Chat with us, powered by LiveChat The Lessons of 1971

WE WILL BEAT ANY COMPETITOR'S ADVERTISED PRICE - Call Now To Confirm Product Availability 1-800-559-0088


The Lessons of 1971

The Case of Gold: Is it The Safest Investment Choice During the Ongoing Banking Crisis?

Although many Americans might be unaware of this, next year would mark 50 years of the abolition of the Bretton Wood Treaty. In effect, this broke any bonds the US dollar had with the gold standard and moved the US economy towards floating exchange rates.

There were many reasons and consequences for the decision. The decision, made by President Nixon, completely overhauled the global financial system and international trade and its aftereffects are still with us today.

Why Was the Treaty Ended?

The main reason for Nixon revoking the Bretton Woods treaty was the economic situation of the United States. The US had been undergoing extreme inflation during that period. This resulted in wage stagnation and a current account deficit.

The direct international convertibility to gold that other nations enjoyed meant that the US federal government’s hands were tied when it came to government spending and budget planning.

Therefore, in addition to surcharges on imports and price freezes, President Nixon abolished the Bretton Woods treaty and removed any semblance of a gold standard.

Immediate Effects

Immediately after Nixon’s executive order, the American public embraced Nixon’s actions. Many experts deemed it a political and economic success. The Dow increased almost 35 points the next day, which at that time was the highest ever.

Additionally, by the end of the year, the US increased its imports and decreased its current account deficit.

In 1973, the global financial system, which operated under a fixed-rate exchange system, moved towards a floating rate system. Therefore, this meant that the primary tool for manipulating monetary policy was not exchange rates.

Future Effects

While President Nixon was praised immediately after the executive order, the effects of Nixon’s actions have been mixed. The inflation continued into the 1970s, and the decade was marked with significant economic stagnation.

Furthermore, the floating rate exchange system allowed the development of more effective monetary policies. This meant more freedom to pursue economic policies. However, some states have been criticized for acting as currency manipulators.

Additionally, economists have suggested that Nixon’s actions may have caused less economic growth, not only for the US but also for the rest of the world.

Would you like to open a gold IRA account? Reach out to Orion Metal Exchange we have a range of investment options to multiply your wealth. Our services also include trading precious metals and private vault storage. Contact us now if you’d like to get started.

Your Order Summary

A minimum total purchase amount of $10,000.00 is required to checkout. Click here to shop more

Your Details Back
Your personal data will be used to process your order, support your experience throughout this website, and for other purposes described in our privacy policy.

Once you've placed the order, our team will contact you shortly.

By submitting your information, you agree to be contacted by Orion Metal Exchange via phone, email or text. You can unsubscribe at any time. Please see our Privacy Policy.