The following is an excerpt from Simon Black, Founder of Sovereign Man – worth the read!
“When the first shot rang out at Dealey Plaza on November 22, 1963, most bystanders didn’t even realize that it was the sound of gunfire. But Texas Governor John Connally was an avid hunter. He recognized the sound, sensed danger, and turned behind him to check if President Kennedy was OK.
Moments later, the second shot was fired, striking Connolly in his back. And as he looked down and saw his blood-soaked shirt, he shouted, “My God, they’re going to kill us all.”
President Kennedy, of course, did not survive. But Connally eventually made a full recovery. And, having achieved near mythical status in the State of Texas, he was re-elected twice more as governor.
Then, in 1971, President Richard Nixon asked Connally to be Treasury Secretary. Connally accepted the post despite having almost zero experience in finance or economics. And when questioned later by reporters about his obvious lack of credentials, he famously quipped, “I can add.”
(Connally later declared personal bankruptcy.)
The US economy was in bad shape at the time; Nixon’s predecessor, Lyndon Johnson, had spent aggressively on the Vietnam War while simultaneously spending billions of dollars– a prodigious sum in the 1960s– on education, anti-poverty, and welfare programs.
And inflation rose to around 6% thanks in large part to this excessive government spending.
Developed countries around the world began to rapidly lose confidence in the US dollar and the American government’s ability to manage its finances. And the Treasury Department started receiving demands from foreign governments who wanted to redeem their US dollars for gold.
Nixon was in a bind about how to fix the economic mess. And it was Connally– full of Texas swagger (and little else)– who convinced the President to formally end the dollar’s convertibility into gold.
Nixon made the announcement on Sunday night, August 15, 1971, unilaterally ending the “Bretton Woods” international monetary system that had been in place since 1944.
The announcement became known as the “Nixon Shock”. And “shock” is probably the right word. Foreign governments were in a panic; their entire financial system had been snatched away, overnight, without any warning. And politicians don’t tend to handle uncertainty very well.
This is where Connally stepped in yet again to smash foreign governments in the face with their new reality. “The dollar is our currency,” he told his fellow finance ministers in late 1971, “but it’s your problem.”
Connally was essentially pointing out that the rest of the world didn’t have an alternative to the US dollar. Nearly every nation on earth conducted international trade in US dollars. And because they had no other alternative, the US government could do whatever it wanted… including rack up huge deficits and painful inflation.
And that’s what happened. With no reason to restrain itself or have any financial modesty whatsoever, US government spending soared. Deficits piled up year after year, leading to a particularly nasty episode of stagflation in the 1970s.
One of Connally’s lasting legacies was scaring the world into setting up an alternative to the US dollar.
Europeans in particular were freaked out by the Nixon Shock… so much, in fact, that western European nations eventually banded together to form their own currency as an alternative to the US dollar; today the euro has about a 20% share of global financial reserves. But with a 60% market share, the US dollar is still dominant. For now.
More than fifty years after the Nixon Shock, the US government still has no financial restraint. Annual deficits easily top $2 trillion, nearly 10% of GDP. America’s fiscal situation is so bad that, within the next decade, 100% of tax revenue may be consumed just to pay for mandatory entitlements (like Social Security) and interest on the debt.
If that weren’t bad enough, the Treasury Department has also made a habit of weaponizing the US dollar, i.e. threatening individuals, businesses, and foreign governments to bend to its will or else be cut off from the global financial system.
It’s no wonder that there’s been so much in the news lately about alternatives to the US dollar. Late last year, for example, Saudi Arabian officials said that they were “open” to selling oil in a currency other than US dollars (i.e. Chinese yuan). And just a few weeks ago, members of the “BRICS” alliance expanded their membership in an effort to directly challenge the dollar’s dominance.”
Simon Black, Founder
Sovereign Man
My (John’s) opinion – The demise of the dollar will accelerate. Gone is the exclusivity of the petrodollar. The Chinese Yuan is on the rise. The BRICS (Brazil, Russia, India, China and South Africa) are seeking to add Argentina, Egypt, Ethiopia, Iran, Saudi Arabia (Iran and Saudi Arabia have historically been enemies -Shiite and Sunni) and the United Arab Emirates (Dubai). BRICS is exploring their own currency backed by other commodities. Commodities like Gold, Oil, and other precious metals.
