49 Years after the Nixon Shock – How is the dollar doing today?


49 Years Ago, on 15 August 1971, in an address to the nation, the then US President, Richard Nixon, announces the devaluation of the dollar (which marked the beginning of the end for the Bretton Woods system) and speaks in detail about the measures taken to increase prosperity in the United States. Extracted below part of the video and speech:

“We must protect the position of the American dollar as a pillar of monetary stability around the world.

In the past 7 years, there has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them.

In recent weeks, the speculators have been waging an all-out war on the American dollar. The strength of a nation’s currency is based on the strength of that nation’s economy – and the American economy is by far the strongest in the world. Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators.

I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

Now, what is this action – which is very technical – what does it mean for you?

Let me lay to rest the bugaboo of what is called devaluation.

If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

The effect of this action, in other words, will be to stabilize the dollar.

Now, this action will not win us any friends among the international money traders. But our primary concern is with the American workers, and with fair competition around the world.

To our friends abroad, including the many responsible members of the international banking community who are dedicated to stability and the flow of trade, I give this assurance: The United States has always been, and will continue to be, a forward-looking and trustworthy trading partner. In full cooperation with the International Monetary Fund and those who trade with us, we will press for the necessary reforms to set up an urgently needed new international monetary system. Stability and equal treatment is in everybody’s best interest. I am determined that the American dollar must never again be a hostage in the hands of international speculators.”

So, what happened 49 years later today? Is your dollar today still worth just as much as 49 years ago?

The Bretton Woods Agreement of 1944 fixed the conversion rate for one Troy ounce of gold at $35. Today, one Troy ounce of gold is at $2035.

Here is a research data we did and to provide you an easy comparison. By overlaying the inflation-adjusted amount in the dollar, you can observe what happened to your dollars in terms of actual purchasing in Cash vs. Gold vs. Dividend Reinvested S&P500.

The green line represents the US dollar in cash, the gold line represents gold, and the red represents the S&P500 with dividend reinvested. With estimated actual buying today (Dated end July 2020) of $16, $740, $1318 respectively

Answer to the question: NO!

This brought to the next question on whether the dollar is collapsing soon? With the idea that “the average lifespan of a fiat currency is 27 years.”

Here is the chart showing the global reserve currencies since 1450

It is a history not to be ignored. It showed the US dollar as the world reserve currency since 1921, and the US dollar is already in its 100th-year crown. Not to forget, the dollar does come on the brink of destruction in the 1970s. Who could be the next one that comes to challenge the dollar? Could it be another fiat currency? Maybe a new form of monetary system? Possible the Yuan Digital Currency? In short, no one knows for sure. And what can you do? Get out of Debt and diversify into Hard Assets!

Good Luck and Best Wishes.

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