(NaturalNews) For centuries, the British Pound was the world’s reserve currency, because it was consider to be the strongest of all currencies.
That is no longer the case; shortly after World War II economically devastated the British Empire, the pound retreated as the world’s reserve currency and the U.S. dollar took its place.
At the time, the American dollar — paper, to be sure — was at least partially backed by a physical, valuable commodity, gold. A decade earlier, one of President Franklin D. Roosevelt’s first acts was to take America off the gold standard, which it had used to back its currency since about 1879, to prevent consumers from making a run on banks as the Great Depression dragged on. In addition, FDR signed an order requiring all gold coins and gold certificates of more than $100 value to be turned in to the Treasury Department in exchange for other money. It was Keynesian economics at its best; inflating the government’s gold stash by hundreds of millions of dollars allowed the Federal Reserve to inflate the supply of paper money in the U.S. system.
In 1971, President Richard Nixon completely removed the U.S. dollar from the gold standard by announcing that the country would no longer convert dollars to gold at a fixed value (three years later, his successor, Gerald Ford, would sign legislation permitting American citizens to once again own gold).
Why is all of this important? Because for more than a half-century, the U.S. dollar has not been valued against a hard commodity but rather by the perception that it has value — not at all the same thing. But this is nothing new; in fact, as new research indicates, the U.S. dollar is really no different from 599 other failed paper (fiat) currencies that came before it.
Nothing, it seems, is “sound” forever, even in the world’s most powerful (economically and otherwise) countries.
According to a report by Gold Silver Worlds, the “fix,” as it were, was in to name the U.S. dollar as the world’s reserve even before World War II ended via an accord known as the Bretton Woods Agreement, after a resort in New Hampshire where world leaders met in 1944. But it wasn’t to last; structural economic imbalances occurred so that many of the world’s governments were able to amass huge amounts of dollar reserves, hence Nixon’s decision in 1971 to essentially abandon Bretton Woods:
President Nixon ended the Bretton Woods agreement, which was a worldwide agreement to use the US dollar as the only world reserve currency. The exchange rates between foreign currencies and the US dollar were fixed at a low rate to stimulate economies worldwide. Moreover foreign holders could redeem their dollars for gold at a fixed rate of $35 per ounce. So a certain amount of gold should be held by the US as their reserves. As such, it was a form of a worldwide gold standard.
Nearing the end?
Over the course of decades, the supply of dollars backed by hard assets (like gold) decreased dramatically, falling from 75 percent initially to just 18 percent by the time Nixon took his actions. The dollar — like the euro and the yen and others — is nothing more than “fiat money,” because dollars are no longer backed by a tangible asset. As explained by Gold Silver World, the paper banknotes were just a promise from the bank (in this case the Federal Reserve) to exchange it for a certain amount of real asset, which was almost always gold or silver.
“Over the past four decades however, the concept of money has been reduced to the promise, cutting every tie with a real backing asset. That’s why it’s called fiat money. Do you see what money IN ESSENCE is and what it HAS BECOME?” the site reported. “The monetary environment we are living in, is a ticking time bomb. The evidence is there by looking back in time and see what happened in similar monetary environments.”
Of the 599 failed paper currencies, researchers found:
— 30 percent, or 184, ended with monetary unions, dissolution or other reforms, like the creation of the euro in 1999;
— 15 percent, or 94, ended via acts of independence (such as former colonial states gaining their independence and renaming or issuing new currency);
— 27 percent, or 156, were devastated by hyper-inflation caused by over-issuance of paper money by governments and central banks (sound familiar?); and
— 28 percent, or 165, were destroyed by war — deemed invalid through military occupation and/or liberation (think Confederate dollars).
And there is this: Most paper “fiat” currencies last 38-39 years — the U.S. went off the gold standard completely in 1971, or about 43 years ago.
Written by J. D. Heyes