Rough Waters Ahead For The US Dollar

There were four circumstances prior to 2008 where the Fed rotated from historic standards and introduced a new monetary policy structure, marking the end of one paradigm and the start of another– a paradigm shift.Historical Paradigm ShiftsThe initially paradigm shift happened in 1933 during the Great Depression when President Franklin D. Roosevelt suspended the convertibility of dollars to gold, effectively deserting the gold standard. Severing the dollars link to gold permitted the Fed to increase the money supply without restriction to promote the economy.Following years of worldwide main banks funding their countrys military efforts in WWII, the monetary system experienced another paradigm shift in 1945 with the finalizing of the Bretton Woods Agreement, which reintroduced the dollars peg to gold. On the night of August 15, 1971, Richard Nixon announced that he would close the gold window, ending dollar convertibility to gold– an explicit default on its financial obligation commitments– in order to curb inflation and avoid foreign countries from retrieving any gold that was still owed to them. Volckers policy change and the reset of interest rates to all-time highs marked the end of 40 years of a rising rate environment.Historical Paradigm ShiftsThe first paradigm shift happened in 1933 during the Great Depression when President Franklin D. Roosevelt suspended the convertibility of dollars to gold, successfully deserting the gold standard. On the evening of August 15, 1971, Richard Nixon announced that he would close the gold window, ending dollar convertibility to gold– an explicit default on its debt responsibilities– in order to suppress inflation and avoid foreign countries from retrieving any gold that was still owed to them.

There were four circumstances prior to 2008 where the Fed pivoted from historical standards and introduced a brand-new financial policy framework, marking the end of one paradigm and the beginning of another– a paradigm shift.Historical Paradigm ShiftsThe initially paradigm shift happened in 1933 throughout the Great Depression when President Franklin D. Roosevelt suspended the convertibility of dollars to gold, efficiently abandoning the gold standard. On the night of August 15, 1971, Richard Nixon revealed that he would close the gold window, ending dollar convertibility to gold– an explicit default on its financial obligation commitments– in order to suppress inflation and prevent foreign countries from retrieving any gold that was still owed to them. On the night of August 15, 1971, Richard Nixon revealed that he would close the gold window, ending dollar convertibility to gold– an explicit default on its financial obligation commitments– in order to suppress inflation and avoid foreign nations from retrieving any gold that was still owed to them.