Summary
Austrian economics perspective from UFM Market Trends (Francisco Marroquín University, Guatemala) arguing that the 45 years since the Nixon Shock represent a “failed monetary experiment.” The piece contrasts pre-1971 (gold standard) and post-1971 (fiat) records on inflation and federal deficits, arguing the data shows gold convertibility effectively constrained fiscal and monetary policy.
Key Points
- Pre-1971 (1951–1971): average federal deficit/GDP = 0.6%; average inflation = 2.2%
- Post-1971 (1972–2015): average federal deficit/GDP = 3.0%; average inflation = 4.1%
- Gold convertibility acted as automatic constraint: rising debt monetization → rising gold price → gold outflows from central bank → pressure to stop monetization
- Without convertibility: no automatic constraint; debt monetization can proceed; inflation “is nothing more than excess of public spending made into a currency”
- Removed from savers: option to protect wealth as liquid gold; now forced to choose between illiquid risky investments or depreciating cash
- Written August 15, 2016 — 45th anniversary of Nixon Shock
Newsletter Angles
- The hard-money/Austrian perspective offers a useful counterpoint to mainstream monetary analysis — the newsletter should engage with this view even if not endorsing it
- The data comparison (pre/post-1971) is striking and regularly cited by Bitcoin and gold advocates; worth engaging with critically
- The “turning everyone into a speculator” argument about removing safe gold holdings connects to Bitcoin adoption narratives
Entities Mentioned
- Federal Reserve — the institution that operates the post-gold monetary system
- Paul Volcker — implicit (he was at Camp David in 1971)
Concepts Mentioned
- Nixon Shock — the event this piece evaluates
- Stagflation — part of the post-1971 inflation record
Notes
UFM Market Trends is a libertarian/Austrian economics publication; strongly biased toward gold standard and hard money. Daniel Fernández is a PhD economist but writing from an ideological perspective. The data points are factually accurate but the causal interpretation (gold standard caused good outcomes rather than gold-era historical conditions) is contested. Good for understanding the hard-money critique; not appropriate as a neutral source.