1) This topic on Gold Standard just came out of nowhere. It would be clearer to the reader if you gave a quick, brief history on what the Gold Standard was. Most people would guess that for every $1 american dollar printed, there was an equivalent mount of goal backing this dollar up kept by the US govt somewhere.
2) Again, the reader is aware that taking the US dollar off the Gold Standard is detrimental to the US economy, from the tone, but why? This is not excatly clear. Why is the US govt able to print money freely now a bad thing? Is it because of inflation whereby oil prices, quoted in US dollars, now will increase because the dollar is worth less, due to the excess of dollars flooding the market? I am sure it can be explained so that it becomes clearer to the reader.
I think a good analogy to explain the gold standard connection and it's abandonment impacting the purchasing power of the dollar is to use the current real estate meltdown. The real estate market started becoming a casino when the fundamental ratios were disconnected from income - whether that be personal income or income on an investment property. The traditional debt to income ratios were ignored and prices became totally disconnected from what the retail buyer could afford and an investor making a reasonable return on investment.
One of the only ways the real estate market is going to come back to a realistic level is to recouple those original ratios to the price of a property.
The financial markets are in crisis for the same reason. The price of stocks were disconnected from the fundamental value and profitability of companies. Option trading and derivatives helped turn the stock market and many middle class families retirement funds into a casino.
Taking the US off the gold standard again removed a fundamental financial check and balance and turned the US dollar into monopoly money. Decoupling investments from rational, measurable metrics contributes to wild speculation and emotional markets instead of those based on real value.
Funny how the US Treasury has stopped reporting how many US dollars are actually in circulation in the last few years. It's as if there's a conspiracy to hide just how much damage has been done. Not only have my 401k and IRAs gone down 40-45% since last year, but since the purchasing power of the US dollar is down to a fraction of what it is was a a decade ago, my net worth is truly peanuts.
I my opinion, taking us off the gold standard has allowed this country to into massive debt and then to believe that we can just print more money to get ourselves out of debt. Debt is the reason why the middle class is dying.
Your explanations about the gold standard are spot on. However you stated on your "About the Project" page that you intend this book for an audience that is worldwide. For this reason, I think you should include a paragraph in another excellent article you wrote on this subject at: http://finance.yahoo.com/expert/article/richricher/124339
"In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States."
If I were from a country outside the United States I would want to know this. So far in this introduction, I feel you are writing to Americans. Your statement 2 paragraphs earlier says that "there are certain events events that effect your life in profound and unseen ways." If you will include the paragraph you left out from your other article I mentioned above, you will drive this point home to your international readers and engage them more directly.
Your explanations about the gold standard are spot on. However you stated on your "About the Project" page that you intend this book for an audience that is worldwide. For this reason, I think you should include a paragraph in another excellent article you wrote on this subject at: http://finance.yahoo.com/expert/article/richricher/124339
"In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States."
If I were from a country outside the United States I would want to know this. So far in this introduction, I feel you are writing to Americans. Your statement 2 paragraphs earlier says that "there are certain events events that effect your life in profound and unseen ways." If you will include the paragraph you left out from your other article I mentioned above, you will drive this point home to your international readers and engage them more directly.
It's clear to me that without gold, or some highly valued commodity backing the dollar, people's trust in what our dollar is worth has to be based on trusting American integrity. We can basically print up as much paper as we want to in order to pay our debts- and whoever we pay has to just believe that we are being honest in our assessment of how much our dollar is worth. It's a little crazy, considering human nature, as well as short-sighted. We eventually end up being bitten by our own unwillingness to bootstrap it temporarily, exchanging short-term discomfort for long-term security, and instead jump at the quick fix. Interesting that this is not a new fad, it's been around at least since Nixon- and we are reaping the consequences of this flawed philosophy and refusal to sacrifice for the greater good. Or even just put our heads together and think outside of the box!
While it is seemingly clear that the abandonment of the gold standard has profoundly impacted the global economy, what you have written so far does not seem to fully explain the results.
Under the gold standard, if money was pegged to physical gold, does it mean that real global economic growth would be limited by the real amount of gold that can be mined?
Is there a need to make a judgement between the gold standard and the current "print as required"? It appears to me that there are pros and cons in both system. For example, it appears to me that, under the latter, the government can provide more money in tandem with population growth. Otherwise, increase in population would result in less money per capita, and relatedly, a lower standard of living, assuming that businesses would be unwillingly to lower the prices of their goods.
Another question that I am curious about is how is money created in other major economies (eurozone, Japan, China, South America, etc), and how do they interact with each other?
Under the current system, is "inflation" a certainty? I would think that "inflation" is a fair certainty if the rate of increase in money supply is greater than the rate of increase in population with 1971 as a base year. And if the world population were to suddenly decrease rapidly, without a corresponding decrease in money supply, then "deflation" would kick in.
A more simplistic question, if money was no longer based on gold, does it mean that they have less reason to go to war to expand their wealth, as they used to do in the ancient past?
Yes it very clear that when you remove the asset of value that is backing a country's "money" that it is not worth the paper it's printed on and 1971 is when the political elite mortgaged America to the highest bidder...currently china and the middle east.
I think that pretty much everyone who is reading this book so far understands what Robert is talking about with the Gold Standard, but I fear that other people who haven't read his other books may not understand. Maybe a brief history on the money system would help, such as how banks started, why we use currency instead of actual gold, and the fact that until this point, currency actually represented gold in storage.
Though people like Steve Forbes, who would put us back on the gold standard, are scorned often, the point can be shave down to the basics: either there is an agreed upon valuable element that man cannot make, such as gold (or silver if you're into pounds sterling), that money is linked with or not. If you have the linkage, there are some sensible controls built in. If not, the world is simply a larger version of junior high school--the money is worth what you can convince the other people in the school (world) it is worth. Those who control money (start thinking China as well as US) have power and can value and devalue EVERYONE'S currency at will. Whatcha gonna do about it? the bullies demand. And the answer is: NOTHING.
