nation which no longer honored its obligations and was set on the road to its current banana republic status.

Instead of impeachment proceedings and his ultimate resignation for the juvenile break in at the headquarters of the nation’s other ruling crime syndicate, Nixon should have been imprisoned for this deliberate and destructive act which has led, in large measure, to the nation’s crushing and insurmountable debt burden, reoccurring booms and busts, and now economic stagnation.

Nixon’s disastrous decision had precedent.  FDR had his own day of monetary infamy in 1933 when, by Executive Order 6102, he outlawed the private ownership of the precious metal while eliminating  gold redemption by banks for dollars.  Ostensibly, the order was instituted as an emergency measure to combat the Depression, but in reality, it was done to allow the Federal Reserve greater “flexibility” in inflating the money supply.

While Roosevelt and Nixon’s decisions would backfire economically, their actions highlighted the totalitarian direction that the federal government and its executive branch were heading throughout the 20th century.  Moreover, the lack of opposition or protest to blatant executive dictatorial decrees by either the legislative or judicial wings of the federal government demonstrates again the flawed and frankly naive argument put forth by Constitutionalists of every ideological persuasion on how the celebrated “separation of powers” theory checks tyranny.

Nixon’s final abandonment of the gold standard had far greater ramifications than simply bad economics.  Without the discipline of hard money, central banks could, and did, create massive quantities of paper money and credit, which enriched the politically connected financial elites and the governments which they were aligned.  Such power was used, in time, to control, spy on, and regulate the subject populations to a degree never seen before.  The power of the state has swelled mostly through bank credit expansion without worry of gold redemption.

Despite what is taught in social science courses, a true gold standard is a greater protector of individuals’ economic well being and, ultimately, their political liberty than any legislation or “rights” document ever penned.  Hard money limits state power!

While it is painful to quote from an ardent opponent of sound money, the international bankster Baron Rothschild said it best when he described the relationship of money and power: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”

Richard Nixon’s elimination of the last remnant of the gold standard over four decades ago combined with FDR’s earlier decree has fulfilled to the detriment of the American and world economies Baron Rothschild’s adage to a tee.  The return of prosperity and individual liberty will only come about when these two heinous acts are eradicated.

*Richard M. Nixon.  “Address to the Nation Outlining a New Economic Policy: ‘The Challenge of Peace.’”  The American Presidency Project.  15 August 1971. http://www.presidency.ucsb.edu/ws/?pid=3115

**Ibid.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/