U.S. Dollar and Gold: An Anniversary

 By: Mitchell Clark
Forty years ago today, U.S. President Richard Nixon appearedon television to tell the world that the U.S. was severing the relationship between gold bullion and the U.S. dollar.

Back in 1944, in a historic agreement reached in Bretton Woods, New Hampshire, the U.S. government agreed to redeem U.S. dollars for gold bullion at the rate of $35.00 U.S. for one ounce of gold for the central banks of foreign countries.

The relationship established between the U.S. dollar and gold bullion at Bretton Woods was often referred to as the "gold standard." Based upon the relationship between the greenback and gold, at Bretton Woods, the central bankers of foreign countries agreed to adopt the U.S. dollar as their official reserve currency. In a nut shell, the U.S. backed its fiat money with gold bullion and foreign central banks backed their currency with
U.S. dollars. All the currencies had a link to gold.

Thirty-three years after the Bretton Woods agreement, on August 15, 1977, Nixon took to the airways to tell the world and in specific to tell the central banks of the foreign countries that the U.S. was reneging on the gold standard deal established at Bretton Woods.

We all know what happened once the tie between the U.S. dollar and gold was eliminated: The U.S. government was free to print money as needed, as it no longer had to worry if it had enough gold in its vault to back all the money being printed. Since the abandonment of the gold standard, the value of the U.S. dollar has lost considerable ground...a process called "inflation." It takes a lot more U.S. pennies to buy a cup of coffee today than it did in 1971.

There have been very stark critics of America's action in abandoning the concept that fiat money should be backed by gold. Some say lack of the gold standard has caused global economic instability since 1977.

But since 2002, another phenomenon has occurred. The price of gold bullion has boomed. Gold has risen in price from $300.00 U.S. per ounce in 2002 to almost $1,800 today-a gain of 500%. And some economists, like me, are calling for gold to hit $3,000 per ounce.

There are many reasons why the price of gold bullion is skyrocketing. (I have written about those reasons in PROFIT CONFIDENTIAL countless times and will continue to write about why I believe the price of gold will rise.) Ultimately, I would not be surprised to one day see the value of the U.S. dollar somehow tied back to gold bullion.

Michael's Personal Notes:

I love the weekends, as they give me time to catch up on my much-needed reading. All week long, I'm inundated with research reports. Sunday afternoons is my time to open up a bottle of Brunello and spend a solid four to five hours just reading financial reports on everything from the market, the economy, and precious metals, to individual stock sectors and other forms of investment.

What I'm finding quite fascinating is the number of analysts who are deeply bearish on America. I've never quite seen anything like this before...so many people calling for the demise of America.
On the one hand, these are smart analysts who bring up very good facts to back up their solidly bearish views. On the other hand, I'm wondering if all this bearishness is getting overblown. After all, when does the market or economy do what is expected of it?

Here are just two reports from the weekend:

Elliot Wave expert Robert Prechter believes that the U.S. is in the early stages of a depression right now.

Well-known investor Jim Rogers, who is highly critical of specific people in Washington, predicts that the U.S. will eventually default on its debt obligations. Rogers believes that the U.S. economy never left the recession that started in 2008 and that we are still in a recession.

Yes, I've been very bearish on the economy as well. But, as a contrarian, one really has to wonder: will the stock market and economy really roll over and perform as the majority of analysts predict?

Where the Market Stands; Where it's Headed:

I continue to hold the belief that a bear market rally that started in March of 2009 presides. According to a report from EPFR Global, a Massachusetts-based research firms, investors pulled more money out from global stock funds last week than any other week since 2008. And we all know what happened after 2008; stocks rallied big time.

I'm going against the popular opinion, as usual, on this one. While many stock advisors are saying that stocks are dead, the rally is over, I'm sticking with my belief that the bear market rally, in spite of it being "long in the tooth," is still alive and well.

The Dow Jones Industrial Average opens this week down 2.5% for 2011.

What He Said:

"I've been pushing gold bullion and gold shares for over a year now. Bank in January 2002, I personally started buying gold shares." Michael Lombardi, PROFIT CONFIDENTIAL, December 13, 2002. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments. Michael has remained steadfastly bullish on gold since 2002.

Retire on This One Hot Stock!

This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.
Artice Source: http://www.articlesphere.com

Related Articles in Finance

People interested in the above article are also interested in the related articles listed below:

The Spring Budget 2017 was announced amidst much anticipation however, many feel that it was not the best job done by the exchequer. Although he covered different dimensions and tried to create a balance between various sectors, the budget is still not considered an exciting one by the experts. Some of the points work well on a long term basis while some are good for immediate effect.
Before you purchase your first home and finance your very first mortgage there are a few things to consider. Consider the following as you embark on your new life journey into homeownership. Before you hire a realtor or start looking at homes it is important to meet with a mortgage broker. Once you have met with a mortgage officer you can determine if you have credit problems that need to be solved prior to looking for a home.
Purchasing a contractor license bond is almost always a requirement of contractors before they are licensed to work on construction projects. Depending on the laws within the state, county, city or even subdivision a contractor license bond could be required. Without the necessary contractor license bond in place the contractors often cannot obtain the license that is needed to provide construction services.

More in Finance

Excellent, Larry. Thank you for taking the new article directory technology and making it work to the max. I encourage everyone to keep contributing and contributing regularly. I can attest to the fact that this site is already a strong directory in a field of many. Kudos to Larry!

Matthew C. Keegan
The Article Writer


I find it a delight to use both as an author and a publisher. It is full of nice little surprises that make the whole process of writing, reading and publishing articles a complete delight. This is one that comes out tops and beats the rest hands down.

Eric Garner
Managing Director


I did a Google search and came across your site. It was exactly what I was looking for and was elated to find such a broad range of articles. As I am launching a free magazine in a small town in Florida, I wanted to be as resourceful as possible while still being able to provide some content that is interesting and well written. Your site has all the variables in the mix. Excellent Site hitting all the notes in the scale sort of speak.

Mo Montana
Florida, USA

Article Topics

Copyright © 2005 - by Larry Lim, Singapore - Article Search Engine Directory at ArticleSphere.com™
All Rights Reserved Worldwide. All Trademarks and Servicemarks are the property of the respective owners.
ArabicBulgarianCatalanChinese (Simplified)Chinese (Traditional)CzechDanishDutchEnglishEstonianFinnishFrenchGermanGreekHaitian CreoleHebrewHindiHungarianIndonesianItalianJapaneseKoreanLatvianLithuanianNorwegianPersianPolishPortugueseRomanianRussianSlovakSlovenianSpanishSwedishThaiTurkishUkranianVietnamese