I read a lot.
I especially love history.
As I contemplate current events, I try to evaluate what are the most significant and important economic developments of our time. While my conclusions are open for debate and only an educated opinion, I’d like to share with you what I think are the most pivotal moments in American monetary history and why 2022 will be remembered in the history books as a very important year in terms of defining money.
The way that I interpret economic history, there are four major events which have shaped America and the economies of the world. They are:
- December 23, 1913 – The Creation of The Federal Reserve.
- April 5, 1933 – Executive Order 6102 – which made it illegal for U.S. citizens to own gold.
- July 1 – 22, 1944 – The Bretton Woods Conference which ushered in the age of the U.S. dollar being the Reserve Currency of the world.
- August 15, 1971 – President Richard Nixon closing the gold window and ushering in the age of floating exchange rates.
These four events have been the most pivotal in shaping monetary policy and defining money for the last 125 years.
The Federal Reserve was created on December 23, 1913, in response to several financial panics that had plagued the United States in the late 19th and early 20th centuries. The purpose of the Federal Reserve was to stabilize the economy by providing loanable funds to banks and other financial institutions, thereby ensuring that businesses can continue to invest and grow even during periods of economic downturn. The purpose of the Federal Reserve is to promote stable prices and maximum employment. It implements this mandate through monetary policy, regulating the money supply to maintain price stability.
The effectiveness of the Federal Reserve has been hotly debated over the years, with some economists arguing that it has not done enough to prevent recessions, while others argue that its actions have actually made recessions worse. Despite these criticisms, the Federal Reserve remains one of the most powerful institutions in the world, and its mission statement continues to be “to promote sustainable economic growth and maximum employment.” The Federal Reserve also supervises and regulates banks to protect the integrity of the banking system and ensure consumer protection. In addition, the Federal Reserve provides financial services to depository institutions, the government, and foreign official institutions. The Federal Reserve is often referred to as “the Fed” and it is the central bank of the United States. The Fed is headed by a Board of Governors, which consists of seven members who are appointed by the President and confirmed by the Senate. The current Chairman of the Board of Governors is Jerome Powell.
How effective has the Fed been? The following chart, created by the Saint Louis Federal Reserve paints the entire picture. Since its inception, $1000 in 1913 dollars is currently worth $34.20. This represents a 96.5% reduction in purchasing power of the dollar.
Based upon this graph you can make your own determination on how effective the Fed has been in creating price stability!
The next pivotal moment in economic history was on April 5, 1933, when President Franklin D. Roosevelt signed Executive Order 6102, which made it illegal for U.S. citizens to own gold.
The order was part of FDR’s effort to stabilize the economy during the Great Depression by taking the country off the gold standard. Prior to Executive Order 6102, gold could be freely bought and sold, and its value fluctuated along with other commodities. However, after the order was enacted, gold became a contraband item, and anyone caught possessing it could be fined up to $10,000 or imprisoned for up to ten years. While some gold was turned over to the government voluntarily, much of it was confiscated through raids on private homes and businesses. In all, approximately 650 tons of gold were seized during the implementation of Executive Order 6102.
Prior to 1933, the United States was on the gold standard, which meant that currency was backed by gold. During the Great Depression, people began hoarding gold, which led to a decrease in the gold supply. To stabilize the economy, President Franklin Roosevelt confiscated gold and made it illegal for citizens to own gold bullion. The move helped to increase confidence in the economy and was part of FDR’s New Deal policies. After World War II, the gold standard was enabled primarily for trade between nations.
The next monumental economic event occurred at the Bretton Woods Conference, which was held from July 1-22, 1944, in Bretton Woods, New Hampshire.
The conference resulted in the creation of the International Monetary Fund (IMF) and the World Bank. It also established a system of exchange rates between nations, based on the gold standard. The conference was attended by representatives from 44 Allied nations. The primary goals of the conference were to rebuild Europe after World War II and to create a more stable global economic system. The agreement also pegged the exchange rate of gold to the US dollar, making the dollar the de facto global reserve currency.
Last on my list of most significant economic events in American economic history August 15, 1971, when President Nixon took the United States off the gold standard by suspending gold convertibility and closing the “gold window.”
This effectively ended the Bretton Woods system of fixed exchange rates, and instead ushered in a new era of fiat currencies and floating exchange rates. There are several reasons why Nixon may have taken this dramatic step. One possibility is that he wanted to free up US monetary policy to combat inflation. With the gold standard in place, the Federal Reserve was constrained in how much it could expand the money supply.
