April 23, 2012
Nixon, Gold and Oil
Bretton Woods collapsed in 1971 when Nixon severed (known as the Nixon Shock because the decision was made without consulting the other signatories of Bretton Woods, even his own State Department wasn't consulted or forewarned) the link between the dollar and gold - the US dollar was now a fully floating fiat currency and the government had no problem printing more money.
Because of the massive printing of the US dollar to cover war and welfare reform costs Nixon worried about the strength of his country's currency.
Recognizing that the US, and the rest of the world, was going to need and use more oil, a lot more oil, and that Saudi Arabia wanted to sell the world's largest economy (by far the US) more oil, Nixon and Saudi Arabia came to an agreement whereby Saudi oil could only be purchased in US dollars. This caused an immediate and strong global demand for US dollars.
The history of fiat money has always been one of failure (most paper money economies downfall can be linked directly to the costs of financing out of control military growth and its wars). Every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of both the currency and of that particular economy.
Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.
Gold remained the basis of the monetary system until 1971.
For the very first time in our history, all money, all currencies, are now fiat - the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to - when the US dollar became fiat, all the worlds currencies became fiat.