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What has changed since the U.S. abandoned the Gold Standard in 1971?

Glenn Dobbs, David Morgan, Doug Casey, Adrian Day, Michael Cuggino, Philip Klapwijk
January 6, 2004
Video Transcript

Glen Dobbs: In 1971, the gold window was closed under President Nixon. What was happening at that time was a significant amount of inflation. Our friends over seas recognized what was happening to the U.S. dollar. They were finding that they had their choice of taking U.S. dollars and keeping them or taking U.S. dollars and exchanging them for gold.

David Morgan: Problem with the United States dollar is that is was so strong, so good, for so long. Up until 1971, it was backed by gold and everybody trusted the United States, because of that, everyone used the dollar as their reserve, because the dollar was actually a warehouse receipt that was valued on that piece of paper for a certain amount of gold and everybody needed that. Well, the French caught on and knew that the United States really didn't have the amount of gold that they said they had. So they called their bluff more or less. They said, "Ok, this is what this receipt says. It says if I turn these in, I'm going to get this much gold." Then they started sending their dollars back to the United States and started draining the gold reserves of the United States of America. This happened under the Nixon administration. His best counselors at the time advised him that he had to throw in the towel; he had to renege on that promise. So in August of 1971, Nixon said, "I'm closing the gold window. We are no longer honoring the dollar based upon the gold standard."

Doug Casey: Well, when you keep your assets in U.S. dollars, you're keeping your assets in an entity that fluctuates in value based upon the whims that are indeed the psychosis of the politicians that control it's value. What is the dollar? It's a liability of the U.S. government and it's increasingly going to be recognized in the U.S. government as being bankrupt. So it's foolish to keep your assets in a liability of a bankrupt entity.

Adrian Day: So U.S. people, whether they're owning now or particularly they're retired or looking ahead to retirement. In my view, they've got to hedge against that dollar; they've got to hedge. There is essentially two ways to hedge; one is in currency and one is in gold. There really is no other way.

Michael Cuggino: All you've got to do is look at continued government spending, deficit spending, the obligations that the Federal government has in the United States in respect to entitlement programs. So, we are going to continue to print dollars and the more we print to take care of the economy and all these obligations, the more the value of the dollar is going to decrease. That is bullish for gold.

Philip Klapwijk: Given the money creation that's going on, which is unprecedented in the scale, it seems to be difficult for the Fed to know exactly when to turn the tap off. By the time it does so, I think it will have created so much extra liquidity and money that we will have an inflation, not just in certain asset prices, but certainly in the price of goods reflected in higher inflation numbers on the CPI. That type of environment, I believe, will be extremely friendly to build.

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