Mid-August 1971, marked a day in economic history that was bound to create problems down the road. August 15th of that year was the date that fiat currencies became uncoupled from the commodity that gave them tangible value. Prior to this date, world currencies had been backed by precious metals. This monetary dependence relied on the fact that $35 would allow the purchase of one ounce of gold from the US Treasury to central banking systems willing to make the exchange.
With Watergate looming in the public psyche and the Vietnam War stimulating Americans to activism on the home-front, it’s no wonder that the value of paper currencies was thrown out the window, like the proverbial baby with the bath water. This phenomenon was just just one more blunder of the Nixon administration, but in retrospect may have been the biggest one of all, at least in terms of future economic repercussions.
Perfection with regard to monetary policy was also not evident in the prior Bretton Woods system which ultimately created the World Bank and attendant International Monetary Fund. The death of Bretton Woods, however, signaled the end of multinational financial decision making, as the world power that held the most cards strong-armed the proceedings.
Although fiat currencies continue unfettered by tangibles, like silver and gold, these precious metals continue to escalate in value as governments wield power over the beleaguered greenback. Unfortunately, all paper currencies are still inextricably linked to the US dollar.
Precious metals are once again taking the global stage, as value stores while worldwide economic crises continue to unfold. It seems that adding precious metals, like silver to wildly fluctuating investment portfolios, could actually stabilize the value of our personal savings, once again.