I want to read Richard Nixons justification for why he got us off the gold standard. I would like you to respond. This is from RN, his memoirs. He says the second week of August, the British ambassador appeared at the Treasury Department to ask that $3 billion be converted into gold. Whether we honored or denied this request, the consequences of our action would be fraught with danger. If we gave the British the gold they wanted, then other countries might rush to get theirs.
If we refused, then that would be an admission that our concern that we could not meet every potential demand for conversion into gold. There was substantial disagreement on closing the gold window, in other words, suspending the convertibility of the dollar into gold. I decided to close the gold window and let the dollar float as events unfolded. This decision turned out to be the best thing that came out of the whole economic program I announced on August 15th of 1971.
What is your response to President Nixon? Well, first of all, the dollar didn't float. It sank because when we, when we went off the gold standard, well gold was so the gold price was $35.00 an ounce and they tried to devalue the dollar twice and they they ended up at about $42.00 an ounce when they closed the window. So you could buy an ounce of gold for $42.00. Now, even with the drop the last couple days, you still need $2600 to buy that same ounce of gold.
So I wouldn't say that was a success. You know, in fact, if you go back to the hearings that they had on, you know, removing gold convertibility for the dollar and, and by the way, the actual definition of a dollar as defined by the Coinage Act of 1792, the dollar was defined as a weight of gold or silver. So that's actually what a dollar was. It wasn't a piece of paper. It was actually a quantity of gold or silver.
But when they, when they were, you know, going to talk, when they talked about removing gold backing, you had like the secretary of the Treasury, the chairman of the Federal Reserve, they all, they all testified. Yeah, we should, you know, we should, you know, detach the dollar from gold. And their argument was that the dollar was propping up gold and that if we could free the dollar from gold, the dollar would rise and gold would fall. Like my father actually
testified. And he was the only people that said, no, it's going to be the opposite. And you're going to have price of inflation, gold's going to go up. You know, then he said a dollar backed by nothing can't be better than a dollar backed by something which which was true. And he and he, And so everything that he said in his testimony stood the test of time. Everything the government experts said was completely
wrong. But, you know, the reason that foreigners were trying to convert their Federal Reserve notes to actual money was that was the deal we made with the world. The world was on the gold standard and we told the world, look, instead of having gold as your reserve, have dollars because you can get the gold whatever you want it just redeem it, it's $3035.00 an ounce. In the meantime, you can take those dollars and loan them to us and buy our treasuries and you'll get interest.
So it's like a way, you know, you, you give us your gold, you take these dollars, you loan them to us, we'll pay you interest, but you can have your gold whenever you want it. So it was a great deal for the world until we screwed them. You know, they, you know, they talk about, oh, you know, we've never defaulted. United States has never defaulted. We 100% defaulted on all those Federal Reserve notes because why do you think they're called notes, right? And notice a promise to pay.
So we promise to pay foreigners gold if they had Federal Reserve notes. Well, when they tried to get their gold that we promised to pay, we defaulted and we said you can't have the gold, you know, So we have a history of defaulting. But that is really was a significant thing because once that happened and, you know, gold went up to 850 pretty quickly. And the dollar tank, you know, that's why oil prices went from $3 a barrel to $30 a barrel, right? It wasn't OPEC sticking it to us.
We try to stick it to OPEC. We try to buy their oil with paper. We used to buy their oil with gold and then we tried to pay paper. They want you to pay paper. We need a lot more, you know. And so the price went up. But what happened was Reagan came along and the inflation scare and rates went up and then the world kind of went back, you know, stayed on the dot. The gold, the dollar standard, even though it wasn't backed by
gold, right? The original reason for Bretton Wood was the dollars convertible to gold. This is as good as gold and that. And we sold the world on that and they bought it. We screwed them in 1971. And but then by the 80s, they forgot about that. And they like, all right, let's stick with the dollar anyway. And then the US was like, wait a minute, So we could just print dollars. We don't have to have any gold. We just keep printing dollars.
It's like, imagine if you had a checkbook and you could just write checks and nobody ever tried to cash them. And once you realize that I can buy whatever I want, it doesn't matter what I've got in a bank. And so we started flooding the world with our worthless IO us and our whole economy changed. Hey, we don't have to make stuff anymore. Let the Chinese make it. Let them deal with the pollution. We'll just print some money and
give it to them. And so all of our factories started shutting down and we started importing all the stuff we weren't producing and paying for it by pretty money. It was like a great deal. And the world is doing all the hard work and they're just stockpiling our, our dollars, our paper money that we create for nothing.
So we built up this whole service sector phony economy and, and, and, and now it's at this extreme level because of how, you know, long the dollar has been the reserve and how we've been able to build up economy that under normal circumstances could never survive. And if the dollar's reserve status goes, I mean, we collapse, you know, like a House of Cards because, you know, we're, we've never been more dependent on it than we are
right now. And, and, and, and, you know, we have this massive debt and we need to keep borrowing more and more money to sustain it. But it's all in dollars. So people have to have coffee. They want to have to loan us all these dollars even though we can't possibly repay the dollars we've already borrowed. All we can do is print more and destroy their value. And, you know, the way our whole debt system works, nobody ever gets repaid anyway because everything has to be rolled over.
I mean, the only way we can make good on a treasury is if we can sell another one to somebody else. It's just a giant Ponzi scheme that has to get bigger and bigger and bigger. But, you know, at some point, the world is going to be OK. You know, this, this, you know, this isn't going to work. We don't, we don't want to play this game anymore because we know how it's going to end. And, you know, maybe Trump will accelerate that once this
euphoria is gone. And the $36 trillion debt quickly becomes 40 trillion, 45 trillion, 50 trillion. And it's like, you know, OK, you know, and we just keep pretty money, pretty money. The whole thing has got to implode. And that's going to be a very difficult adjustment process for the United States because if we can no longer depend on the dollar's reserve status, that means we have to live within our means. That means we can't consume so much more than we produce.
That means we can't borrow so much more than we save. But our whole economy is built on us doing that, right? And So what happens when you have to restructure that economy, when all the shopping centers strip have to shut down because we there's nothing on the shelves, We can't keep shopping anymore because we don't make any of this stuff that was on those shelves. We have to start producing
things again. Now maybe it'll be easier with with, you know, AI and robotics and stuff like that. I mean, hopefully that will be something that makes rebuilding the economy easier. But this whole artificial economy has to collapse in order for a real one to take its place. That's why it hasn't happened, because nobody wants to let the phony economy take collapse because so many people are enjoying the phony economy, and so many people would be hurt if we allowed it to collapse.
So we have to continue to sustain it. But the more we sustain it, you know, the bigger the bubble gets and the more painful it ultimately is when it eventually collapses, which it always does.