- The World Needs a Gold-Backed Deutsche Mark
by Patrick Barron, https://mises.org/
The seeds of sound-money destruction were sown at the 1944 Bretton Woods Conference, which established that US dollars could be held as central bank reserves and were redeemable for gold by the US Treasury at thirty-five dollars an ounce. This was the so-called gold exchange standard, but only foreign central banks and some multinational organizations, such as the International Monetary Fund (IMF), enjoyed this right of redemption. The system depended upon the solemn promise by the US that it would refrain from issuing unbacked dollars. The watershed event that ushered in a new malignant, pure fiat money era occurred on August 15, 1971, when the US abandoned the gold exchange standard in order to stop the drain on the US gold stock.
American money printing had begun in earnest in the previous decade in order to finance Lyndon Johnson’s “guns and butter” policy. The Fed monetized government debt to fund LBJ’s Great Society welfare programs while the government fought a war in Southeast Asia at the same time. Dollar claims in the form of government bills and bonds built up at central banks around the world. At the recommendation of French economic advisor Jacque Rueff, a free market economist and gold standard proponent, French president Charles de Gaulle ordered the Bank of France to redeem 80 percent of its US dollar holdings for gold, per the solemn promise made at Bretton Woods. Thus began a run on the US Treasury’s gold reserves that culminated in President Nixon taking the dishonorable action of abandoning the gold exchange standard. This set the course of unfettered fiat money expansion that has led the world to the precipice of monetary destruction.
This end to the Bretton Woods system—itself already deeply flawed—ushered in the age of competing fiat currencies worldwide. We are now headed toward the chaotic destruction of this system as well.
The Scenario for a Worldwide Currency Collapse
Alasdair Macleod has written exhaustively of the inevitable destructive result of money printing that now has entered hyperinflation in America. Macleod defines hyperinflation not as prices out of control (yet) but as the scenario whereby government spending can be financed only through ever-increasing issues of fiat money. Skyrocketing price inflation, the traditional definition of hyperinflation, follows inevitably from previous acts of excessive and increasing money printing that first reveal their destructive nature in stock market, real estate, and commodity bubbles before emerging as out-of-control consumer price inflation that devastates society, as seen in Weimar Germany in 1923, and more recently in Argentina, Venezuela, Zimbabwe, and elsewhere. The horror stops only when society abandons the hyperinflated money and adopts a new or different currency.