Dec 6, 2011
The United States has run up a cumulative $7.5 trillion Trade Deficit. The last time the country ran a trade surplus was in 1976. Nixon closed the Gold Window in 1971. Do you believe it's just a coincidence that the rise of an un-backed Fiat Dollar and the rise of the Trade Deficit haapened so close in time? The Country has been in a pronounced economic decline since the 1970's and when the Gold Window was closed. Since then the money supply has increased many times as has inflation.
While living standards have declined, so has domestic energy production. This has exacerbated the Trade Deficit and has cost consumers countless billions. The ability to print up currency and dump it on a willing world, in exchange for their production, has enabled the Government to present the illusion that things are alright. But look at the dying industrial cities in America. Detroit, once a paragon of industrial success, has fallen upon hard times. The average Detroit home is going for $6,000, only 25 percent of students graduate from high school and unemployment among men has reached nearly half of the work force.
Such trade imbalances were much less likely to occur under a Gold Standard. Countries were not likely to allow complete depletion of their gold reserves. Fiat currencies can keep being produced regardless how bad the imbalance becomes. Then it is up to the trading partners to decide whether or not to accept the currency. At some point enough will be enough and it will be game over.
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