All the academics of the "issue" are silly--that's the bottom line. There is a standard that is real OR manipulation. Those are the choices.
The gold standard did have flaws. Any disruption to gold or the access of gold could have an immediate impact on the economy.
One shipwreck in the 1890s sent the market into a panic that's worse than what we're seeing now.
It's not unlike the current dilemma we have with oil.
In truth, our economy is incredibly complicated, which is good and bad, and increasingly technical.
I think we're blaming the gold standard and the lack thereof for not having a financially-educated populace and fiscally-responsible government.
If you had voters who watched the government and were not blinded by their own ideologies, you could have a crap-standard and it would work.
I was never taught in school that the dollar was no longer backed by gold or silver. It was just until 5 years ago - I learned this!
It made me realize that our money is a currency - that must continue MOVING else it will be destroyed by inflation.
Moving into cash flow assets - such as real estate. I realize also that not all real estate cashflows - and that it takes a lot of financial education (Reading Financial Statements - learning the numbers and making mistakes to become great at it.
The gold standard did have flaws. Any disruption to gold or the access of gold could have an immediate impact on the economy.
One shipwreck in the 1890s sent the market into a panic that's worse than what we're seeing now.
It's not unlike the current dilemma we have with oil.
In truth, our economy is incredibly complicated, which is good and bad, and increasingly technical.
I think we're blaming the gold standard and the lack thereof for not having a financially-educated populace and fiscally-responsible government.
If you had voters who watched the government and were not blinded by their own ideologies, you could have a crap-standard and it would work.
We should remember, that it wasn't a full, clear gold standard. Only few banknotes were covered by gold in Fort Knox. Banks were allowed to create some money out of thin air, only FED was made to keep gold prices on given level.
The real 100% gold standard, divided on LOAN banking and DEPOSIT banking ended in the first part of XIX century. When government allowed bankers to use deposits in order to give loans, everything began to collapse. Borrowing something we do not own (it belongs to someone else) is stealing, right? And that's why so called "runs" on banks took place - people had realized, that bankers do not have their money, and they wanted to take it back as soon, as possible. In the result, the last ones were losers (it wasn't enough money to give back).
So, gov said: no worry! We will take care of your money; you will be able to have them back at any time. And created cetral banking system. Now, cental bank (in USA FED - the name isn't adequate) with happiness helps all the banks, when they have no money left.
It's a great deal - banks gain profits from almost nothing (non-existing money) and gov has possibility to take loans forever (in theory of coruse; practise says something different), and when needed, to pay its own bills (gov sells bonds, and FED buys them - it's fully legal!!!).
The significance is overwhelming. I sill wonder how Nixon was able to convince entire world that US dollar is as good as gold. Oil is still priced in dollars. Even US congressman Ron Paul is saying that war in Iraq was because Sadam was threatening to sell oil in euros, Chavez in Venezuela the same and now Iran is selling dollars and buying gold. US benefited tremendously of this system because they were able to buy stuff with paper and export inflation. Asia have huge amounts of US dollars and is kind of suck with them!
US congressman speech on dollar hegemony: http://video.google.com/videoplay?docid=-8327695139643041382&ei=Rr15SamR...
I believe it is very clear what the gold standard is - it simply means that your US Dollar is backed by a certain standard of gold. I believe it was $20 per ounce. Now we're seeing up to $800 or more per ounce.
To get into why and how President Nixon took the USA off of the gold standard, there have to be broader questions answered.
Such as: Is the president of the USA truly the man in charge? If so, how can his actions be explained? If not, then who is?
This would get into so much detail, and such an amazing amount of shocking information, that... well... you'd have to write a book about it! I really do hope that Robert delves deeper into the realm of secrecy behind these actions.
I think you need to clarify the importance of sticking to the gold standard. I understand the concept, but only because I've read about it before - any readers new to the world of finance may be befuddled and may not easily grasp the deep impact it has.
Robert, thank you so much for your initiative to make this book available as you write it. In fast times like these we live in, it is a fast way for you message to get to us.
I think the removal of the gold standard by president Nixon in 1971 was the answer to the problem they had back then: there was no more gold to pay for the American way of life. That was a crysis and they solved it by creating the fiat currency. I think the fiat currency made possible the flourishing time that America has experienced since the 70's but has also taken us to new problems and a new crysis.
I wondered many times why we, humans, get into crysis? And why the solutions we find and use always contain the seeds for the next crysis we are heading into? If you have any possible answers to these questions, I would like you to share them with us. I honestly belive there are no bad guys and good guys. The only explanation I could come up with so far is that this is human nature and this is our pattern of evolution... something I can humbly accept, but I don't think I will ever expalin myself or understand.
I grew up in the UK and was well aware at a young age that a Five Pound Note was worth something, because it said on it. "I promise to pay the bearer on demand the sum of ... (not sure of the exact words now) Anyway, I grew up believing that if I took the note to the Bank of England they would give me Five Pounds (GBP) worth of gold. After all someone made a PROMISE on the bank note and signed it.
Well I have just taken out a $20 note (Australian) and had a read. I quote.. "This Australian Note is Legal Tender Throughout Australia and Its Territories". Signed by the Governor of The Reserve Bank of Australia and the Secretary To The Treasurer.
ha.. Legal Tender! No real value other than "let's keep passing this piece of paper around among us in Australia and Its Territories and hope that no one questions it's real value until after we are dead and gone!
No mention of a promise to redeem the tender for something of value.
I guess that means we have no reserves down under either? Quick pass it on, I will give you this $20 note for 2 x $10 notes. Ahh that feels safe.... But what happens if I'm the one holding the Legal Tender when the music stops?
