20 Aug 2009

Dress Rehearsal for 2010? Nixon Defends Dollar From the Evil Speculators

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This has been floating around the internet (e.g. LRC), but I just watched it this evening. Rarely have I seen such a video clip packed so densely with economic fallacies and simple lies. But for our purposes, note the emphasis on protecting American workers and the dollar from international speculators. I think we will be hearing the same justification for some more government interventions into the financial system very soon.

UPDATE: After I posted this, I listened to it again. Wow, what a liar. At around the 2:00 mark, he says, “The effect of this action, in other words, will be to stabilize the value of the dollar.” In context, he is talking about domestic purchasing power; he at least admitted in the previous sentence that the dollar would buy less in terms of foreign goods.

OK Mr. President, let’s see how well your promise held up. You took the dollar off gold (“temporarily”…) in August 1971, in order to stabilize its domestic purchasing power. Let’s check out what happened to the annual percentage increases in the Consumer Price Index (CPI) twenty years before and after your merciful move:

Surprise surprise. It looks like when Nixon took away foreign central banks’ ability to turn in dollars for gold, that the Fed decided to print up a lot more dollars, which in turn caused US prices to soar. How odd.

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