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Putting the World on a Paper Standard

Half a century ago one of the most disastrous monetary policy decisions in US history was committed by Richard Nixon. In a television address, the president declared that the nation would no longer redeem internationally dollars for gold. Since the dollar was the world’s reserve currency, Nixon’s closing of the “Gold Window” put the world on an irredeemable paper monetary standard.

Richard Nixon during his televised speech on the “temporary” closing of the gold window (effectively a debt default). [PT]

The ramifications of the act reverberate to this very day. America’s current financial mess, budget deficits, the reoccurring booms and busts, the decline of living standards (particularly the middle class), all have their genesis with Nixon’s infamous decision in August, 1971.

Culmination of a Long-Term Plan

Abandoning the last vestiges of the gold standard was the culmination of a long-term plan of the banksters, politicians, financial elites, and deceitful economists. The first step was the establishment of the Federal Reserve in 1913 whose primary purpose was to allow its member banks to inflate the money supply without fearing the consequences – bank failures/panics, bank runs, recessions/depressions. The Fed could, and still does, through the control of the money supply enrich itself, the government, and its aligned financial elites at the expense of the public at large.

Woodrow Wilson signs the Federal Reserve Act in late 1913 – conveniently just half a year before WW1 breaks out.. [PT]

The next step on the road to monetary debasement was Franklin Roosevelt’s draconian measure of outlawing the private ownership of gold. This was not only an unprecedented and outrageous attack on private property, but it also eliminated gold redemption of dollars domestically, which gave the Fed unlimited power to print money without fear of its notes being redeemed.

FDR’s decree outlawing private gold ownership in the US. [PT]

…click on the above link to read the rest of the article…

A Look Back at Nixon’s Infamous Monetary Decision

August 12, 2021

A Look Back at Nixon’s Infamous Monetary Decision

A half century ago one of the most disastrous monetary decisions in U.S. history was committed by Richard Nixon. In a television address, the president declared that the nation would no longer redeem internationally dollars for gold. Since the dollar was the world’s reserve currency, Nixon’s closing of the “Gold Window” put the world on an irredeemable paper monetary standard.

The ramifications of the act continue to this very day. America’s current financial mess, budget deficits, the reoccurring booms and busts, the decline of living standards (particularly the middle class), all have their genesis with Nixon’s infamous decision in August, 1971.

Abandoning the last vestiges of the gold standard was the culmination of a long-term goal of the banksters, politicians, financial elites, and deceitful economists. The first step was the establishment of the Federal Reserve in 1913 whose primary purpose was to allow its member banks to inflate the money supply without fearing the consequences – bank failures/panics, bank runs, recessions/depressions. The Fed could, and still does, through the control of the money supply enrich itself, the government, and its aligned financial elites at the expense of the public at large.

The specious justification for the law, enacted shortly after the start of FDR’s first tyrannical term in office, was to fight the Great Depression. Of course, the measure did nothing to mitigate the Depression which, in fact, was not caused by Americans’ ownership of gold, but rather the Fed itself and its wild inflationary policies throughout the “Roaring 20s.”

…click on the above link to read the rest of the article…

Nothing to Fear But Fear Itself

March 16, 2020

NOTHING TO FEAR BUT FEAR ITSELF

Customers waited in line at a Costco in Burbank last week to buy water and other supplies for fear that COVID-19 would spread and force people to stay indoors.

“So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory. And I am convinced that you will again give that support to leadership in these critical days.”- Franklin D. Roosevelt – March 4, 1933

Franklin D. Roosevelt spoke these words during his first inauguration at the depths of the Great Depression in 1933. The narrative taught in government schools is how FDR’s words invigorated the nation and inspired the people to show courage in the face of adversity. His terminology was that of a general leading his troops into battle.

What is not taught in government schools or proclaimed by the propaganda spewing fake news media were the dictatorial type actions taken by FDR over the next month after his “inspirational” speech. He was the first Democrat president to not let a crisis go to waste. The day after his inauguration, Roosevelt assembled a special session of Congress to declare a four-day bank holiday, and on March 9 signed the Emergency Banking Act.

