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We’re getting ’70s flashbacks in markets too


BloombergOpinion/John Authers

Repost from 8-18-2021

Ed Stein cartoon graphic of gold bar flying a dollar kite

“The echoes of that decade are everywhere, but a shock to match Nixon’s breaking of the dollar’s link to gold are unlikely without an inflationary crisis first.”

USAGOLD note: It all gets down to the stability of the dollar as a long-term store of value and medium of exchange. If inflation undermines that stability – if it becomes the problem some believe possible (and to which Authers alludes in the editorial) – there will be changes, and some of those might be beyond the control of the United States. Already, many nation-states have begun turning to gold and other currencies to balance their reserve holdings. And then there is the lingering speculation that China has systematically increased its gold holdings by a significant number – much larger than what it is reporting officially. (Keep in mind that China is still the largest holder of U.S. Treasury securities.) Authers raises the prospect of a return to the gold standard and concludes: “The chances of such a thing happening are between slim and non-existent, at least without a crisis first.” At the same time, he entertains the notion at length. His analysis is food for thought at the link above.

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