The dotcom bubble. The financial crisis of 2008 and 2009. The oil price spiral of the 1970s. The launch of the single currency. It would be fun, in a nerdish kind of a way, to debate which was the most seismic economic event of postwar history. But in fact the answer would be this: the ‘Nixon shock’, a fateful day when the final link between gold and the money you carry around in your pocket, or on your bank card, was finally severed. And it happened 50 years ago this week.
A half-century on — enough time for some historical perspective — how’s it going? Well, since then we have seen a couple of rounds of hyper-inflation, and may be heading into another; a couple of spectacular asset bubbles; the worst financial crisis the world has ever known; the lowest interest rates since records began; and debt exploding on a scale that would once have been unimaginable. Stable? Not exactly. The gold standard was not perfect, far from it. But in reality we are still reeling from the Nixon shock, and trying to work out what a functioning monetary system might look like.
Even with worries about inflation rising, gold has hardly been performing well. It has fallen sharply over the past week, and even more over the past year: down from $2,000 an ounce 12 months ago to $1,740 now. But gold is not the same thing as money any more, whatever its true believers might try to claim. That ended half a century ago.
Gold, along with silver, had been the base of all money throughout most of human history. Under the postwar Bretton Woods system, mainly designed by John Maynard Keynes, the dollar was linked to gold, and other currencies were linked to the dollar.