Robert, thank you for this poignant and timely book. You make it quite clear as to how the gold standard abandonment was the financial shot heard 'round the world and why it still resonates today. As an American, I think the sad truth of it is that these sorts of back-door dealings occurred and keep occurring, like this financial bailout, because the public is not just uneducated but completely brainwashed as a result. I see no discernment happening amongst my fellow students, or teachers, for that matter, in graduate school. As you say in the book, in school we learn about balancing our checkbooks and maybe calculating profit and loss when buying stocks, but we're not taught the basic principle that money ITSELF is a commodity. In other words, we're only taught to think of money as being some dead paper asset existing in an economic vacuum instead of a living thing which can be negatively or positively affected by the conditions it exists in.
In my opinion 2-3 sentences can be spared to explain how the gold standard was abandoned first by the west european nations (... uuuHHH GOVERNMENTS) in order to finance the 2 world wars. That after the world war II, according to the Bretton-Woods agreements, many of the important currencies were exchangable in US dollars, which in turn were exchangable in GOLD. This system didn't allow these countries to print their own currencies at will, because they were obliged to come up with US dollars ... No wonder this was the most prosperous period for Western Europe in the 20th century. After Nixon abandoned the standard he also let the european governments loose. Look at Europe now...
Robert, I clearly understand that the value of a $US is based on a promise of the people to repay the debt. That is really sinking in as I read and study this present crisis. I would find it harder to explain to someone else how the gold standard is different. In that section of the chapter, I suddenly felt lost and started to think you were moving too quickly. I think the way things were can be explained better for people to really "get it".
The concept of the gold standard is simple. For money to have any meaningful use in commerce it must represent value. There have been many forms of money, but historically gold has been the most stable. It is not, nor has it ever been the perfect medium for money, but it is the best we have seen yet. In article I of the Constitution the founding fathers made it unmistakably clear that they wanted a hard currency. Many of their own states had been ravaged by the bubbles created by fiat currency systems. In 1971 we removed any semblance of value from our currency. The only thing you can legally trade a dollar for is another dollar. The effect of having an inherently valueless money is that it throws all relationships between debtors and creditors into chaos. By having the power to print money without limit allows the government and the large banks to siphon off all of the country's prosperity through the insidious mechanism of inflation. Why should the price of goods go up when the technology to manufacture them becomes cheaper and more efficient? Inflation. Why does it now take two incomes to maintain the same quality of life for your family that only required a single income as little as one generation ago? Inflation....the hidden tax. By taking us off the gold standard Nixon created a pure fiat currency. It is only a question of time before the government and the Federal Reserve print enough money to make it's value completely negligible. Unfortunately for the rest of the world, as a result of Bretton Woods all countries have tied their currencies to the dollar. When the dollar fails, so will everyone else.
Dear Robert,
Thank you very much for starting this fantastic project of ebook.
I have been reading your books for few years now, and learned a lot.
Special thanks for "the guide of investing in gold and silver" It is a unique one !
In my reading, I don't think you did a good enough job explaining what the gold standard was. I know what the gold standard is, but for people who might not have any clue, you might want to give them a 1 or 2 paragraph background about Bretton Woods, the convertibility of gold, Fort Knox and bars of gold etc. There wasn't enough emphasis on convertibility of gold to and from dollars; how making it illegal to possess gold except for numismatics.
So that they have a better idea why its abandonment has pushed our "money" into becoming a fiat currency. And like all currencies in the past they inflate until they are no more or collapse. Okay that last part might scare most "normal" people who haven't been studying up on fiat currencies and history; but I believe that is where we are heading.
You did a pretty good job in describing why the abandonment in 1971 had a profound impact on the global economy. One criticism or suggestion that I have is that you jumped from talking about Nixon to talking about the federal reserve and back to Nixon and the gold standard.
I think you should separate these out. Complete your discussion about Nixon and 1971 and then transition to Buckminister Fuller, cash heist and the creation of the federal reserve. And discuss how the federal reserve is not part of the government.
"It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."
If the dollar as a currency is backed on the promise of repaying borrowed tokins with other tokins later, where is the value established for the tokins since gold is no longer the measurement?
these past few years I have been reading quite a few books mentioned in the Rich Dad series so it was easy for me to clearly understand what you are talking about. It's possible that some people might not truly get the whole picture but you do a great job or introducing the concept and keeping it succinct.
I found that Peter Kershaw's book ECONOMIC SOLUTIONS helped me immensely in understanding this point though it was rather deep.
We're replacing cash with credit cards, while not exactly the same as moving off the gold standard, isn't it similar in the sense that it makes it easier than ever to spend money that you don't have.
I always find it humorous that Alan Greenspan - Chairman of Federal Reserve for so many years and in charge of manipulating the money supply - was in Ayn Rand's inner circle in his earlier years, and even wrote an segment in one of her books AGAINST the US going off the Gold Standard! I've always wondered what cause HIM to change his position so drastically. Do you know?
What is the true value of money (USD)? Breaking the link to the precious metal with the US increasingly mounting on unfathomable debts, what catasthrophy will cause the rules to change?
With a breath of hope, the world is still functioning on the USD currency benchmark. However confidence today is lower than ever before. The impact when the world revalues the dollar and comes to a conclusion that it is not even worth the value of a piece of paper it is printed on, when the promises of Americans have no further value. President Nixon had successfully created a toxic currency. Plugging a problem then but creating an incredibly huge snowball of a bigger problem now.
A catasthrophy will cause the rules to change. A new bank will emerge, a new global currency adopted and a severly bankrupted country will crumble and be indebted to all the other nations.
When we are in a particular world, we use the language of that world. When someone else comes into that world it is like a foreign language. I have had many years in the financial arena so financial terminology is familiar to me. Even with my exposure to this terminology, I am unclear about the gold standard issue. The wording of what you are saying isn't connecting. Maybe you could explain it like to a 4th grader?
