Today is August 15th. That is, today is the 40th anniversary since President Richard Nixon took the dollar off the gold standard on August 15th 1971. During that time, US spent so much money for the war spending and they could not borrow any more debt because US gold reserves were totally depleted due to this spending. Because of this, Richard Nixon end the gold standard by axing the bretonwoods system so that they were able to create the unlimited money from thin air. On that day, money officially became fiat money. In this blog, I will discuss what happened to our economy since 1971 and what will likely happen in the future.
Since 1971, amount of money supply increased dramatically. Therefore, dollar was constantly devalued. According to the trusted sources (Such as John Williams of Shadowstats.com), dollar was devalued approximately 98% since President Richard Nixon ended the gold standard on 1971 (See the chart below). This chart basically said that value of the dollar went down significantly as Fed prints more and more money. On the other hands, if you look at price of gold during the same period (Please see chart below), price is just skyrocketed. Many people think that gold price appreciated but it is not really true. Value of the gold stays always the same but value of the dollar came down. This applies to all other commodities, such as silver, oil and coffee. People's standard of living has deteriorated severely since 1971 (Practically speaking since 1913). Only one wage earner could support whole family during 1971 but now, two wage earners (husband and wife) must work hard in order to feed the family. Given that, how about the prospect of the future?
Dollar devaluation since 1971 (Courtesy of Dollardaze.org)
Price of gold (Courtesy of goldprice.org)
If you look at history as a guide, it is pretty much obvious that people's standard of living will deteriorate even further in the future. Fed has printed money like crazy now and they will print even crazier in the future. Until 2008, there were no QE, QE lite, and QE2. And, I expect Fed to start another round of QE in very near future. Understand that QE basically means money printing. In last blog, Bob Chapman claimed that inflation rate will be 20 - 30% range next year due to QE2 and inflation will become hyperinflation (50% annual inflation) if Fed starts implementing QE3. Of course, I think price of gold and silver will keep going up while currency all around the world will be devalued at the same time. I expect to see more and more riots like London (Do you think young people are rioting for no reasons?). I am not going to surprise to see the similar riots in US in very near future.
In order to protect yourself from this, if I can only recommend one thing, then I will definitely recommend gold and silver (If interested in buying the gold and silver in wholesale price). Gold and silver has been the money for more than 5,000 years and these have always protected people from devaluation of currency by reckless government. I hope people will take necessary action to protect themselves before it's too late because time is almost up.
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Published: 16 August 2011