The Gold Standard – 1945 to the Recent Past

Front face of $5 and $20

5$ and $20

“FEDERAL RESERVE NOTE”

“THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE”

Two intertwined events took place between the end of World War II and the dawn of the 21St Century.

President Franklin Delano Roosevelt, with the cooperation of Congress, took the United States government took the US economy off the gold standard in 1933 (History.com, here). President Nixon, in 1971, cancelled the direct convertibility of the United States Dollar into gold (wikipedia, here). Slowly, inexorably and inevitably, after World War II, the US Economy itself took the place of the gold standard, within the United States. Thus, US currency, labeled “FEDERAL RESERVE NOTE” and “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE” is backed by “The full faith and credit of the United States.”

During the same time period, as the United States helped France, the United Kingdom, West Germany, other nations of western Europe, Japan and S. Korea build or rebuild their economies, especially in the 1940s, ’50s, and ’60s, the United States became like the gold standard for other countries of the world. Their currencies are not in a de jure manner based on our currency, however, their economies are in a de facto manner intertwined with ours in such as way as to be separable with drastic consequences.

If the US government defaults on its debts – our debts …

  • Russia, Iran, Saudi Arabia, and other oil producers will continue to sell oil – to Europe and China.
  • Interest rates will spike up and stay high because the US Treasury bills will be downgraded to junk.
  • It will weaken, the European Union and the Euro, however, the EU and Euro will recover.
  • It will strengthen the Yen, however, this will continue to be offset by costs to Japan of cleanup of the Fukushima disaster, $1.0 Trillion USD and climbing.
  • Inflation with jump and stay high, globally.
Star Trek, TOS, Cast on the Bridge

Star Trek, TOS

We are moving into uncharted waters, boldly going where none have gone before. Or perhaps, Kirk would say, foolishly going. The shutdown of the national parks and agencies such as the ATF, Dept. of Commerce, DoE, EPA, FDA, IRS, NASA, NOAA, and Dept. of Interior parks such as Gateway National Recreation Areas, Statue of Liberty, Yosemite etc., will have profound effects. Unlike television shows, the shutdown is not scripted; the shutdown will not wrap up neatly at the end of one hour, and the good guys may not win.

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Series on the Shutdown.

  1. L. Furman, Popular Logistics, 9/30/13, Government Shutdown – Partial – Ok, But What’s Next? Default?
  2. L. Furman, Popular Logistics, 10/2/13, The Gold Standard, 1945 to the Recent Past.
  3. L. Furman, Popular Logistics, 10/2/13, Real Shutdown increases Real Unemployment by 800,000 Real Americans.

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Larry Furman is a candidate for General Assembly  (Site / Join / Contribute) to represent NJ Legislative District 12, which stretches from Matawan to New Hanover and includes Old Bridge, Manalapan, Englishtown, Roosevelt, Millstone, Jackson, and various other towns (click here). He is also an analyst with Popular Logistics. He holds a Bachelor’s in Biology, and an MBA in “Managing for Sustainability” from Marlboro College, Vermont. He also has experience in information technology. He can be reached at ‘Larry” at Furman For New Jersey. com.