It's about "Checks" and "Balances". When you have something like Gold as the standard to how much you can print and use for money then obviously that's great, because you CAN'T spend what you DON'T have, and Gold was that standard. Once you start printing more of what you DON'T have that is at it's core COUNTERFEITING and/or STEALING, but what's even worse, now you're putting it in the public's hands to use as actual currency. Now everyone is using money without fully knowing it's counterfeit. You might as well use Monopoly money. You CAN'T continue to print money backed by NOTHING and expect NO BAD THING to happen. This I did not fully realize until 4 months ago. This is very convicting for me as I am now 42 years old. I'm ashamed of myself for not appreciating true history as I NOW do. Our nation's current total debt is 53 Trillion dollars and IT'S GROWING !!! What's even more amazing, almost every country around the world has imitated from our Fractional Reserve Banking System and it's going to be affecting everyone the world over.
I have read many of your books, especially Prophecy. In great detail you go into this subject of Nixon and him taking the US off of the gold standard. It seems interesting that although my father (who is in his late 60's) remembers this, he does not know or even care of its significance in the world today. All he can do now is watch his investments in "well diversified mutual funds" decrease in value, and ask why. I see a lot of fear in him, and I hope and pray that as I educate myself and my family more on the subject of money and how it works, that I can be there to help him when he needs it.
I was warned when Nixon took the US off of the gold standard that money was almost worthless... But due to my age and naivete I really did not understand it. Now I am reading as many books as I can to improve lvel of knowledge.... "The Creature from Jeckyl Island is still available...
Do you know if that book is true???
You have done a great job to simplify the understanding of it and it's effects. My guess is 90% of the people in this country do not know what the gold standard is and what effects it has caused. I can understand that the Government didn't want all of our gold to go to foreign countries but they should have designed a better plan and kept within the checks and balances.
I have been aware of many conspiracy theories for many years. I am the son of a Cuban man who I have heard many times talk about Castro, Kennedy, and the Mafia. Before Kennedy Las Vegas was nothing but a dessert and Cuba was the place of choice for americans to go gamble but everything change.I have not doubt that there was also the sort ot thing when Nixon took the gold standard away. For thousands of years gold and silver were the standard to trade land, animals, and everything else. Now we are in a system that makes no sense. Just like someone else mentioned in the post earlier we have a system based in trust when trust is at its lowest point, at least of my life time.
I am still learning about how the whole gold standard situation came about, but being given a direction towards previously unheard of resources has been a boon. As supporters, I think it is also important that forum members share what each one of us is doing/reading on an individual level. For example, after reading Increasing Your Financial IQ, I have used the internet much more as a resource tool, using local government and international business websites and forums to follow up on the information I read. Our individual economic status directly impacts our neighbors- if i don't shop my grocery store goes broke, but then how will i eat? What we learn and how we share what we learn is the pavement on that two-way street.
The gold standard is a straightforward enough equation wherein the US Dollar was redeemable for a certain amount of gold. Although the absence of the gold standard may have had a direct impact on the impact of the current economic bust, let us remind ourselves that it cannot render us immune to one. The dollar was not a free floating currency in 1929. Greed and excess, however, were common to both busts as functions of human beings.
I do understand what being taken off the Gold Standard and what it meant when Nixon took us off of it, which was in big part to listening to Michael Maloney's new book. I am saddened that the greed of our politicians has put our country into this position. If I know someone is greedy and dishonest I personally would not lend them any money. I believe being taken off the Gold Standard has greatly contributed to our current condition. Bills have been passed to shell out money for wars and other Government project we don't see the results from. For instance the bank ballout of $350,000,000,000 to help the American people but it is being used by the banks to pay down their own debt, buy other businesses, and help them get richer!! This sucks!!
What I would like to know is who pushed Nixon to take us off the Gold Standard? Did he get paid to do it? WHO IS REALLY IN CONTROL OF THE FED?; because it is a private bank, I believe, in control of the money.
The abandonment of the gold standard freed the government from the hinderance of backing the money with gold and the constraints on money creation that goes along with the gold standard. Since gold is no longer required to be a part of the currency, the gov't in conjunction with the federal reserve and other banks can magically create money out of thin air through debt or the printing press. This debases the currency along the way. Therefore, it basically mandates inflation in order for the economy to "expand".
The way I understand it, the "gold standard" meant that our wealth was backed by real, tangible gold. For every $20 bill, there was an ounce of gold at Fort Knox. Taking us off of the gold standard means that our wealth is now backed by trust. Every dollar bill is now backed by a dollar's worth of I.O.U.'s.
Imagine an entire financial system based on trust and being run by people who are not trust worthy. You might find $20 worth of gold costs $850. There is nothing real and tangible backing up our wealth.
Yes, I do understand that it did happen, I just found out today though that he(Nixon) did this unilat. and the reason he did it. But my burning question is if a President and the %#@, I mean the Fed, can do this what in the world can people such as ourselves do. I mean WOW! this is really surreal to know that only a few people can destroy the globe completely from the inside out without anyone even realizing it. Makes war seem not so bad huh? I mean at least you have a better chance of surviving and if you dont, your bound to pass on much quicker, and less painfully. I think I have an idea what your answer will be Robert, but I'm on the edge of my seat to hear what and have to say, again that is, as always. Thanks for all your doing.
I think the US government and FED's goal are to control the world's currency supply. Their first step is to get the dollar as world reserve currency. US and fed wanted to let the world believe that US dollar is powerfull. Then they started spending on vietnam war and preventing inflation. Before the world knew that US printed currency more than what they reserved in gold.(i think that was biggest scam of all). The moment US and FED were on fiat currency. They were very happy. They can print much as they can without other people knew that they were scammed the world. If they FED can control the money supply the can control assets and the government can grew bigger, powerfull. That was conspiracy.
I believe that it is clear that the change from the Gold Standard has made a tremendous impact on our financial systems, and I believe that you have done a good job of trying to explain it in simple terms, particularly since there is nothing simple about it. Certainly I don't imagine that Nixon had a real grasp of the full impact of this decision on our future, nor do I believe that most American's grasp the impact that it has had and will continue to have.
Hi Robert (& Team)
1) This topic on Gold Standard just came out of nowhere. It would be clearer to the reader if you gave a quick, brief history on what the Gold Standard was. Most people would guess that for every $1 american dollar printed, there was an equivalent mount of goal backing this dollar up kept by the US govt somewhere.
