Dear PGM Capital blog readers,
Today August 15th 2011, is the 40th anniversary of President Nixon’s ending the Gold Standard and the end of the Bretton Woods international monetary system and the creation of modern FIAT currency.
Nixon based his decision on the fact that too much gold was leaving the USA because France’s president Charles de Gaulle was reducing France’s dollar reserves, trading them for gold.
On August 15th 1971, the price of Gold was approx. USD 35.00 an ounce and today, August 15th 2011, 40 years later Gold closed at USD 1,766 an ounce as can be seen from below chart.
When today exactly 40 years later, we watch ex president Nixon’s speech of August 15th 1971, what can we conclude?
- Did Nixon really protected and stabilized the USD by decoupling it from Gold?
- Were the so-called “International Money Speculators” wrong for selling the USD and converting their USD into Gold?
- Did the speech of Nixon marked a new beginning for the USD?
Secondly, do you think that the current financial and debt crisis will lead us to a return to the Gold Standard?
- If Yes, what do you think the price of Gold will be when it happens?
- If No, where do you think the price of Gold measured in USD, will be on August 15th 2016?
I hope to have informed you satisfactorily and am looking forward to being at your service as usual.
Yours sincerely,
Eric Panneflek
Chairman
Chairman
Listening to Nixon I realize that his solution has caused the American dollar to become the pitiful thing it now is. And when he promises that this will save jobs, guarantee America’s position in the world and more of the same blah-blah, it saddens me to see what has become of a once great nation, the model for the free world to emulate. But now this position has been undermined and America has reverted to cheap monetary tricks to reduce his debts by devaluating the US$, and thus causing world wide panic in countries pegged to the US$. In one stroke the US has not only lost its monetary credibility, but also its position as a trustworthy global economy leader.
I forgot to answer the two questions as to the return to the ‘gold standard’ and what the price will then be and what if not and what it will then be in terms of US dollars?
I don’t think we will return to the gold standard, but rather to a combination of the dominant currencies: yuan, Can $, Aus $ and gold. The value of these currencies may be pegged to a universal gold standard, but not the way it used to be.
In both scenarios the US$ vs the gold cum other currencies as well as to the US$ vs gold, will assume stratospheric proportions. Translated into present day denomination gold will go through the $5000 range, thus reducing the dollar to a non-player. All this, of course, if America does not wake up and start doing something about the current situation. Whatever positive action they take, it will cause a lot of pain, poverty, political fall-out, probably the emergence of a new party, horrendous crime and an enormous brain drain.
If America reasserts itself and if they come to their senses they will make a turnaround, they will show that resilience that was once their trademark and they have enough potential to make it happen. But then we’ll be 10 to 15 years later and the world will be a different place.