The End of the Gold Standard

Why did Nixon enact policies that effectively ended the gold standard (i.e. the coupling and convertibility of the US dollar to gold) in 1971, effectively turning the international monetary system away from precious metals towards fiat money? What is the significance of that event in the development of contemporary capitalism?

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I don't know the word for this but the basic idea is that without gold backed money things could be more profitable as they could overcome the amount of gold that there was in the world with ease.

The gold standard was effectively ended by FDR, Nixon merely removed the last vestiges of it.

The reason being that fiat currency is more flexible than "precious" metals, giving the state more autonomy in regards to its monetary policy, rather than being fixed on some commodity.

Because Vietnam and Korea bankrupted the United States and in a certain sense it has been running on fumes ever since.

Pegging US dollars to oil instead of gold means US can print trillions with no consequence.

The gold standard is paramount to socialism. Only useful idiots or outright reactionaries would propose to abandon it.

It was the main reason why the Soviet Union fell.

Only if currency speculators don't feel it weakening then the effect will be a major bout of inflation as happened in the 70s and even in 2008.

As long Saudi Arabia is stable, rules OPEC, and pegs its oil to US dollar. An absolute monarchy currently undergoing a fucking political purge. :^)

It'd be a crying shame if someone were to put a bullet in the heir apparent.

It just became unpractical to back-up currency on ever growing global trade, gold being nostalgia for mercantilism, and seeing the US would not be able to hoard as much eventually. If gold was the the back-up for money now we´d have a severe deflation.

Have you read this article? I think it’s a pretty good read on the Ritz Carlton escapade. I just can’t see how anyone can argue that history is over after that insane incident.

I hope you realize that the under the gold standard it was largely paper notes representing gold that circulated and generally not physical gold.

We already have commodity price deflation it’s built into the mechanics of the capitalist system. We’ve only avoided it by severely devaluing the currency every time it looms and we’re not always even successful at stopping it as 2008 proved. It doesn’t even really matter because there’s still commodity price deflation in gold terms, it’s just that gold becomes more valuable while the fiat currency that circulates becomes less so.

That article, with its confusion about media silence, is missing something much simpler. Dosh!

Grab it while it's hot.


Perhaps the only thing Trotsky was ever right about.


Tying your currency to any kind of hard capital limits it's liquidity based the total value of the capital you have on hand. Basic economics that most right-wing-wongers can't understand.

Even if the USA held all the gold reserves in the entire world it would still mean a vastly smaller amount of currency would be available for circulation and the economy would be much much smaller because of this.

I keep telling you guys that while this is theoretically true this is not possible in reality under capitalism. If it was possible the Keynesians could conceivably claim that they have a fix for periodic capitalist crisis that can ensure eternal growth disregarding natural limits here but they can't.

I didn't say it meant unlimited growth. Inflation is still a thing. The falling rate of profit is still a thing.

Tying your currency to something like gold will stop inflation, but it will create another problem, precisely the problem that we moved away from it to get away from in fact.

Besides, the idea that your 'backed currency' is really backed by anything is merely a spook. If you go to bank and ask for your property the state can just as easily tell you go kick bricks and send you packing back home with your little scraps of paper.

If only you knew how bad things really are.

If you tie currency to your energy production, it might work. Electricity/etc. and food turns into abstract and concrete labor, which turns into commodities, which the population consumes, and extracts more energy.

So what do you guys think about Gadaffi's plan for a gold based Pan-African currency? Would it have actually hurt the petrodollar?

Why does there need to be inflation or deflation at all? Have you thought this through?

If everyone is spooked into accepting fiat money why not perfectly balance the money supply against the supply of commodities? This is essentially what Milton Friedman proposed in the 1970s, in his opinion, the fiscal policies of the 1970s were far too liberal and the result was there was "too much money chasing too few goods"

Friedman believed that by removing gold as a fetter, ensuring the independence of the central bank and liberalizing exchange markets that the capitalist economy would come to a kind of equilibrium where the money supply was perfectly balanced by the whims of the market. It wasn't very far removed from the idealist vision presented to us by ideologues of crypto-currency today.

Keynes favored inflation because he saw it as benefiting the manufacturing class and steadily liquidating the unearned income of rentiers. Many governments post-WWII did too. But many economists including right-wing Keynesians have been less committed to this pro-inflation anti-rentier stance than Keynes himself.

Taking Keynes theory at face-value it is logical that the money supply could be expanded in lockstep against the supply of commodities out there.You don't have to be a Freidmanite to think this could be done based on the premises of post gold standard neoclassical economics.