2) Again, the reader is aware that taking the US dollar off the Gold Standard is detrimental to the US economy, from the tone, but why? This is not excatly clear. Why is the US govt able to print money freely now a bad thing? Is it because of inflation whereby oil prices, quoted in US dollars, now will increase because the dollar is worth less, due to the excess of dollars flooding the market? I am sure it can be explained so that it becomes clearer to the reader.
I think a good analogy to explain the gold standard connection and it's abandonment impacting the purchasing power of the dollar is to use the current real estate meltdown. The real estate market started becoming a casino when the fundamental ratios were disconnected from income - whether that be personal income or income on an investment property. The traditional debt to income ratios were ignored and prices became totally disconnected from what the retail buyer could afford and an investor making a reasonable return on investment.
One of the only ways the real estate market is going to come back to a realistic level is to recouple those original ratios to the price of a property.
The financial markets are in crisis for the same reason. The price of stocks were disconnected from the fundamental value and profitability of companies. Option trading and derivatives helped turn the stock market and many middle class families retirement funds into a casino.
Taking the US off the gold standard again removed a fundamental financial check and balance and turned the US dollar into monopoly money. Decoupling investments from rational, measurable metrics contributes to wild speculation and emotional markets instead of those based on real value.
Funny how the US Treasury has stopped reporting how many US dollars are actually in circulation in the last few years. It's as if there's a conspiracy to hide just how much damage has been done. Not only have my 401k and IRAs gone down 40-45% since last year, but since the purchasing power of the US dollar is down to a fraction of what it is was a a decade ago, my net worth is truly peanuts.
I my opinion, taking us off the gold standard has allowed this country to into massive debt and then to believe that we can just print more money to get ourselves out of debt. Debt is the reason why the middle class is dying.
I get the gist of it, if not the full ramifications. It's enough to get me intrigued to learn more.
Your explanations about the gold standard are spot on. However you stated on your "About the Project" page that you intend this book for an audience that is worldwide. For this reason, I think you should include a paragraph in another excellent article you wrote on this subject at:
http://finance.yahoo.com/expert/article/richricher/124339
"In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States."
If I were from a country outside the United States I would want to know this. So far in this introduction, I feel you are writing to Americans. Your statement 2 paragraphs earlier says that "there are certain events events that effect your life in profound and unseen ways." If you will include the paragraph you left out from your other article I mentioned above, you will drive this point home to your international readers and engage them more directly.
Very good start and well done!
Your explanations about the gold standard are spot on. However you stated on your "About the Project" page that you intend this book for an audience that is worldwide. For this reason, I think you should include a paragraph in another excellent article you wrote on this subject at:
http://finance.yahoo.com/expert/article/richricher/124339
"In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States."
If I were from a country outside the United States I would want to know this. So far in this introduction, I feel you are writing to Americans. Your statement 2 paragraphs earlier says that "there are certain events events that effect your life in profound and unseen ways." If you will include the paragraph you left out from your other article I mentioned above, you will drive this point home to your international readers and engage them more directly.
Very good start and well done!
It's clear to me that without gold, or some highly valued commodity backing the dollar, people's trust in what our dollar is worth has to be based on trusting American integrity. We can basically print up as much paper as we want to in order to pay our debts- and whoever we pay has to just believe that we are being honest in our assessment of how much our dollar is worth. It's a little crazy, considering human nature, as well as short-sighted. We eventually end up being bitten by our own unwillingness to bootstrap it temporarily, exchanging short-term discomfort for long-term security, and instead jump at the quick fix. Interesting that this is not a new fad, it's been around at least since Nixon- and we are reaping the consequences of this flawed philosophy and refusal to sacrifice for the greater good. Or even just put our heads together and think outside of the box!
While it is seemingly clear that the abandonment of the gold standard has profoundly impacted the global economy, what you have written so far does not seem to fully explain the results.
Under the gold standard, if money was pegged to physical gold, does it mean that real global economic growth would be limited by the real amount of gold that can be mined?
Is there a need to make a judgement between the gold standard and the current "print as required"? It appears to me that there are pros and cons in both system. For example, it appears to me that, under the latter, the government can provide more money in tandem with population growth. Otherwise, increase in population would result in less money per capita, and relatedly, a lower standard of living, assuming that businesses would be unwillingly to lower the prices of their goods.
Another question that I am curious about is how is money created in other major economies (eurozone, Japan, China, South America, etc), and how do they interact with each other?
Under the current system, is "inflation" a certainty? I would think that "inflation" is a fair certainty if the rate of increase in money supply is greater than the rate of increase in population with 1971 as a base year. And if the world population were to suddenly decrease rapidly, without a corresponding decrease in money supply, then "deflation" would kick in.
A more simplistic question, if money was no longer based on gold, does it mean that they have less reason to go to war to expand their wealth, as they used to do in the ancient past?
Yes it very clear that when you remove the asset of value that is backing a country's "money" that it is not worth the paper it's printed on and 1971 is when the political elite mortgaged America to the highest bidder...currently china and the middle east.
I think that pretty much everyone who is reading this book so far understands what Robert is talking about with the Gold Standard, but I fear that other people who haven't read his other books may not understand. Maybe a brief history on the money system would help, such as how banks started, why we use currency instead of actual gold, and the fact that until this point, currency actually represented gold in storage.
Though people like Steve Forbes, who would put us back on the gold standard, are scorned often, the point can be shave down to the basics: either there is an agreed upon valuable element that man cannot make, such as gold (or silver if you're into pounds sterling), that money is linked with or not. If you have the linkage, there are some sensible controls built in. If not, the world is simply a larger version of junior high school--the money is worth what you can convince the other people in the school (world) it is worth. Those who control money (start thinking China as well as US) have power and can value and devalue EVERYONE'S currency at will. Whatcha gonna do about it? the bullies demand. And the answer is: NOTHING.
All the academics of the "issue" are silly--that's the bottom line. There is a standard that is real OR manipulation. Those are the choices.
