2.7 Cheating The Game and Breaking The Standard

By the 1960s and 1970s, things had begun to change, and the proverbial leaves across the American forest began to change colors, indicating that winter was approaching in the distance.

Yellows, with tinges of red, began to transform the dashboard of the Vessel of Society, and strangle rumblings began to be heard.

Aspiration, fear, and desire fueled a drive towards the previously impossible. Faced with the daunting prospect of Mutually Assured Destruction, over the course of 10 tense years Americans invented the mathematics and technology required and landed a man safely on the moon.

But where was all this money coming from? How was America affording these great exploits? It was true that the world wanted to save in US Dollars, which could be exchanged directly for gold, which enabled the US to borrow... but something was not right.

The outside world looked in, and began to suspect something was amiss.

Back then, money was based on gold, a dollar was a dollar, and dollars could be exchanged for gold - at $35 an ounce. A dollar meant something, and what it meant was gold at $35 an ounce.

Suspecting that the United States was spending more dollars than it had gold to repay, the world began approaching the window, and asking to exchange the dollars they held for gold.

There was one small problem - they were right, and the gold didn't exist. The United States had borrowed and spent more money than it had gold in the vaults. The United States had cheated The Game it had established, and broken The Standard it had set.

When the fraud was uncovered, Nixon met secretly at Camp David with advisors on August 13, 1971, and then on August 15, 1971, unilaterally shattered the Bretton Woods agreement, defaulted on the obligation of the United States to pay gold for cash, enacted wage and price controls, set a 10% import surcharge, and ushered in the modern era of freely floating fiat currencies.

This was done unilaterally and without the consent of any of the parties who had originally assented to the rules of The Game established at Bretton Woods.

After decades at $35, as I write today the printing presses of fake currency continue to whir, the price of gold hovers near $2,000, and the previous American Order hurtles towards its end.

On August 15th, 1971, money as we knew it, and the integrity of the United States as the backbone of a world order, ended.

As a result of shattering for a second time the quality and integrity of the US Dollar and inflating the money supply...

...once again the market and economy of the United States apparently soared, flushed with the new "money" the government was now free to fabricate.

Predictably, prices soared as more fake money chased limited goods, leading Volcker to 'break the back of inflation' by jacking up interest rates to levels inconceivable in our modern economy.

Because the price of bonds moves inversely to interest rates (falling interest rates make the price of bonds go up, and rising interest rates make the price of bonds go down), interest rates at sky high levels created the potential for a 40 year bull run in the perceived safety of government bonds.

This bull run recently ended when **real interest rates turned negative.

During that time, two generations of Americans became very rich and secure, with those who could afford to riding the skyrocketing prices of their real property and stock holdings towards the heavens...

...or where they actually heading towards a hell they could not perceive coming?

Forward to 2.8 A Last Gasp For the Bull Run
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