Nixon "Temporarily" Closes Gold Window

Yesterday, August 15, was the anniversary of the closing of the gold window by President Nixon. It was the end of the commodity-backed money system that attempted to keep politicians honest about how much of a government spending policy they could pursue. From thenceforth, we would be able to print our money without the constraints of the gold standard. The war in Indochina and the domestic changes of the Great Society created by LBJ had increased the deficit to record amounts. That, coupled with irresponsible monetary policy by the Federal Reserve led to a bout of huge inflation that would engulf the rest of the 1970's, even while unemployment remained high. Arthur Burns was the Fed chairman at this time, appointed by Nixon in 1970 and then threatened by Nixon in 1971 to keep monetary policy relaxed during his reelection campaign. This would temporarily decrease unemployment and generate a false prosperity that would help to land Nixon in the White House for a second term. Both LBJ and Nixon are representatives of the type of politicians that we have with us today. They will do the irresponsible thing for our future, to grant them reelection today. Remember them when you look at our current politicians.

In this video, we see Nixon's faulty reasoning for his "temporary" closing of the gold window. With the increased fiscal irresponsibility of the Kennedy-LBJ idea of lower taxes in addition to higher government spending, we amounted huge deficits. Those large deficits coupled with Nixon's declaration that he was now a "Keynesian" in favor of deficit spending, only added to the budgetary problems of the United States. This bad budget led to a direct pressure on the value of the dollar. As the dollar plummeted, nations abroad, who looked for the stability of the dollar as an international unit of trade, began to worry. If they now converted their devalued dollars to gold, they could quickly exhaust the United States' supply of gold. Nixon blames speculators, when it was the United States' own fault that the dollar was failing. It seems to be the age-old excuse. Whenever you see a politician start to blame speculators, you can be sure that those problems are that politician's own fault.