What the American people should have feared was the government taking control of every aspect of their lives and threatening them with imprisonment if their dictums were not followed. On March 6, taking advantage of a wartime statute that had not been repealed, he issued Presidential Proclamation 2039 that forbade the hoarding ‘of gold or silver coin or bullion or currency’, under penalty of $10,000 and/or up to five to ten years imprisonment.”

…click on the above link to read the rest of the article…

“We Have Never Seen This Before”: The Last Time The Market Did This, FDR Confiscated All The Gold

March 6, 2020

“We Have Never Seen This Before”: The Last Time The Market Did This, FDR Confiscated All The Gold

To say that moves in the US stock market have been erratic in the past two weeks would be a prodigious understatement: with the Dow Jones swinging by over 1,000 points on nearly 5 occasions in the past two weeks (today’s 970 point move would have been the fifth)…

… traders – holding on for dear life in a market rollercoaster the likes of which have not been seen in years – have given up trying to make sense, and are just praying they don’t lose all their money. “When you have a 4.5% up day in the market and a 2% down day – what does that mean?” Kathryn Kaminski of AlphaSimplex Group told Bloomberg. “It just means we don’t know what’s going on.”

And while futures continue to slide amid a surge in US coronavirus cases late on Thursday with over 2,000 New Yorkers now having self-quarantined, and emboldening what little is left of the bears – recall that heading into this week, single stock/ETF short interest was at all time lows…

… the bulls, who are rapidly losing faith that even the Fed can prop up this market, are pointing to the recent dramatic rebounds in the stocks most recently on Wednesday when the S&P500 surged back above 3,124 (it is now trading well below 2,990), yet which nobody can fully explain because even though there are several catalysts for the rebound that one could point to, historically speaking none of them are entirely satisfying as explanations, and as Nomura’s Masanari Takada writes in his daily Nomura quant note, “we suspect that more than a few investors (whether bearish or bullish) are feeling paralyzed in the face of such unusual swings in the market.”

…click on the above link to read the rest of the article…

The Forgotten Media Purges of the Great Depression

October 28, 2019

The Forgotten Media Purges of the Great Depression

Republican Hoover built the federal broadcasting shield in 1927. Roosevelt fashioned it into a weapon in 1934 and Democrats have never put it down since. One might consider the elaborate FCC speech barriers: A Poll Tax on Public Debate

One of the more enduring myths accepted as reality in our modern society is that America has a relatively free press. The ruling authorities and their entrenched accomplices promote that lie as diligently as they work to ensure that it never again becomes true.

America did have a mostly free and independent press until the rise of broadcasting in the 1920s. Within a few years, a small group of Republicans, progressives and corporate interests successfully nationalized the airwaves with restrictive licensing that blocked competition, rewarded insiders and squelched dissent.

Over the next few decades, the increasingly powerful medium of radio and then television drowned out the previously broad spectrum of information and ideas—with often three or more diverse choices of daily newspapers in many U.S. cities—and turned free speech into carefully rationed federal broadcasting privileges, their anointed urban newspaper monopolies and a few approved magazines.

One of the more ironic parts of this forgotten history is that a Republican, Herbert Hoover, led the initial charge to politicize the press. When the more authoritarian FDR took the reins in 1933—holding onto power until his death in 1945—he would ultimately purge the airwaves as well as the newspaper and magazine stands of the nation’s greatest commentators, publishers, editors and writers. In their absence, only pro-war / pro-welfare state neo-liberals and neo-conservatives would survive in mainstream media for generations to come.

…click on the above link to read the rest of the article…

Trump, FDR, and War

September 29, 2019

Trump, FDR, and War

President Trump’s campaign of “maximum pressure” against Iran reminds me of President Franklin Roosevelt’s similar campaign against Japan prior to the Japanese attack on Pearl Harbor.

