President Nixon, defaulted on the US$ obligations in 1971. The Bretton Woods agreement of 1944 was torn up, and the US$ was no longer redeemable for Gold anywhere. While this betrayal shocked the world, it should not have. It was the logical next step to Roosevelt’s default thirty-eight years earlier, when overnight the US$ was made irredeemable to US citizens.
These gross violations of contract by US governments, first with its own citizens and then with the international community, are scarcely unique in history; in fact, they continue a long tradition.
“With the exception only of the period of the gold standard, practically all governments in history have used their exclusive power to issue money to defraud and plunder the people.” Friedrich von Hayek
No monetary system that is divorced from the free market will ever be free from distortions. The lesson is that governments cannot ever be trusted with money. In the free market, any mint or bank that in any way adulterated or ‘fiddled’ with money or devalued their client’s wealth, would be out of business forever. The free market would not of course completely stop criminality, but it would ensure that the risk was minimised and that criminal behaviour did not become institutionalised.
When people cannot trust their money, then they cannot trust their society. When people cannot trust their society then society breaks back down into its constituent tribal parts. Tribal conflict (war) is always the result.
“…if central bankers are managing a “gold standard” in order to control monetary policy, whatever it is they are managing is not really a gold standard.”
Richard H. Timberlake Jnr.