You get close to to the mark but lose it. What causes the falling rate of profit? We are told by the foremost Marxian rop theorists that it is "overinvestment" and the growing composition of constant capital against a diminishing ratio of variable capital. Ok, but what causes that? What creates the limit on investment opportunities? What causes capitalists to "overinvest" in constant capital? Why can't capitalists maintain a constant share of variable capital by hiring new workers and giving out raises?

Some of the more consistent FRoP theorists have put forward the "profit squeeze" theory of crisis that posits that crises happens when the reserve army of labor is depleted and wages begin to rise as capitalists struggle for labor. This has major theoretical merit for its coherency but it isn't born out by actual reality. Since the neoliberal reforms of the late 70s there hasn't been any increase in wages in fact the minimum wage has had a falling trajectory since 1969 and unemployment has been higher than the period of the post-war boom–which boasted higher profits! Likewise, I can't think of a single capitalist economy that ever used up all its potential labor-force in its entirety. Many capitalist states have large non-working portions of the population that aren't technically counted as unemployed because they don't regularly compete in the labor market and you have many people doing odd-jobs and part-timing.

There is the insinuation to of much of the literature on FRoP that the capitalists fail because they don't exploit their workers hard enough. It's not true! If anything a rising rate of constant capital indicates rising exploitation by raising the productive power of labor.

Another thing that these theorists tend to overlook is that profit rates are not static. While we can see its long-term trajectory we also see that average profits rise and fall with booms and these oscillations sometimes include very long periods! Debts and other types of expenses that seem reckless post-depression are seen as sustainable during an economic boom. And generally its not like profits gradually taper off but in fact they go through the floor once recession sets in.

What's happening here? The primary cause that sets a capitalist crisis in motion is the overproduction of commodities against the supply of the money commodity. This is why Sam Williams has pointed out that if you don't adhere to Marxist monetary theory then you are effectively a believer in Say's Law.

Golden inflation isn't even that rare, actually. It tends to happen every time there's a major expansion in the supply and production of gold. When the price of gold falls and the price of commodities stays the same or increases then you effectively have golden inflation.

Even the most fervent gold bugs can't explain the period from the 1890s to the Great Depression which suffered from pervasive long-term gold inflation.

Gold actually has a use-value so it isn't a spoog :DDDDDDDDD
For a whole host of historical and economic reasons capitalists essentially treat gold as the money commodity. There's a beauty to Marxist monetary theory that most of its critics don't see and that is the fact that the enormous amount of human labor needed to mine for gold serves to valorize it as the money commodity. It is a process of metamorphosis in that sense.

How is inflation favoring manufacturers over rentiers? The price of properties rises with inflation just as the price of commodities, does it not?
I would say that inflation hits mainly wage workers because their income is exclusively monetary.

You only need to expand the money supply because the principle on loans can’t be adjusted down to reflected the more valuable dollars during a deflation period.
Computers can fix this, and indeed bitcoins popularity is due to its very ability to continually adjust in real-time to its rise in value by dividing it into ever smaller coins.
Bitcoin is going to force banks to do the same, allow dollars to be divided up into fractions of pennies like bitcoin, or adjust the principle on loans like how they do with interest rates now on ARMs.

Because fiat money is not debt free. It must be destroyed by either the debt being paid off or being written off if the debtor can’t pay.

The main worry for manufacturers and agricultural capitalists is price deflation. Classic depressions were associated with deflation for a reason-during the Great Depression the economy got JUSTed so hard by inflation that profits went negative across the board. We still have commodity price deflation but this is covered up by the intentional depreciation of fiat currencies- if you look at commodities in terms of their gold price they do still decrease during crises like we saw in old-school business cycles.

There are a number of things that the reigning neoclassical economic orthodoxy cannot explain about this question when it comes to economic theory

1. The "stagflation" of the 1970s where inflation grew by leaps and bounds and yet economic growth stalled and unemployment stayed surprisingly high. I guess it could also be argued that the return of unemployment to the hyper-inflationary Weimar economy also hinted at the falsity of this piece of Keynesian orthodoxy
2.The rise of producer prices (particularly oil) in the middle of a recession (e.g. 2008)
3. the return of deflation to the American economy despite an impressive expansion of the money supply (2009); this is mirrored in certain economies with low-inflation or deflation despite record low interest rates and major attempts to prime the economy to produce inflation. Switzerland, Japan, Denmark and Sweden all experimented with negative interest rates- an unprecedented phenomenon in economic history. While Japan remains probably the cheapest place to borrow money in the world many analysts are still debating over whether Japan is experiencing deflation or whether this has come to an end. The fact that Japan has done so much to try to stop deflation and hasn't found a solution that works suggests that the ultimate question over inflation and deflation might not be up to central bank policy makers but to the structure of the economic system itself.

