Gold Standard Or Nixon Standard

On Sunday, August 15, 1971, Richard Nixon unilaterally brought to an end the last trace of an experiment in international monetary affairs that stretched back over a century. He announced that the United States government would no longer abide by the 1944 Bretton Woods agreement to deliver gold at $35 per ounce to any government or central bank.


What he abolished was not a gold standard. It was a government promise standard. There was never a gold standard in the nineteenth century or early twentieth century. It was always a government promise standard. It was as reliable as government promises.

Governments always announce and defend by monopolistic violence their legal sovereignty over money. They say that they will control the terms of exchange. All monetary standards are based on government promises and IOUs called government bonds. These contracts are always broken by governments. The only major exception in history was Byzantium for about 800 years, beginning in the early fourth century under the emperor Constantine.

What Nixon destroyed was called the gold-exchange standard. It was first adopted by governments at the Genoa Conference of 1922. It was an agreement to avoid returning to the pre-World War I gold coin standard, which had been independently but almost simultaneously revoked by European governments when war broke out in August. They all then resorted to monetary inflation. This was a way to conceal from the public the true costs of the war. They imposed an inflation tax, and could then blame any price hikes on unpatriotic price gouging. This rested on widespread ignorance regarding economic cause and effects regarding monetary inflation and price inflation. They could not have done this if citizens had possessed the pre-war right to demand payment in gold coins at a fixed rate. They would have made a run on the banks.
Governments could not have inflated without reneging on their promises to redeem their currencies for gold coins. So, they reneged while they still had the gold. Better early contract-breaking than late, they concluded.

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