The gold standard did have flaws. Any disruption to gold or the access of gold could have an immediate impact on the economy.
One shipwreck in the 1890s sent the market into a panic that's worse than what we're seeing now.
It's not unlike the current dilemma we have with oil.
In truth, our economy is incredibly complicated, which is good and bad, and increasingly technical.
I think we're blaming the gold standard and the lack thereof for not having a financially-educated populace and fiscally-responsible government.
If you had voters who watched the government and were not blinded by their own ideologies, you could have a crap-standard and it would work.
I was never taught in school that the dollar was no longer backed by gold or silver. It was just until 5 years ago - I learned this!
It made me realize that our money is a currency - that must continue MOVING else it will be destroyed by inflation.
Moving into cash flow assets - such as real estate. I realize also that not all real estate cashflows - and that it takes a lot of financial education (Reading Financial Statements - learning the numbers and making mistakes to become great at it.
The gold standard did have flaws. Any disruption to gold or the access of gold could have an immediate impact on the economy.
One shipwreck in the 1890s sent the market into a panic that's worse than what we're seeing now.
It's not unlike the current dilemma we have with oil.
In truth, our economy is incredibly complicated, which is good and bad, and increasingly technical.
I think we're blaming the gold standard and the lack thereof for not having a financially-educated populace and fiscally-responsible government.
If you had voters who watched the government and were not blinded by their own ideologies, you could have a crap-standard and it would work.
We should remember, that it wasn't a full, clear gold standard. Only few banknotes were covered by gold in Fort Knox. Banks were allowed to create some money out of thin air, only FED was made to keep gold prices on given level.
The real 100% gold standard, divided on LOAN banking and DEPOSIT banking ended in the first part of XIX century. When government allowed bankers to use deposits in order to give loans, everything began to collapse. Borrowing something we do not own (it belongs to someone else) is stealing, right? And that's why so called "runs" on banks took place - people had realized, that bankers do not have their money, and they wanted to take it back as soon, as possible. In the result, the last ones were losers (it wasn't enough money to give back).
So, gov said: no worry! We will take care of your money; you will be able to have them back at any time. And created cetral banking system. Now, cental bank (in USA FED - the name isn't adequate) with happiness helps all the banks, when they have no money left.
It's a great deal - banks gain profits from almost nothing (non-existing money) and gov has possibility to take loans forever (in theory of coruse; practise says something different), and when needed, to pay its own bills (gov sells bonds, and FED buys them - it's fully legal!!!).
The significance is overwhelming. I sill wonder how Nixon was able to convince entire world that US dollar is as good as gold. Oil is still priced in dollars. Even US congressman Ron Paul is saying that war in Iraq was because Sadam was threatening to sell oil in euros, Chavez in Venezuela the same and now Iran is selling dollars and buying gold. US benefited tremendously of this system because they were able to buy stuff with paper and export inflation. Asia have huge amounts of US dollars and is kind of suck with them!
US congressman speech on dollar hegemony:
http://video.google.com/videoplay?docid=-8327695139643041382&ei=Rr15SamR...
Robert,
Very clear.
Francis Guevara
I believe it is very clear what the gold standard is - it simply means that your US Dollar is backed by a certain standard of gold. I believe it was $20 per ounce. Now we're seeing up to $800 or more per ounce.
To get into why and how President Nixon took the USA off of the gold standard, there have to be broader questions answered.
Such as: Is the president of the USA truly the man in charge? If so, how can his actions be explained? If not, then who is?
This would get into so much detail, and such an amazing amount of shocking information, that... well... you'd have to write a book about it! I really do hope that Robert delves deeper into the realm of secrecy behind these actions.
I think you need to clarify the importance of sticking to the gold standard. I understand the concept, but only because I've read about it before - any readers new to the world of finance may be befuddled and may not easily grasp the deep impact it has.
Robert, thank you so much for your initiative to make this book available as you write it. In fast times like these we live in, it is a fast way for you message to get to us.
I think the removal of the gold standard by president Nixon in 1971 was the answer to the problem they had back then: there was no more gold to pay for the American way of life. That was a crysis and they solved it by creating the fiat currency. I think the fiat currency made possible the flourishing time that America has experienced since the 70's but has also taken us to new problems and a new crysis.
I wondered many times why we, humans, get into crysis? And why the solutions we find and use always contain the seeds for the next crysis we are heading into? If you have any possible answers to these questions, I would like you to share them with us. I honestly belive there are no bad guys and good guys. The only explanation I could come up with so far is that this is human nature and this is our pattern of evolution... something I can humbly accept, but I don't think I will ever expalin myself or understand.
I grew up in the UK and was well aware at a young age that a Five Pound Note was worth something, because it said on it. "I promise to pay the bearer on demand the sum of ... (not sure of the exact words now) Anyway, I grew up believing that if I took the note to the Bank of England they would give me Five Pounds (GBP) worth of gold. After all someone made a PROMISE on the bank note and signed it.
Well I have just taken out a $20 note (Australian) and had a read. I quote.. "This Australian Note is Legal Tender Throughout Australia and Its Territories". Signed by the Governor of The Reserve Bank of Australia and the Secretary To The Treasurer.
ha.. Legal Tender! No real value other than "let's keep passing this piece of paper around among us in Australia and Its Territories and hope that no one questions it's real value until after we are dead and gone!
No mention of a promise to redeem the tender for something of value.
I guess that means we have no reserves down under either? Quick pass it on, I will give you this $20 note for 2 x $10 notes. Ahh that feels safe.... But what happens if I'm the one holding the Legal Tender when the music stops?
:-)
Robert, thank you for this poignant and timely book. You make it quite clear as to how the gold standard abandonment was the financial shot heard 'round the world and why it still resonates today. As an American, I think the sad truth of it is that these sorts of back-door dealings occurred and keep occurring, like this financial bailout, because the public is not just uneducated but completely brainwashed as a result. I see no discernment happening amongst my fellow students, or teachers, for that matter, in graduate school. As you say in the book, in school we learn about balancing our checkbooks and maybe calculating profit and loss when buying stocks, but we're not taught the basic principle that money ITSELF is a commodity. In other words, we're only taught to think of money as being some dead paper asset existing in an economic vacuum instead of a living thing which can be negatively or positively affected by the conditions it exists in.
