At the same time, a major financial crisis was brewing... The government had borrowed extraordinary sums, and we were having a hard time repaying creditors. That’s because at the time, every dollar was required to be backed by $0.25 worth of gold. So the government couldn’t print unlimited amounts of money out of thin air. Also, foreign creditors who owned U.S. government bonds were allowed to collect repayments in gold bullion instead of dollars... so our gold reserves were quickly disappearing. Get this: Between 1958 to 1968, 52% of America’s gold reserves left the country in the form of repayments for our debts. The government was scared. It knew there was only one way out... another Debt Jubilee. First, we eliminated the 25% gold backing of every dollar. Then, in 1971, President Nixon completely defaulted on our promise to pay gold for dollars to our foreign creditors. Once again, the government simply wiped the slate clean. No one could redeem dollars for gold any longer. This allowed the Fed to print as much money as it needed to make payments on our debts. But once again, there were consequences...
after booming, the stock market soon fell 50% in a single year. Investor confidence was crushed. Supreme Court Justice Harlan Fiske Stone vowed he would never buy another federal bond. We had another Debt Jubilee in America about 40 years later... Starting in the late 1960s, we saw another populist uprising... a combination of economic and social upheaval. If you’re old enough to remember, think about the anger and resentment of the 1960s. The Black Panthers’ slogan was: “Power to the People.” The idols of the day were people like Latin-American guerrilla leader Che Guevara, Malcolm X, and Muhammad Ali. All over the country, there was one clash after another... Small farmers fought banks and railroads... Union workers battled their bosses and federal judges. On college campuses, students fought anyone with authority. Election rallies routinely ended in violence. Things were so bad, Lyndon Johnson decided not to run for re-election. Martin Luther King Jr. and Robert Kennedy were assassinated. In 1968 alone, there were violent uprisings in more than 120 U.S. cities. A few miles from where my company is headquartered today, thousands of National Guard troops and 500 state police officers were brought in to quell the violence and looting.
American Consequences
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