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This Week in History:
Nixon Ends Bretton Woods
August 15, 1971

August 2010

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Nixon’s departure after resigning, August 1974

August 15, 1971 is a day which should be emblazoned in the minds of all Americans, and others, who wonder "what went wrong" in the world economy and world politics over the past 30 years. It was on that day, that President Richard Nixon, acting under the aegis of the likes of de facto pro-consul Henry Kissinger, and international bankers, responded to extraordinary pressure on the U.S. dollar, by taking the dollar off the gold-reserve standard. Thus commenced the era of the "floating exchange rate," in which governments lost control of their currencies and credit, and the international speculators had, increasingly, free rein to loot the world economy.

Despite the fact that the international markets had been wracked by currency crises from 1967 forward, the crisis took most professional economists "by surprise." "Free market" guru Milton Friedman, whom President Nixon revered then, and President George W. Bush worships today, had already established dominance in the economic field, with his insistence that governments should stay out of financial policy. Under pressure, Nixon was forced to do just the opposite.

Not only did the President sever the relationship between gold and the dollar— creating total uncertainty in the domain of exchange rates, and throwing a monkey wrench into international trade agreements— but he also declared a wage-and-price freeze, a rather intrusive intervention into the "marketplace," which went precisely against his ideology. The freeze was followed by six months of wage-and-price controls, as the government explicitly began to enforce a reduction in wages, and a more decisive shift away from a producer-based economy.

On the spot, to point out the earth-shattering significance of this decision, was none other than Lyndon LaRouche. Economist LaRouche, who had just established his political organization a few years previously, had been on record, since 1958-59, as a critic of the "consumer" society, and a forecaster. He had forecast, that if the U.S. did not shift its economic policy toward a pre-Truman approach (i.e., toward international, anti-colonial development), that a series of monetary crises would break out in the mid-1960s, leading toward a potential new world depression.

When President Nixon made his move, LaRouche was publicly vindicated, and his organization began to grow by leaps and bounds, on the college campuses, in particular.

At that point, LaRouche made another forecast, which the last 30 years have more than borne out. He said that the continuation of the application of austerity, and monetarist measures, which Nixon carried out, would lead toward the imposition of world fascism, with a depression comparable only to the 14th Century Dark Age, leading potentially to world war as well.

Many have complained over the years, that LaRouche's forecast did not instantly come to fruition. Indeed, there have been many opportunities for shifting the direction of the world economy, each of them flubbed by a political leadership unwilling to take on the axioms of the post-1971 world.

Thus, we have come closer and closer to the establishment of the fascist world empire, of which LaRouche warned.

But today, as the disintegration accelerates, the great potential remains for national leaders and citizens to face the depth of the crisis, realize their mistake, and turn to the leadership which LaRouche's record so amply displays.


The original article was published in the EIR Online’s Electronic Intelligence Weekly, as part of an ongoing series on history, with a special emphasis on American history. We are reprinting and updating these articles now to assist our readers in understanding of the American System of Economy.

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