The Biggest Experiment of the Past 50 Years Has Failed

August 15, 1971. It was a Sunday. The world as everyone knew it was about to change. 

Actually, the world was about to reset. 

On that Sunday night, as Americans settled in to an evening of The Wonderful World of Disney, or maybe the ABC and CBS Sunday Night Movies of the week, Richard Nixon shuffled into a television studio in Burbank, California to interrupt those regularly scheduled broadcasts. 

There, sitting against the backdrop of a presidential-blue curtain, he delivered an 18-minute speech that Forbes later labeled “one of the most momentous monetary decisions in world history.” 

Nixon told Americans that the embattled U.S. dollar would no longer be backed by gold. 

More than half a century later, most of us probably don’t recall that event as especially momentous. Time moves on. New generations rise up that are unfamiliar with the past. People adapt and the new reality quickly morphs into the status quo. 

Alas, August 15, 1971 marked the end of a particular branch of history. 

And the beginning of a new age. 

It was the first time in thousands of years of monetary history that money was not backed by some form of metal, most typically gold. 

A new experiment had begun and ultimately, it had one question to answer: Could government, unconstrained by the discipline that gold imposes, effectively and prudently manage a currency backed by nothing? 

That answer, the world has now come to realize, is demonstrably no. 

The years since Nixon’s killed the gold standard have proven that if you give a monkey unfettered access to a banana plantation he will, in fact, gorge himself to death. 

Every presidential administration since Reagan has spent frivolously and expanded government tremendously, all on the idea that, with a fiat dollar, governmental debt simply does not matter.  

America spent the past 50 years pretty much running the U.S. Treasury’s printing presses non-stop. But in the last 20 years the speed at which America has willed new dollars into existence is just egregious.  

Now, that profligacy has come home to roost.  

The nation that once owned the world’s largest currency and gold reserves now possesses history’s largest accumulation of debt. Uncle Sam, gluttonous and obese, owes $31.5 trillion—more money than the country can ever repay. 

But that’s precisely the point I am getting at here.  

We aren’t going to repay it. 

Instead, we—and by that I mean, the U.S. government—are going to bring about the next great monetary reset…what I call “The Final Reset.” 

I know lots of people will roll their eyes and think “conspiracy theory” or “lunatic.”  

So be it.  

But if you consider the conditions that forced Nixon to end the gold standard in the first place, you might begin to see two major parallels that remind you of today: 

First, inflation was hammering the nation, and Arthur Burns, chairman of the Federal Reserve at the time, rightly saw that increasing interest rates and thereby increasing unemployment would be ineffective against inflation. That’s because he realized inflation stemmed from forces beyond the Fed’s control—namely labor unions pushing wages higher, food shortages, and OPEC’s control of oil prices. 

Those are identical pressures today, though their causes are different. Wages are rising because workers are tired of Corporate America’s greed and have struck out on their own in the digital economy, forcing companies to raise salaries to attract in-house workers. Food prices are rising because of war and widespread global droughts. And energy prices are up because of war forcing an entire continent (Europe) to radically reshape its energy supply chain. 

Second, America’s share of global output was decreasing, reducing demand for dollars, as post-war Europe and Japan were finally back to normal and suddenly running economies that were highly competitive with the U.S.  

Today…China anyone? Or the fast growth of resource-rich emerging nations over the last 20 years.  

They’re all reducing demand for U.S. dollars as they increasingly trade in local currencies, and as they increasingly hold non-dollar currencies in reserve. 

I could go on, but then this dispatch just devolves into a history tome. 

Instead, I will cut to the chase: Where does all of this go—what will The Final Reset be and what will it look like? 

It won’t be pretty, for sure. It will be painful, that’s a given. Great wealth will evaporate. And as with Nixon’s August 15 dictate, the reset will involve a fundamental change to the global monetary system we’ve had in place for decades. 

On the sunnier side of this dark street, it will present opportunities for those who recognize a reset is in the cards—that it simply has to happen to save Western economies from a devastating collapse.  

Of course, you need to begin preparing now because once a single domino topples, the reset will begin to unfold quickly. 

But we will pick up with that tomorrow…