Property owners aren't the only type of rentier. In Keynes time, perhaps the largest and most pernicious class of rentiers were holders of bonds, dividend-paying stock, and financiers. Associating low-interest rates with inflation Keynes thought that this class would be liquidated both by a conscientious bank policy setting interest rates at a low-rate and the ensuing inflation. Inflation eats away at the real value of debts by gradually diminishing the real value of what the debtor must pay to his creditor.

There is a similar relationship with landlords here where rental contracts, especially those concluded over long-periods, are steadily devalued by inflation. Marx writes about how this was a big factor in the rise of the bourgeoisie in 16th century England as tenants conducting long-term contracts paid essentially little or nothing to their landlords due to the influx of precious metals from the new world.

Property values can rise. That much is true, but the game is stacked in favor of the buyer who will see the real value of his mortgage payment go down over time. Inflation still has the potential to devalue even real estate, a popular song of the Weimar Republic was called "Drinking Away Grandma's House"

Yes, this is a fact overlooked by Keynesians especially given the fact that employers are resistant to granting pay-raises. The worker's lot in life is not particularly favorable under deflation or inflation because capitalism itself is the problem.

The Keynesians argue it is a pro-labor policy because most in-debted individuals are also workers. But they ignore both its effect on real spending power and the fact that inflation creates major incentives to take out credit to buy things in effect increasing levels of indebtedness. It is a lot like curing a heroin addiction with more heroin.

Let's assume this point is true, how come none of the major governments of the world have adopted a debt-free fiat currency except Lincoln's government in the American Civil War. Can you tell me what the effects of issuing the greenback were? In any case, surely, the capitalists would be eager to adopt a solution that promises to keep the economy expanding forever.

This is typically done via inflation and newsflash: the returns on US bonds are typically rather small. If the US goes through an inflationary event like the 1970s or the low-interest high dollar inflation of the 2008 crisis then the real value of both interest and/or principal maybe lost altogether.

*landowners aren't the only type

**JUSTed so hard by deflation

Well that was a lot of effort to answer my question. My thanks user for helping a brainlet understand.
The points you bring on inflation pretty much confirm my understanding that the money supply actually has a small impact over inflationary trends. The game is played mainly between the ability of the industrial base to absorb the spending power of society, which kind of explains why the underlying deflationary tendency diverges from mainstream predictions and resurfaces despite the various techniques put in place by Keynesians and neoliberal policy makers like.

Good point and I see what you mean. Essentially Keynes "plan" failed because it could not work against capitalism's own faults.

As much as I appreciate the answer I feel like I still don't understand shit despite trying to learn Marxist theory as best as I can.

I hate to shill this constantly but read this man's blog:
Sam Williams is probably the most thorough and consistent Marxist thinker and he has a good overview of all kinds of economic theory and history. Even though he knows non-Marxian theory in-depth he essentially critiques and BTFOs all their non-arguments. It literally doesn't matter where you start almost any link you click on his page will be good.

You can also watch Harvey's series on Reading Capital if you ever attempt to read it. I think some legitimate criticisms of Harvey has been made by Williams and others but he still presents the text in a very approachable way.

I am in fact trying to read capital and having a very hard time doing so. Thanks for the links, I will take a look.

o-our guy?

Money is just accounting, all you need is a ledger and a guy with a big stick to beat up people who try to cheat their obligations. No commodity needed.

unlike gold, which can't be cut up into smaller piece–


To allow for the petrodollar to take off.

The two countries that had the most natural gold at the time were the Soviet Union and South Africa. If I'm the president of the world's forefront capitialist power, how do you think I'm going to feel about the world's economy being based around a natural resource possessed mostly by the Union of Soviet Socialist Republics?

With fiat currency you can manipulate its value relative to other countries. So for example the Chinese like to keep the value of the Yuan low to keep its exported goods compettitive.

Why hand over actual gold when you can just hand over paper?

pls get a tripcode

u r a very valuable poster

here have a voucher for ur work

Ok. test.

All that I read is a very long ideological masturbation. This is an ideological piece of garbage.


Wait, is this real…? How come this isn't a hop topic in contemporary political debates?

Believe it or not, many European politicians do not fully understand how the system works. And even the ones that know, wouldn't be able to force themselves free unless they face up against the US. It doesn't help that the system is already completely ingrained into most economies since people have been buying US debt. If they take down the US economy they will be sure to follow, causing major problems for their own country (and likely an American assassin on their ass). The only thing that can stop the petrodollar is the oil nations (risking their lives against the US) or oil simple running out.

Why do you think that China bothered keeping the US economy afloat during the 2008 crash? Because if they didn't, their own economy would be in the shitter.