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The great Keynesian coup of August 1971: Fifty years later

Mises Institute/William L. Anderson/8-10-2021

photo of Nixon, Schultz and Friedman meeting in the White House Oval Office two months before announcement to abandon the gold standard

“On August 15, 1971, the last remains of what had been a magnificent monetary system died a terrible death, and the American academic, political, business, and media elites led the cheers. The Dow Jones Average jumped by more than 32 points the next day. A de facto national default was spun as a great liberation from a tyrannical financial arrangement that had plagued humanity for generations. A half century later the disinformation continues, as intellectual bankruptcy parallels the financial bankruptcy of that event.”

graphic image of a book and reading glasses A Good Weekend ReadUSAGOLD note: Where we have been and where we are going from an Austrian School of Economics perspective …… “The collapse of the monetary order in 1971,” writes Anderson,” reflected the massive dislocations and malinvestment of resources that ultimately turned the decade into one crisis after another, and the current economy is facing risks of even greater magnitude. Unfortunately, Keynesians rule the day, just as they did fifty years ago.” As we have mentioned previously, gold has functioned admirably as a hedge against the fiat money system over its first fifty years. There is no reason to believe it won’t do the same during the next (and probably final) chapters in that saga – however short or long they might be.

Image: Richard Nixon meeting with George Schultz and Milton Friedman in the Oval Office two months before severing the ties between the dollar and gold. Friedman, says Anderson, was not unhappy to see the ties between gold and the dollar broken, even though his theories on economics generally speaking were in direct opposition to those of the Keynesians. Schultz, at the time, was Director of the Office of Management and Budget. Friedman was a professor of economics at the University of Chicago.


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