When U.S. President Richard M. Nixon announced on Aug.15, 1971 that the United States would no longer adhere to the gold standard – the mechanism that fixed the U.S. dollar's value to that of gold − the move was cheered.
The Dow Jones Industrial Average jumped nearly 4%, and The New York Times gushed, "We unhesitatingly applaud the boldness with which the President has moved."
But now, 40 years later, there is a new gold-standard debate and the decision is being examined anew.
Proponents say the move had to be made, since the gold standard needlessly restricted the U.S. Federal Reserve's ability to manage the money supply, particularly during times of economic distress.
To critics, however, the once-heralded decision has lost much of its former luster. They say that abandoning the gold standard has served only to devalue the dollar, making everything else comparatively more expensive.
Here at Money Morning we've talked about the implications of the gold standard debate, as well as how our readers can capitalize on gold as a safe-haven investment – especially given the "yellow metal's" ever-increasing value versus the dollar.
Since the dollar became a "floating" currency 40 years ago, it has plummeted in value against gold. In 1971, a dollar was worth 1/35 of an ounce of gold; today it is worth about 1/1,750 of an ounce.
A return to the gold standard "would solve the unemployment problem, because expensive capital makes people use more labor," Money Morning Contributing Editor Martin Hutchinson said recently. "And it would indeed enforce fiscal discipline."
The gold-standard debate is a topic that we've studied here at Money Morning – as part of our ongoing analysis of the ever-changing global-investing environment. On this auspicious anniversary, we're making these reports available to you from our archives, free of charge.
For instance:
- To read more about the benefits of a return to the gold standard – and why Washington will probably never do it, click here.
- To read more about the dollar's demise and how to protect yourself from it, click here.
- To read about how the sale of now-unused U.S. gold reserves could help reduce the national debt, click here.
- To read Money Morning metals commodity expert Peter Krauth's prediction on how high the price of gold will go, click here.
News and Related Story Links:
- Bloomberg BusinessWeek:
The Nixon Shock - Wikipedia:
Nixon Shock - MarketWatch:
Gold-standard debate back, 40 years after Nixon. - WhiteHouse.gov:
Richard M. Nixon. - Money Morning News:
How You Can Get a Private Briefing From Our Global-Investing Gurus - Private Briefing:
Official Website.
As I have watched the economic crisis unfold (and unfold some more) I cast about for something to do with my money. People kept saying "gold." But I stayed skeptical for a long time.
Like most people in our generation, I am an avid reader of the news and GOLD as a hedge kept popping up as a topic in relation to the uncertainty in Washington, Wall Street, Europe.
But the only kind of "hedge" I knew was the kind that went around the yard.
So, I asked an older friend of mine (near 80 at the time and a Wall Street maven his whole life – old school). When he said "gold may be the only answer right now," it finally persuaded me to dabble. But I was really just a dabbler. Nothing more. That, however, changed.
I won't give you a rags-to-riches routine, because a) I wasn't wearing rags and b) the returns have been delightful, but I haven't won the lottery or anything like that.
What I learned is that the trick is staying on the right side of the gold behemoth. Long or short.
There is so much money to be made whether gold is on the uptick or down-tick. Just have to know when to get in and get out. The "how" is, as always, the sticking point.
For what seemed like the longest while, I was in the gold markets but not really OF them. I didn't get the whole dynamic.
Like everyone else, I was skeptical of ANY forecaster: how can anyone figure this out?
But Gary Wagner of the Gold Forecast is shockingly accurate. It is truly uncanny. So, I am recommending him and his small, stellar company.
Be sure to try the free subscription. It actually is free and they don’t bug you. Nothing to lose, I’m just saying, Gary Wagner of the Gold Forecast is shockingly accurate. It is truly uncanny.