After England declared war on Germany, owing to the latter’s invasion of Poland, the American people were overwhelmingly opposed to entry into the war. That was because they recognized that U.S. interventionism into World War I, which cost the lives and limbs of tens of thousands of American soldiers and severely infringed on the liberty of the American people, had accomplished nothing.

Americans had no interest in doing it again. Their mindsets were similar to those of our American ancestors, whose founding foreign policy was to avoid involvement in Europe’s forever wars.

In his 1940 campaign for president, Roosevelt told the American people that he was with them in their opposition to foreign wars. He said to them, “I’ve said this before, but I shall say it again and again and again: Your boys are not going to be sent into any foreign wars.”

The problem is that FDR was lying. In fact, his secret aim was to circumvent the will of the American people and somehow maneuver the United States into the war.

During that time, U.S. presidents were still complying with the provision in the Constitution that prohibits the president from waging war without first securing a declaration of war from Congress. FDR knew, however, that securing such a declaration was impossible, given the overwhelming sentiment against getting involved in another European war.

So, FDR, who is widely recognized as one of the craftiest politicians in U.S. history, began figuring out a way by which he could embroil the nation in the war despite the fierce opposition of the American people.

…click on the above link to read the rest of the article…

Fourth Turning Economics

August 5, 2019

Fourth Turning Economics

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

The quote above captures the current Fourth Turning perfectly, even though it was written more than a decade before the 2008 financial tsunami struck. With global debt now exceeding $250 trillion, up 60% since the Crisis began, and $13 trillion of sovereign debt with negative yields, it is clear to all rational thinking individuals the next financial crisis will make 2008 look like a walk in the park. We are approaching the eleventh anniversary of this crisis period, with possibly a decade to go before a resolution.

As I was thinking about what confluence of economic factors might ignite the next bloody phase of this Fourth Turning, I realized economic factors have been the underlying cause of all four Crisis periods in American history.

Debt levels in eurozone, G7, US and Germany

The specific details of each crisis change, but economic catalysts have initiated all previous Fourth Turnings and led ultimately to bloody conflict. There is nothing in the current dynamic of this Fourth Turning which argues against a similar outcome. The immense debt, stock and real estate bubbles, created by feckless central bankers, corrupt politicians, and spineless government apparatchiks, have set the stage for the greatest financial calamity in world history.

…click on the above link to read the rest of the article…

The First New Deal Ruined Energy Innovation

February 18, 2019

The First New Deal Ruined Energy Innovation

About the only disappointing aspect of Burton Folsom’s New Deal or Raw Deal is that it doesn’t go far enough in its critique of FDR’s rural electrification program.

The Roosevelt Institute claims, in all seriousness, that “while 90% of urban dwellers had electricity by the 1930s, only 10% of rural dwellers did and roughly 9 out of 10 farms had none,” as if electrons magically stopped flowing in the presence of barnyard animals and corn cribs.

But farmers used electricity before Roosevelt took office; they just produced or procured it themselves instead of taking it off a federally subsidized grid.

Strangely, pundits on the left continue to laud FDR’s Rural Electrification Administration even though it increased demand for electricity created largely by “dirty” sources, especially coal, while squelching demand for electricity generated by local, often green, means.

To this day, South Dakota’s prairie remains dotted with the skeletons of farm windmills abandoned long ago thanks to the Rural Electrification Administration.

This is not to say that all electricity from the grid was dirty, as some of it came from hydroelectric plants, like those along the Missouri and Niagara rivers, nor that all locally generated electricity came from green sources, as some of it came from fossil fuel–powered generators and flatulent mules. But the point here isn’t to count kilowatts; it is to point out what the New Deal cost us in terms of green-energy innovation.

Although, since the New Deal, farms in the United States decreased in relative terms and absolute numbers, they still number in the millions. And although farmers are notoriously “cash poor,” only a small number are “dirt poor.”