This move effectively ended the Bretton Woods system of fixed exchange rates that had been in place since the end of World War II. By suspending gold convertibility, Nixon allowed the Fed to print more money without having to worry about maintaining gold reserves. In addition, by moving to a floating exchange rate system, Nixon made it easier for US exports to compete in international markets. With a fixed exchange rate, US exports would become more expensive as the dollar appreciated relative to other currencies. However, with a floating exchange rate, the dollar would adjust automatically to changes in supply and demand, making US exports more competitive. Thus, while Nixon’s decision had far-reaching implications for the global economy, it also served his domestic objectives.
For the last 50 years I have listened to financial expert’s bad mouth gold as a barbarous relic. Really? Here is a snapshot of Gold’s performance compared to the Dow Jones Industrials Average from August 15, 1971, to present.
You be the judge as to what holds its purchasing power better. Gold has outperformed the Dow by 1325%.
I’ve studied these four events in detail to try and I’m convinced that 2022 will go down in history as a year equally as pivotal.
Why?
Two events occurred in the first quarter of 2022 which will have the most far-reaching economic consequences of which I can think.
Event #1 – February 21, 2022 – Justin Trudeau the Prime Minister of Canada won approval from the House of Commons for the Emergencies Act.
The Act was passed in response to the “trucker’s strike.” This act allowed the government to take unprecedented power in the name of national security, including the ability to suspend due process and confiscate assets. The Act also allows for the detention of suspected terrorists without trial. While the act has been criticized by many as a violation of international law, Trudeau has defended it as a necessary measure to protect Canadians from future attacks. While some argue that these measures were necessary to protect the country during a time of crisis, others point to the lack of accountability and oversight as a major concern. Critics also argue that the Emergency Act violated Canadians’ rights to property and due process, and that it gave the government totalitarian power.
Event #2 – February 28, 2022. No sooner had the ink dried on the new Canadian law when on February 28, 2022, the United States in response to the Russian invasion of Ukraine decided to confiscate Russian assets and along with the EU impose harsh economic sanctions. The Central Bank of Russia was blocked from accessing more than $400 billion in foreign-exchange reserves held abroad and the EU imposed sanctions on several Russian oligarchs and politicians. The purpose of the sanctions was to prevent further encroachment by the Russian government into Ukrainian territory and to compel Russia to comply with its international obligations under the UN Charter and various treaties The confiscation of assets component froze the assets of individuals and entities involved in the invasion.
The monetary system as we know it today has been weaponized. Western democracies have resorted to desperate measures to maintain their grip on power, and this has led to the erosion of property rights and the exploitation of everyday people and other governments.
It matters not whether you love or hate the truckers, and/or Russia, all that matters is that Western democracies violated the very principles which define them as being progressive and civilized when they decided that individuals and other governments were not entitled to possess their own wealth because they disagreed with a prevailing policy, action, or behavior.
It was a clear “my way or the highway” as far as international law was concerned. You would expect this from a third world, banana republic dictator, but not from the leaders of the United States and Canada. The consequences of this behavior are monumental because they will further violate trust and trade which is what makes the economic world go round.
Stop and think about it.
Do you think other nations when they see this expropriation of assets are willing to invest their monies in the borders of Canada and the United States? Since Treasury policy often depends upon foreign nations purchasing other nations debt these incidents threaten the very foundation of all liberal democracies and how funding occurs.
The problem is that once you see these events you cannot unsee them!
If a government does not respect property rights, what do they respect? When a government no longer respects property rights, it erodes the power of its citizens and undermines the stability of liberal democracies. Property rights are essential to individual liberty and economic freedom. Property rights are the cornerstone of any liberal democracy. They protect the power of individuals and families to accumulate wealth and to pass that wealth down through the generations. Without respect for property rights, government officials can freely seize land and businesses, and redistribute them as they see fit. This leads to cronyism and corruption, as well as economic stagnation. Moreover, without property rights, there is little incentive for people to invest in their own businesses or to take care of their stuff. Show me a country that does not respect property rights and I will show you a poor country. Show me a country that does not respect property rights and I will show you a country that does not respect human rights either.
I consider these two events from 2022 to be central towards understanding what is happening in the world. Over the past week, the media services are reporting that Vladimir Putin has once again organized the B.R.I.C.S nations, which consist of Brazil, Russia, India, China, and South Africa to organize world trade away from the U.S. dollar.
In other words, it clearly appears that there is a massive move towards de-dollarization. Russia is redirecting all its trade flows away from dollar denominated goods and services and encouraging other nations to do likewise.
Pay attention, this move will help define money moving forward. Particularly since Putin has backed his currency with gold.
