The Secret Return to the "Gold Standard"

Although it happened more than 40 years ago, many Americans still rue the day back in 1971 when U.S. President Richard M. Nixon effectively took this country off the so-called "gold standard." Under a true gold standard, paper notes are "convertible" into pre-determined, fixed quantities of the "yellow metal." What actually happened back in 1971 was that President Nixon - facing huge budget and trade deficits, and a plunging dollar - enacted a series of economic moves, including the unilateral cancellation of the direct convertibility of the U.S. dollar into gold. By slamming the "gold window" shut, Nixon also brought down the curtain on the existing Bretton Woods system of global financial exchange. The fallout was immediate, creating a situation that financial historians still refer to as the "Nixon Shock." Proponents of the gold standard say the real damage is still being wrought: That decision four decades ago led directly to the uncertainty, volatility and irresponsibility that we see in the U.S. economy and global financial markets today. Whether you agree or not is a topic for another time. But what I'm here to tell you today is that the world's central banks have quietly - almost secretly - returned the world to a new version of the gold standard.