Decisions made in the past can affect the future. In the case of cryptocurrencies in the United States, it is easy to realize this. Indeed, their development and their establishment in the country are the consequence of a decision taken by Richard Nixon in 1971. During this year, he announced that the United States would no longer agree to exchange dollars held by foreign governments for gold. Among other things, this decision has had the effect of encouraging a marked increase in the rate of adoption of cryptocurrencies in the country many decades later. Explanations.
A landmark decision
50 years ago, the 37e US President Richard Nixon told the world that his country was unable to continue to have a control over the global monetary system as he did in the past. It was as if he was asserting that the United States would remain the most important economic power, but that it would be unable to continue to ensure its dominance.
In truth, Nixon’s announcement was arguably one of the most difficult he has made. Indeed, recognizing that the United States is weak is not easy. That being said, in the context of the time, the President did not really have a choice, since the confidence in the dollar had been shaken due to rising inflation. Moreover, the gold reserves in the vault of Fort Knox were quickly depleting.
Certainly, Nixon had asserted that his decision to “close the gold window” was only temporary, but it wasn’t. Indeed, this decision marked the 19th century and its effects continue to this day. All things considered, Nixon’s announcement sounded like a confession: The economic system was out of breath and had to be reinvented.
A world that has become unstable, but fortunately cryptos…
After Nixon made the decision to turn his back on gold, several economists expressed their joy. According to them, the consequences would only be positive. They thought, for example, that the end of fixed exchange rates would lead greater price stability as well as low inflation. However, not everything went exactly as planned. On the contrary, the situation has deteriorated.
In the absence of the dollar as the axis of the international economic system, inflationary pressure has intensified. And since oil was traded on the basis of the dollar, the devaluation of the American currency led to a price increase. The banks then tried to react by creating money by buying bonds. Trillions of dollars have been injected into the global economy over the past decade. However, all of this turned out to be ineffective.
Nixon did not know this, but his decision in 1971 gave birth to a world of financial markets with unstable prices and geopolitical tensions. Above all, confidence in central banks has begun to crumble. And since then, cryptocurrencies have emerged as an alternative to support the market.
In 1971, US President Nixon made one of the most important decisions in the United States; a decision whose effects are being felt to this day. By choosing to end the exchange of dollars for gold held by foreign governments, Nixon has created an unstable financial world in which cryptocurrencies now appear as useful solutions.
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