The Ghost Of Richard Nixon And The Golden Anniversary

Tasty cake with flag on bunch of paper dollars

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Everyone has their own memory of Richard Milhous Nixon, aka "Tricky Dick". Most might assume the moniker stems from his involvement in Watergate. Some claim its origins lie elsewhere. As I mentioned in my first book, Escaping Oz: Protecting your wealth during the financial crisis, and Escaping Oz: Navigating the Crisis Richard Nixon effectively killed the World War II-era Bretton Woods Agreement. In a nutshell, Bretton Woods made the US Dollar (USD) the financial anchor for the world by equating it with a fixed amount of physical gold. Wars (wars are expensive) and the expansion of social programs led to outsized deficits (though minuscule compared to our present condition) and foreign trading partners wanted their cut of the US gold stock in exchange for USD.  

Nixon assured everyone that the suspension of convertibility (USD for gold) was temporary. There's an old joke about nothing being as permanent as a temporary government measure (mull that over when you consider governmental action of the last 18 months). The temporary suspension was to precede a new international monetary conference to move convertibility from $35 to one ounce of gold to something higher, likely much higher. There was no international conference and we ushered in a world of floating exchange rates.  

To the surprise of some, the international system of commerce and finance continued with the USD as the big dog in the neighborhood. The big dog had to navigate rough patches. There was inflation in the 1970s and financial crises in 1994, 1998, 2008, and most recently 2020. The United States also uses the USD as a geopolitical hammer to bring nations to heel when there's a deviation from US-prescribed policies — ask Iran, Russia, China, Venezuela et. al. That hammer is losing its effectiveness and it's not logical to assume that those taking the geopolitical beatings will keep their noggin in the path of the hammer. Countries have found ways around the USD and the currency's disintermediation is just getting started.  

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