De-dollarization is the process by which countries move away from using the US dollar as the primary currency for trade and begin to use other currencies, such as the euro or the yuan. While this may seem like a simple shift, it can have major implications for international trade. For one thing, it can disrupt trade flows. If a country that typically uses dollars to buy oil suddenly begins using euros instead, the oil market may be thrown into chaos. Additionally, de-dollarization can lead to increased tensions between countries. As different countries define value in different ways, de-dollarization can be seen as an affront to US power and influence. Finally, de-dollarization raises questions about what money is and what it represents. If the dollar is no longer the global standard, what will take its place? These are just some of the consequences of de-dollarization that trade experts are grappling with. All of this has profound implications for the global economy and your investment portfolio.
I have written extensively about this here:
What Effect Will De-Dollarization Have?
The Most Empowering Trading Question: Who Is Winning?
Are We Witnessing an End to the Petrodollar?
The bottom line is – fasten your seat belts. Money is quickly being redefined and the risks to your purchasing power have never been greater.
Cryptocurrencies were developed exactly with this type of economic framework in mind. Yet, despite that look at how the crypto markets have been decimated over the past 7 months.
The beauty of the crypto markets is that they are the only asset class that truly promotes authentic property rights in several different ways.
First, they provide a way for people to own and control their own money, without the need for a bank or other third party. One of the key features of cryptocurrencies is that they are decentralized, meaning that they are not subject to the control of any single entity. This has several implications, one of which is that it promotes property rights.
Cryptocurrencies are often referred to as “digital property,” and for good reason. Just like traditional property, cryptocurrencies are scarce resources that are owned by individuals. Unlike traditional property, however, cryptocurrencies are not subject to the whims of governments or other powerful institutions. This makes them much more resistant to seizure or confiscation and gives individuals a greater degree of control over their own wealth. This increased control over one’s property is a major benefit of cryptocurrencies and is one of the things that makes them so attractive to many people. Another way in which cryptocurrencies promote property rights is using cryptographic keys. To own a cryptocurrency, an individual must have the private key associated with that currency. This key gives the owner exclusive access to the funds stored in that cryptocurrency and prevents anyone else from spending those funds. This ensures that only the owner of a cryptocurrency can decide how to use it, giving them complete control over their property. This means that people can hold onto their money and use it as they see fit, without having to worry about losing it to inflation or other financial institution concerns.
In addition, cryptocurrencies also offer a degree of anonymity, which can be helpful for people who want to keep their property ownership private.
Finally, the decentralized nature of cryptocurrencies means that there is no central authority that can exercise control over the currency or confiscate funds. As a result, cryptocurrencies offer a high degree of security and protection for property rights.
We are living in interesting times.
Huge risks always present massive opportunities.
How do you make sense of it all?
In today’s day and age, I highly encourage you to utilize artificial intelligence in your trading decision-making process.
While a.i. in its present form cannot answer the effect that de-dollarization will have on the American economy, it is the best and most effective way to avoid dangerous markets and stay on the right side, of the right trend at the right time.
Traders have to focus on what “IS” happening. The Vantagepoint A.I., with its accurate forecasts, is here for you!
We are witnessing incredible volatility because of the complexity the arises when you confront the intersection of the legacy financial system and redefining money. But the artificial intelligence continues to excel in keeping traders on the right side of the right trend at the right time.
Finding value is becoming a completely consuming activity on the part of traders and investors. The target moves quickly based upon too many factors that remain unseen to the naked eye.
Most traders have problems with the timing of their trades.
If you want to win, it’s all about who has the best tools.
The beauty of neural networks, artificial intelligence, and machine learning are they are fundamentally focused on pattern recognition to determine the best move forward. When these technologies flash a change in forecast – pay attention, it is newsworthy.
We often do not understand why something is occurring but that does not mean that we cannot take advantage of it. Remember What’s Important.
Price is the only thing that matters when we are trading. It is what can make you wealthy or decimate your account. Everything else is just noise. Stories are everywhere offering drama, fear, and endless dreamlike opportunity.
Are you capable of finding those markets with the best risk/reward ratios out of the thousands of trading opportunities that exist?
Knowledge.
Useful knowledge.
And its application is what A.I. delivers.
Isn’t that what we all want from the markets? Consistency.
See for yourself how a machine-based learning software makes it easier to find statistically solid trends and generates better returns with less risk.
Most traditional indicators that traders use today were developed in the 1970’s and 1980’s. They are incapable of telling you what the market is going to do moving forward.
Once again, machine outperforms humanoid.
It’s important that you find out more and discover why artificial intelligence is vital in protecting the purchasing power of your portfolio.
Join us for a FREE, Live Training. We’ll show you at least three stocks that have been identified by the A.I. that are poised for big movement… and remember, movement of any kind is an opportunity for profits!
Discover why artificial intelligence is the solution professional traders go-to for less risk, more rewards, and guaranteed peace of mind.
Visit with us and check out the A.I. at our Next Live Training.
It’s not magic. It’s machine learning.
Make it count.
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