VAN NUYS BLOG SUPPLEMENTAL STROKE B:

This past weekend when I clicked “publish” on my blog about the origin of the Gold Standard, I opened the news headlines and was amazed to read about a Golden Anniversary: it was 50 years ago, on August 15, 1971, that Pres. Nixon came on TV to announce that the Universe had changed. The dollar would no longer be backed by the Gold Standard. I unpublished, and rewrote to mark the event.

Nixon’s forgotten bombshell came despite the Gold Standard having been staunch Republican policy for 100 years, and in contradiction to the library of Republican economic tracts and editorials and sermons promising ruination should we leave the Gold Standard, and to boot, he announced it as an imperial fait accompli…so, wow, goodbye to all this:

Nixon is correctly regarded as small-minded, anti-intellectual, bigoted, regressive and paranoid. So it is astonishing that, though he considered them maggots, he actually seems to have read the reports sent up by the weak-kneed pink Ivy League effetes staffing his cabinet offices. He perceived that with hard money, the Main Street economy was in imminent danger of a crash, a slump, and then a slippery, never-ending deflation. [Patient Reader, take that bemused look off your face, economic troubles for the masses were really a big worry to him. Back then, under the New Deal, and having fought three wars in succession, we hadn’t known hard times for a generation. Nixon worried about bringing home an army of angry, dope-smoking veterans exposed to Godless Communism. If the country had no jobs for them, no churn, no frontier, no growth, and no future, his historical page would be a wet crumpled-up wash rag on the john floor of the Library of Congress’s remaindered book jumble sale.] Nixon’s base were Christian Main Street cloth coat conservatives, not the worldly Rockefeller wing. Bankers existed, in the world of downtown Van Nuys, to make car loans and give enough interest on the savings account so that a man of 24 had enough saved already to buy a low-mortgage bungalow for his pregnant bride. And too often, they wouldn’t do even that. Nixon didn’t go to Yale and showed it now; he thought the Old Money was betraying America by hedging their American wealth in gold, and limiting America’s future growth. Nixon looked past the aura — the mystical, Calvinistic, 17th century alchemical absolutist purity of the Gold Standard — and saw the Witch of the East. He dropped the house. William Jennings Bryan was right. The one-earner + one-shopper + two-car passbook-saving Malthusian-positive family, his base, had been crucified upon a Cross of Gold.

“Prosperity without war requires action on three fronts. We must create more and better jobs. We must stop the rise in the cost of living. We must protect the dollar from the attacks of international speculators. [Slyly dog-whistling to voters: the “You-know-who-skis.”] We are going to take action. We are going to move forward to a new prosperity without war that befits a great people, all together, and along a broad front.”
— From Nixon’s Saturday, August 15 1971 broadcast

Nixon became convinced a larger money supply would help achieve conditions for the marvelous velocity of money effect of full employment. This would need planning and management, and strong Federal control. But it was not socialism, if it was managed by a guy like him.

Pres. Roosevelt, in 1933 during the Depression [caused by the “Lords of Finance: The Bankers Who Broke The World,” Ahamed, Liaquat Penguin, 2009] had already faced down the gold-bugs by doubling down on gold.The New Deal aggressively moved to buy, hoard, smuggle in, and prop up the gold dollar by counter-intuitively making dollars not convertible to gold. Gold was recalled from circulation, wedding rings excepted, and citizens were given back paper currency at a set price. The U.S. Treasury buried them in Fort Knox and made it illegal for Americans to buy gold coins at all. This earned the howls and hatred of conservatives for being a class traitor. But Roosevelt intended to maximize the amount of gold available to the government to back the paper he needed to prime the pump. 40 years later, in a sense, Nixon was just making the New Deal official: not only was gold not convertible, but the amount of dollars issued into the economy would henceforth bear no relationship whatsoever with the amount, or price, of gold in the world’s vaults.

It took a Quaker Siegfried from California to finally slay the dragon of the Rhinegold. World governments were marshaled into the scheme, the Fed banks and Treasury Dept. and International Settlements systems were upgraded to IBM punch cards, and by mid 1973, the apparatus for the petrodollar was up and running. So, while the Brady Bunch went to Hawaii, Nixon’s mandarins were placing the dollar in an intricate “basket of currencies and commodities” (gold included, and oil); all balanced against each other in the new global currency market. That sounds like a Round Table of equals, but in reality, it was dollar imperialism. The keystone role of the dollar as the world’s trade coin was mortared in place with a kind of agio — an extra premium value over other currency. This was guaranteed because of the agreement that the world oil market would be denominated only in U.S. dollars. This means that before any other country gets to fill their gas tank, even with their own oil, their money has to first stop at the U.S. Temple to visit the moneychangers. This agio petroleo, which few American citizens even know exists, is the source of Original Sin: American Exceptionalism. It floods our economy with billions and billions of unearned dollars’ worth of purchasing power. If another country gets rich by developing, if they use more oil to fuel their growth, their rise isn’t “eating our lunch” at all! It only helps the U.S. economy rise higher still above them! It’s a neat trick, but it…set the planet on fire with burning oil, wars and greed and it has baked the Tree of Life to certain extinction right down to the roots, within my lifetime. It mightn’t have been that way.

Nixon seemed to want to harness the agio petroleo to finance universal health care, up-grade the South to modernize and equalize our racist economy, boom the starter-furniture showrooms once more, and set the clean-shaving barbers in Van Nuys abustle with jovial backslapping and clean racist jokes. There is good reason to believe Nixon would be appalled by what happened: plastic 24% credit traps and Quantitative Easing and underwater mortgages and medical bankruptcies and off-shoring and speculative ballooning of asset prices and austerity and starving the public sector and endless “Disaster Capitalism” wars and baking the Middle Class to certain extinction right down to the roots, within my lifetime.

If you don’t remember the Universe changing to a fairer economy in the early ‘70s, you’re not alone. You DO remember why you don’t remember, though — you just have never thought about why Islamic terrorism appeared out of nowhere at just this time.

The OPEC nations, who already saw the agio as a slap in the face, a grabby U.S. “tax” biting into their profits, had a collective conniption when the U.S. turned around and quite brazenly, considering Nixon’s audible anti-Semitic asides, shipped massive armaments to reinforce Fortress Israel. They were incensed that the petrodollars Nixon was stealing from them, he was using to kill them. [In their culture that’s wrong.] In 1972 they picked up their oil, in 1973 they took it home. The Oil Embargo caused a world-wide run for the last drops of gas. Since these fumes now had to be bought in the new petrodollars, it caused in turn a run on the U.S. dollar. That in turn caused the value of the U.S. dollar to soar 40% in the new currency markets. Instantly, every American product all over the world was 40% more expensive. Instantly, every consumer in the world, especially Americans, stopped buying American anything.

Who even remembered we had gone off the Gold Standard? Armageddon was on Main Street’s mind by 1973, not currency. Nixon, itching to try out his new shiny, whirring Modern Middle-Class Money Machine, never got his sweaty hands near the plastic-coated controls. Somebody came along and threw a bucket of Watergate on him, and he melted, melted, what a world…

NEXT IN PART FOUR OF VAN NUYS — A VIEWING: The Van Nuys family in Old New York