…click on the above link to read the rest of the article…

How Executive Order 6102 Doomed America

September 28, 2018

How Executive Order 6102 Doomed America

BUENOS AIRES – Today, we woke up in Buenos Aires with a disagreeable headache… and a depressing hypothesis:

First, it doesn’t matter whether Brett Kavanaugh is on the Supreme Court or not; one more Deep State toad won’t make any difference.

Second, the Supreme Court has been derelict in its duty for the last 80 years.

For years, the Court has looked the other way as the feds robbed one class of citizen (ordinary, working people) and rewarded another (the elite).

Third, as a result, the American empire faces a catastrophic money crisis… probably accompanied by internal schisms, social breakdowns, and dangerous political scuffles.

Let’s begin by looking again at the connection between time and money.

Losing Time

If you work by the hour, the guy with money can buy your time. That’s what it really means to say someone is “rich” – he has more time because he can control not only his own, but yours, too.

The guy who had $1,000 worth of stocks in 1971 could buy approximately 250 of the average working man’s hours. Today, that $1,000 worth of stocks is worth about $28,000… which, at today’s $26-per-hour average, will buy 1,077 hours of the typical working man’s time – four times as much as in 1971.

In other words, compared to the wage earner, the capitalist is four times as rich.

Invert it, and you see about the same thing. A working man would have had to labor for 212 hours to buy the 30 Dow stocks in 1971. Today, his time is much less valuable; he has to sweat for 1,000 hours to buy the Dow.

That’s why the liberals whine about “inequality”… and probably why Donald J. Trump was elected. Few people may have done the math, but a lot of people suspected a rat.

And they were right.

Many – including the president – pointed their fingers… but at the wrong rat!

…click on the above link to read the rest of the article…

Three New Deals: Why the Nazis and Fascists Loved FDR

September 17, 2018

Three New Deals: Why the Nazis and Fascists Loved FDR

[Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933-1939. By Wolfgang Schivelbusch. Metropolitan Books, 2006. 242 pgs.]

Critics of Roosevelt’s New Deal often liken it to fascism. Roosevelt’s numerous defenders dismiss this charge as reactionary propaganda; but as Wolfgang Schivelbusch makes clear, it is perfectly true. Moreover, it was recognized to be true during the 1930s, by the New Deal’s supporters as well as its opponents.

When Roosevelt took office in March 1933, he received from Congress an extraordinary delegation of powers to cope with the Depression.

The broad-ranging powers granted to Roosevelt by Congress, before that body went into recess, were unprecedented in times of peace. Through this “delegation of powers,” Congress had, in effect, temporarily done away with itself as the legislative branch of government. The only remaining check on the executive was the Supreme Court. In Germany, a similar process allowed Hitler to assume legislative power after the Reichstag burned down in a suspected case of arson on February 28, 1933. (p. 18).

The Nazi press enthusiastically hailed the early New Deal measures: America, like the Reich, had decisively broken with the “uninhibited frenzy of market speculation.” The Nazi Party newspaper, the Völkischer Beobachter, “stressed ‘Roosevelt’s adoption of National Socialist strains of thought in his economic and social policies,’ praising the president’s style of leadership as being compatible with Hitler’s own dictatorial Führerprinzip” (p. 190).

Nor was Hitler himself lacking in praise for his American counterpart. He “told American ambassador William Dodd that he was ‘in accord with the President in the view that the virtue of duty, readiness for sacrifice, and discipline should dominate the entire people. These moral demands which the President places before every individual citizen of the United States are also the quintessence of the German state philosophy, which finds its expression in the slogan “The Public Weal Transcends the Interest of the Individual”‘” (pp. 19-20). A New Order in both countries had replaced an antiquated emphasis on rights.