In my opinion 2-3 sentences can be spared to explain how the gold standard was abandoned first by the west european nations (... uuuHHH GOVERNMENTS) in order to finance the 2 world wars. That after the world war II, according to the Bretton-Woods agreements, many of the important currencies were exchangable in US dollars, which in turn were exchangable in GOLD. This system didn't allow these countries to print their own currencies at will, because they were obliged to come up with US dollars ... No wonder this was the most prosperous period for Western Europe in the 20th century. After Nixon abandoned the standard he also let the european governments loose. Look at Europe now...
Robert, I clearly understand that the value of a $US is based on a promise of the people to repay the debt. That is really sinking in as I read and study this present crisis. I would find it harder to explain to someone else how the gold standard is different. In that section of the chapter, I suddenly felt lost and started to think you were moving too quickly. I think the way things were can be explained better for people to really "get it".
Well, ignorance of the masses that are easy to control these days ...
The concept of the gold standard is simple. For money to have any meaningful use in commerce it must represent value. There have been many forms of money, but historically gold has been the most stable. It is not, nor has it ever been the perfect medium for money, but it is the best we have seen yet. In article I of the Constitution the founding fathers made it unmistakably clear that they wanted a hard currency. Many of their own states had been ravaged by the bubbles created by fiat currency systems. In 1971 we removed any semblance of value from our currency. The only thing you can legally trade a dollar for is another dollar. The effect of having an inherently valueless money is that it throws all relationships between debtors and creditors into chaos. By having the power to print money without limit allows the government and the large banks to siphon off all of the country's prosperity through the insidious mechanism of inflation. Why should the price of goods go up when the technology to manufacture them becomes cheaper and more efficient? Inflation. Why does it now take two incomes to maintain the same quality of life for your family that only required a single income as little as one generation ago? Inflation....the hidden tax. By taking us off the gold standard Nixon created a pure fiat currency. It is only a question of time before the government and the Federal Reserve print enough money to make it's value completely negligible. Unfortunately for the rest of the world, as a result of Bretton Woods all countries have tied their currencies to the dollar. When the dollar fails, so will everyone else.
Dear Robert,
Thank you very much for starting this fantastic project of ebook.
I have been reading your books for few years now, and learned a lot.
Special thanks for "the guide of investing in gold and silver" It is a unique one !
Gil Castel, Israel
In my reading, I don't think you did a good enough job explaining what the gold standard was. I know what the gold standard is, but for people who might not have any clue, you might want to give them a 1 or 2 paragraph background about Bretton Woods, the convertibility of gold, Fort Knox and bars of gold etc. There wasn't enough emphasis on convertibility of gold to and from dollars; how making it illegal to possess gold except for numismatics.
So that they have a better idea why its abandonment has pushed our "money" into becoming a fiat currency. And like all currencies in the past they inflate until they are no more or collapse. Okay that last part might scare most "normal" people who haven't been studying up on fiat currencies and history; but I believe that is where we are heading.
You did a pretty good job in describing why the abandonment in 1971 had a profound impact on the global economy. One criticism or suggestion that I have is that you jumped from talking about Nixon to talking about the federal reserve and back to Nixon and the gold standard.
I think you should separate these out. Complete your discussion about Nixon and 1971 and then transition to Buckminister Fuller, cash heist and the creation of the federal reserve. And discuss how the federal reserve is not part of the government.
http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm
"It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."
I've watched the movie "Zeitgeist" though, and they do a pretty good job explaining it there. So I came into this with some background.
If the dollar as a currency is backed on the promise of repaying borrowed tokins with other tokins later, where is the value established for the tokins since gold is no longer the measurement?
these past few years I have been reading quite a few books mentioned in the Rich Dad series so it was easy for me to clearly understand what you are talking about. It's possible that some people might not truly get the whole picture but you do a great job or introducing the concept and keeping it succinct.
I found that Peter Kershaw's book ECONOMIC SOLUTIONS helped me immensely in understanding this point though it was rather deep.
he who has all the gold makes the rules
We're replacing cash with credit cards, while not exactly the same as moving off the gold standard, isn't it similar in the sense that it makes it easier than ever to spend money that you don't have.
I always find it humorous that Alan Greenspan - Chairman of Federal Reserve for so many years and in charge of manipulating the money supply - was in Ayn Rand's inner circle in his earlier years, and even wrote an segment in one of her books AGAINST the US going off the Gold Standard! I've always wondered what cause HIM to change his position so drastically. Do you know?
What is the true value of money (USD)? Breaking the link to the precious metal with the US increasingly mounting on unfathomable debts, what catasthrophy will cause the rules to change?
With a breath of hope, the world is still functioning on the USD currency benchmark. However confidence today is lower than ever before. The impact when the world revalues the dollar and comes to a conclusion that it is not even worth the value of a piece of paper it is printed on, when the promises of Americans have no further value. President Nixon had successfully created a toxic currency. Plugging a problem then but creating an incredibly huge snowball of a bigger problem now.
A catasthrophy will cause the rules to change. A new bank will emerge, a new global currency adopted and a severly bankrupted country will crumble and be indebted to all the other nations.
When we are in a particular world, we use the language of that world. When someone else comes into that world it is like a foreign language. I have had many years in the financial arena so financial terminology is familiar to me. Even with my exposure to this terminology, I am unclear about the gold standard issue. The wording of what you are saying isn't connecting. Maybe you could explain it like to a 4th grader?
