How Is Money Created? / Growth and Inflation, Part 1: 97 Percent Owned (Enhanced DVD)
The end of the Bretton Woods system saw the collapse currencies fixed to a gold standard. The question, “what has government done to our money?” offers insight into the timeline of the events leading up to the crash of Bretton Woods between August and December of 1971.
On 15 August 1971, U.S. President Nixon imposed a freeze on price and wage inflation. As European Central Banks moved to redeem “swollen stock of dollars for gold” the Nixon’s executive order established the US dollar as a fiat currency. From that moment forward, the US dollar was no longer pegged to precious metal reserves. Now traded as ‘fiat’ without sovereign gold valuation, the President was forced to fix the currency against Keynesian supply and demand.
Twentieth century international monetary policy shaped by Bretton Woods, the basis of the post-war international payments system, was in large measure and effect of Keynes’ thesis that exchange rates pegged to fiat valuation of credit and the costs of inflation in response to the free flow of international capital, were inconsistent with domestic labor policy and economic strategies, now challenged by multilateral, free-trade.
Throughout the 20th century, Western neoclassical economics most associated with the British School of Keynesian economics followed Keynes’ notions of utility; the foundation to the formal concept of market equilibrium, the basis to capital. Other determinants such as inflation and price, contributed central bank valuation of fiat currency.
How Is Money Created? / Growth and Inflation, Part 1: 97 Percent Owned