…click on the above link to read the rest of the article…

President Franklin D. Roosevelt: Architect of Monetary Madness and a U.S. Debt Default

July 8, 2018

President Franklin D. Roosevelt: Architect of Monetary Madness and a U.S. Debt Default

Every schoolchild is dutifully taught that President Franklin D. Roosevelt (FDR) was America’s savior. They are repeatedly told that FDR and his New Deal policies pulled the U.S. out of the Great Depression. What nonsense. In fact, FDR was the architect of monetary madness and an American debt default. Yes, FDR engineered a U.S. debt default in 1933.

This story is brilliantly told in a new scholarly book by Sebastian Edwards, the Henry Ford II Professor of International Economics at the University of California at Los Angeles. Edward’s book, American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold, has just been released by the Princeton University Press.

FDR entered the White House on March 4, 1933, and in less than two months (April 19, 1933), he announced that he was taking the U.S. off the gold standard. FDR asserted that he was doing this to end the Great Depression and to raise farm prices. As FDR put it: “the whole problem before us is to raise commodity prices.”

FDR gave Congress license, and Congress used it to abrogate the Gold Clause via a joint resolution in June of 1933. Before that, a gold clause was included in most private and public bond covenants. These covenants insured that bond holders would receive interest and principle payments in dollars that contained as much gold as the dollar had contained when the bonds were issued.

The U.S. government manipulated the price of gold upward until President Roosevelt redefined the dollar in gold terms under the Gold Reserve Act of January 1934. Overnight, the dollar became 41% lighter. This left gold-clause bond holders out to dry.

…click on the above link to read the rest of the article…

Learning from America’s Forgotten Default

May 22, 2018

President Franklin D. Roosevelt signs the Gold Bill (also known as the Dollar Devaluation Bill)

Learning from America’s Forgotten Default

One of the most pervasive myths about the United States is that the federal government has never defaulted on its debts. There’s just one problem: it’s not true, and while few people remember the “gold clause cases” of the 1930s, that episode holds valuable lessons for leaders today.

LOS ANGELES – One of the most pervasive myths about the United States is that the federal government has never defaulted on its debts. Every time the debt ceiling is debated in Congress, politicians and journalists dust off a common trope: the US doesn’t stiff its creditors.

There’s just one problem: it’s not true. There was a time, decades ago, when the US behaved more like a “banana republic” than an advanced economy, restructuring debts unilaterally and retroactively. And, while few people remember this critical period in economic history, it holds valuable lessons for leaders today.

In April 1933, in an effort to help the US escape the Great Depression, President Franklin Roosevelt announced plans to take the US off the gold standard and devalue the dollar. But this would not be as easy as FDR calculated. Most debt contracts at the time included a “gold clause,” which stated that the debtor must pay in “gold coin” or “gold equivalent.” These clauses were introduced during the Civil War as a way to protect investors against a possible inflationary surge.

For FDR, however, the gold clause was an obstacle to devaluation. If the currency were devalued without addressing the contractual issue, the dollar value of debts would automatically increase to offset the weaker exchange rate, resulting in massive bankruptcies and huge increases in public debt.

To solve this problem, Congress passed a joint resolution on June 5, 1933, annulling all gold clauses in past and future contracts.

…click on the above link to read the rest of the article…

The US Two-Tier Monetary System that Ended in 1971

May 4, 2018

The US Two-Tier Monetary System that Ended in 1971

QUESTION: You said the US had a two-tier monetary system under Bretton Woods. Can you explain that one, please?

DHJ

ANSWER: When Roosevelt confiscated gold, he created, in reality, a two-tier monetary system quite frankly as the medieval city of Florence. The Great Financial Panic of 1344 was when the value of silver rose dramatically blowing out the silver/gold ratio. Silver was used locally for the normal people. Their wages were paid in silver. The gold florin was used for international trade and companies had to keep actually two sets of books with accounting in each separate currency.

When Roosevelt confiscated gold, he devalued the dollar from $20.67 per ounce of gold to $35. Gold remained the unit of account for INTERNATIONAL transactions. While the last silver dollar was at first still minted, it was decided to end that production as well. Therefore, the last U.S. silver dollar to be struck was that of 1935. Nonetheless, the government then maintained silver as a backing for the currency domestically and issued Silver Certificates until 1963.

