For gold bugs, August 15, 1971 is a day that will always keep them up at night.
On that fateful day, President Richard M. Nixon officially closed the gold window.
In doing so, the final link between the US dollar and gold was severed.
Before this move was made, foreign governments had the privilege of redeeming their dollars for gold.
But because the Federal Reserve began engaging in inflationary monetary policy during the 1960s, foreign governments started to redeem increased amounts of dollars for gold.
The easy money policies of the 1960s were no coincidence.
In the 1960s, the US engaged in an orgy of military spending during the Vietnam War while also spending beaucoup bucks on Great Society domestic programs.
Guns and butter baby!
Someone had to finance this government largesse and the Fed gladly took on this role.
By removing the restraint of gold redemption, the Fed could carry out more inflationary monetary ventures than ever before.
The 1970s showcased the many perils of an unrestrained Fed.
First off, the US was at the mercy of an Arab oil embargo that led to a full-fledged energy crisis.
Inflation was also in the backdrop — a logical result of the easy money and big spending in the 1960s.
The government attempted to fight inflation by enacting price controls.
Richard Nixon’s Executive Order 11615 was designed to “stabilize the economy, reduce inflation, and minimize unemployment.”
Although the price controls were designed to fight inflation and counter the effects of the Organization of Petroleum Exporting Countries (OPEC)’s production cuts, these price controls failed to control inflation.
But it didn’t stop there. The price controls created a whole new set of problems in the form of shortages.
If you dust off your history books, you’ll probably remember those long lines being formed at gas stations throughout the 1970s.
Those weren’t random occurrences, folks!
They’re the product of price controls, which prevent market actors from making adjustments to supply and demand.
Basic economics has never been a strong suit of politicians.
The US economy continued to sputter under Jimmy Carter’s watch who did little to undo the easy money policies and economic interventionism of the Nixon administration that created America’s stagflationary environment.
It wasn’t until Ronald Reagan came into office in 1980 that economic sanity was restored in the US.
Prudent tax cut policies and deregulation measures coupled with Fed Chair Paul Volcker’s move to increased interest rates, allowed the American economy to recover.
The malaise of the 1970s was soon an afterthought.
However, the effects of going off the gold standard are still being felt to this day.
The proof is in the pudding:
Since 1971, the value of the dollar has plummeted by 98%. In purchasing power terms, a dollar today is worth 2 cents compared to 1971.
You can thank the Federal Reserve for that level of monetary debasement.
It’s amazing what a half century of money printing can do to a nation’s currency.
Inflation is a blight on the economy as it punishes savers, while debtors benefit.
It’s one of the principal catalysts behind the growing wealth gap in America.
Let’s face it, we’re likely not bringing the gold standard back.
Politicians love easy money. After all, they need a massive central piggy bank to finance their domestic and military ventures.
But who said that you can’t profit from inflation?
Thank goodness for income properties.
They’re the most proven asset class and they’re great in inflationary contexts.
I know you probably have your doubts.
There are a lot of financial “experts” who are absolutely afraid of debt.
To be sure, there was once a time where debtphobia was justified.
In fact, in the present, it makes sense to avoid consumer debt.
But in the post-1971 world, it’s a whole different ballgame.
Pardon my French, but debt is my favorite four-letter word.
You see, taking on mortgage debt is effectively shorting the US dollar because you can pay it back in cheaper dollars.
Here’s how it goes.
When you borrow for a $100,000 house in 2020 or this year, and each year there’s inflation, you’re still paying back the same fixed amount of $100,000.
Here’s the catch though: You’re outsourcing the carrying costs to tenants and paying back the mortgage with cheaper dollars.
In the end, you win and the banks lose.
It’s the ultimate political statement.
You don’t even have to consume hours of political news or wait in line to pull a lever for a political candidate to stick it to the powers that be.
It’s up in the air if we’re going to return into a stagflationary environment like the 1970s.
Frankly, I’m not in the business of making economic predictions.
But I’m big about preparing yourself for all economic upheavals that come your way.
And the best way to do that is by joining us at the Empowered Investor Inner Circle.
At the Empowered Investor Inner Circle, you’ll receive the only education you’ll ever need to become a successful real estate investor.
In this community, there are experts and members around the country who are equipped with the latest in cutting-edge real estate investing techniques to help you make the most of your investments in the inflationary times that await us.
These guys have years, and even decades, of real estate investing experience through thick and thin.
Been there, done that is the motto of this community.
There’s plenty of quick fix solutions out there promoted by people who claim to be experts in their field but have ZERO experience in delivering the goods.
The Empowered Investor community is just on a different level and it’s leading the way in helping countless people build wealth and thrive no matter the economic circumstances.
The Empowered Investor Inner Circle is the community that will put you on the path to maximizing your return in life.
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