Politicians are liars.
I know. This is a real shocker, right? I’m sure you don’t need me to tell you this. So, let’s just call this a friendly reminder.
I was personally reminded of this fact as I wrote an article about the anniversary of Richard Nixon slamming shut the gold window recently
Forty-eight years ago, Pres. Richard Nixon ordered Treasury Secretary John Connally to uncouple gold from its fixed $35 price and suspended the ability of foreign banks to directly exchange dollars for gold. In effect, he severed the last tie between the dollar and the gold standard and turned it into a pure fiat currency. By fiat currency, I mean backed only by the *cough* “good name” of the U.S. government.
In other words, backed by a bunch of lying politicians.
During a national television address, Nixon promised the action would be temporary in order to “defend the dollar against the speculators.”
There’s lie number one.
Temporary.
I don’t know about you, but when I hear the word “temporary,” I think a few weeks. Maybe a few months. Not 48 years! As Milton Friedman said, “Nothing is so permanent as a temporary government program.”
That brings us to the next lie. And it was a doozie! We’re talking “pants on fire” territory.
When he announced the closing of the gold window, Nixon said, “Let me lay to rest the bugaboo of what is called devaluation,” and promised, “your dollar will be worth just as much as it is today.”
What actually happened is the value of the dollar has dropped some 80 percent since Nixon made that fateful decision. Meanwhile, the dollar value of gold has gone from $35 an ounce to about $1,500.
Practically speaking, this means that if you had stashed an ounce of gold along with 35 one-dollar bills under your bed in 1971, today, you could buy an expensive tailored suit with your gold. The $35 in cash wouldn’t get you a pack of fancy underwear.
Of course, Nixon knew damn well that uncoupling the dollar from gold would cause the greenback to devalue. Heck, that was the whole point. As Ryan McMaken summed up:
“Nixon yearned to be free of this restraint so he could spend dollars more freely, and not have to worry about their value in gold. Nixon’s move was, in short, the final and total politicization on money itself, and, as Jim Grant notes, ‘The Ph.D. standard is … a political institution. It is the financial counterpart to the philosophy of statism.’”
So, what have we learned here?
Politicians lie. Nixon lied. Clinton lied. Obama lied. Trump lies. They all lie.
Don’t trust them. Unless of course, they’re telling you they’re going to do something awful. They tend to tell the truth about that. (Horton’s law.)
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