It's about "Checks" and "Balances". When you have something like Gold as the standard to how much you can print and use for money then obviously that's great, because you CAN'T spend what you DON'T have, and Gold was that standard. Once you start printing more of what you DON'T have that is at it's core COUNTERFEITING and/or STEALING, but what's even worse, now you're putting it in the public's hands to use as actual currency. Now everyone is using money without fully knowing it's counterfeit. You might as well use Monopoly money. You CAN'T continue to print money backed by NOTHING and expect NO BAD THING to happen. This I did not fully realize until 4 months ago. This is very convicting for me as I am now 42 years old. I'm ashamed of myself for not appreciating true history as I NOW do. Our nation's current total debt is 53 Trillion dollars and IT'S GROWING !!! What's even more amazing, almost every country around the world has imitated from our Fractional Reserve Banking System and it's going to be affecting everyone the world over.
I have read many of your books, especially Prophecy. In great detail you go into this subject of Nixon and him taking the US off of the gold standard. It seems interesting that although my father (who is in his late 60's) remembers this, he does not know or even care of its significance in the world today. All he can do now is watch his investments in "well diversified mutual funds" decrease in value, and ask why. I see a lot of fear in him, and I hope and pray that as I educate myself and my family more on the subject of money and how it works, that I can be there to help him when he needs it.
I was warned when Nixon took the US off of the gold standard that money was almost worthless... But due to my age and naivete I really did not understand it. Now I am reading as many books as I can to improve lvel of knowledge.... "The Creature from Jeckyl Island is still available...
Do you know if that book is true???
You have done a great job to simplify the understanding of it and it's effects. My guess is 90% of the people in this country do not know what the gold standard is and what effects it has caused. I can understand that the Government didn't want all of our gold to go to foreign countries but they should have designed a better plan and kept within the checks and balances.
I have been aware of many conspiracy theories for many years. I am the son of a Cuban man who I have heard many times talk about Castro, Kennedy, and the Mafia. Before Kennedy Las Vegas was nothing but a dessert and Cuba was the place of choice for americans to go gamble but everything change.I have not doubt that there was also the sort ot thing when Nixon took the gold standard away. For thousands of years gold and silver were the standard to trade land, animals, and everything else. Now we are in a system that makes no sense. Just like someone else mentioned in the post earlier we have a system based in trust when trust is at its lowest point, at least of my life time.
I am still learning about how the whole gold standard situation came about, but being given a direction towards previously unheard of resources has been a boon. As supporters, I think it is also important that forum members share what each one of us is doing/reading on an individual level. For example, after reading Increasing Your Financial IQ, I have used the internet much more as a resource tool, using local government and international business websites and forums to follow up on the information I read. Our individual economic status directly impacts our neighbors- if i don't shop my grocery store goes broke, but then how will i eat? What we learn and how we share what we learn is the pavement on that two-way street.
The gold standard is a straightforward enough equation wherein the US Dollar was redeemable for a certain amount of gold. Although the absence of the gold standard may have had a direct impact on the impact of the current economic bust, let us remind ourselves that it cannot render us immune to one. The dollar was not a free floating currency in 1929. Greed and excess, however, were common to both busts as functions of human beings.
I do understand what being taken off the Gold Standard and what it meant when Nixon took us off of it, which was in big part to listening to Michael Maloney's new book. I am saddened that the greed of our politicians has put our country into this position. If I know someone is greedy and dishonest I personally would not lend them any money. I believe being taken off the Gold Standard has greatly contributed to our current condition. Bills have been passed to shell out money for wars and other Government project we don't see the results from. For instance the bank ballout of $350,000,000,000 to help the American people but it is being used by the banks to pay down their own debt, buy other businesses, and help them get richer!! This sucks!!
What I would like to know is who pushed Nixon to take us off the Gold Standard? Did he get paid to do it? WHO IS REALLY IN CONTROL OF THE FED?; because it is a private bank, I believe, in control of the money.
The abandonment of the gold standard freed the government from the hinderance of backing the money with gold and the constraints on money creation that goes along with the gold standard. Since gold is no longer required to be a part of the currency, the gov't in conjunction with the federal reserve and other banks can magically create money out of thin air through debt or the printing press. This debases the currency along the way. Therefore, it basically mandates inflation in order for the economy to "expand".
The way I understand it, the "gold standard" meant that our wealth was backed by real, tangible gold. For every $20 bill, there was an ounce of gold at Fort Knox. Taking us off of the gold standard means that our wealth is now backed by trust. Every dollar bill is now backed by a dollar's worth of I.O.U.'s.
Imagine an entire financial system based on trust and being run by people who are not trust worthy. You might find $20 worth of gold costs $850. There is nothing real and tangible backing up our wealth.
Yes, I do understand that it did happen, I just found out today though that he(Nixon) did this unilat. and the reason he did it. But my burning question is if a President and the %#@, I mean the Fed, can do this what in the world can people such as ourselves do. I mean WOW! this is really surreal to know that only a few people can destroy the globe completely from the inside out without anyone even realizing it. Makes war seem not so bad huh? I mean at least you have a better chance of surviving and if you dont, your bound to pass on much quicker, and less painfully. I think I have an idea what your answer will be Robert, but I'm on the edge of my seat to hear what and have to say, again that is, as always. Thanks for all your doing.
I think the US government and FED's goal are to control the world's currency supply. Their first step is to get the dollar as world reserve currency. US and fed wanted to let the world believe that US dollar is powerfull. Then they started spending on vietnam war and preventing inflation. Before the world knew that US printed currency more than what they reserved in gold.(i think that was biggest scam of all). The moment US and FED were on fiat currency. They were very happy. They can print much as they can without other people knew that they were scammed the world. If they FED can control the money supply the can control assets and the government can grew bigger, powerfull. That was conspiracy.
Why was Nixon allowed to make such a decision on his own?
I believe that it is clear that the change from the Gold Standard has made a tremendous impact on our financial systems, and I believe that you have done a good job of trying to explain it in simple terms, particularly since there is nothing simple about it. Certainly I don't imagine that Nixon had a real grasp of the full impact of this decision on our future, nor do I believe that most American's grasp the impact that it has had and will continue to have.