When the price of silver was rising with just about all other commodities during the early 1960s, the pressure was mounting on the financial system. President Kennedy authorized the abandonment of silver as a backing for the currency. He allowed the silver certificates to be redeemed for silver bullion. However, the minimum lot accepted for redemption was 5,000 for this was the size of the silver bars.

Therefore, in 1963 is when we see the beginning of the end in the two-tier monetary system. Between 1964 and 1971, the gold standard remained intact until President Nixon was forced to close the gold window ending the convertibility of dollars to gold internationally.

…click on the above link to read the rest of the article…

State Property

February 18, 2018

State Property

Franklin D. Roosevelt’s New Deal wrung from the trauma of the 1930s a lasting legacy of economic and social reform, including the Social Security Act, new banking and financial laws, regulatory legislation, and new opportunities for organized labor. Taken together, these reforms gave a measure of security to millions of Americans who had never had much of it, and with it, a fresh sense of having a stake in their country.

From the dust jacket description of Freedom From Fear, The American People in Depression and War, 1929-1945, David M. Kennedy, Oxford University Press, (1999)

When one man’s security becomes another man’s chain gang.

The above paragraph concisely sums up conclusions about the New Deal that can be found in thousands of textbooks, histories, and articles. You can guess that the tome (it’s 858 pages, SLL has not read it) reflects the reigning academic ideology, an impression furthered by its Pulitzer Prize. Pulitzers are awarded to fans of Franklin Delano Roosevelt and the New deal, not critics. If the latter stood a chance, Amity Shlae’s fine critical analysis, The Forgotten Man, A New History Of The Great Depression, might have received one.

Putting food on the table has a large place in human history. So too do governments. More often than not, they’ve worked at cross-purposes. Governments don’t produce, they take. Whatever they take means less food, and everything else, for those from whom they take it.

One man’s government-bestowed security is another’s government-bestowed insecurity. There weren’t enough plutocrats to fund the New Deal. It reached into the pockets of people who were only an economic rung or two above its beneficiaries. The money taken from a taxpayer might have meant deferred truck maintenance or no trip to the doctor for his sick daughter.

…click on the above link to read the rest of the article…

Gold is the spectre haunting our monetary system

April 22, 2016

Close-up of bars of pure gold bullion — A scramble for gold has begun as central banks bet against US dollar inflation CREDIT:ALAMY

For a century, elites have worked to eliminate monetary gold, both physically and ideologically.

This began in 1914, with the UK’s entry into the First World War. The Bank of England wanted to suspend convertibility of bank notes into gold. Keynes counselled wisely that the bank should not do so. Gold was finite, but credit elastic.

By staying on gold, the UK could maintain its credit, and finance the war effort. This transpired. The House of Morgan organised massive credits for the UK, and none for Germany. This finance was crucial, and sustained the UK until the US abandoned neutrality and tipped the military balance against Germany.

Despite formal convertibility of sterling to gold, the Bank of England successfully discouraged actual conversion.

Gold sovereigns were withdrawn from circulation and turned into 400-ounce bars. This form of bullion limited gold ownership to the wealthy, and confined gold’s presence to vaults. A similar disappearance of gold as a circulating currency occurred in the US.

Gold graph — The price of gold has jumped in recent years CREDIT: LONDON METAL EXCHANGE

In 1933, US President Franklin Roosevelt issued an executive order making ownership of gold a crime. FDR relied on the Trading with the Enemy Act of 1917 as statutory authority for this edict. Since the US was not at war in 1933, the enemy was presumably the American people.

In 1971, US President Richard Nixon ended convertibility of US dollars into gold by trading partners of the US. Closing the gold window was said by Nixon to be temporary. Forty-five years later the window is still closed.

…click on the above link to read the rest of the article…

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