The earth was suffering from a massive abundance of dollars in 1971. The world was being flooded with money by British international investment and assistance, as well as US government policies that were inflationary.
The earth had too little golden at the same time, especially the United States. That was a problem because, unlike today, exchange rates did n’t float freely on markets. Money were to be exchanged for gold for$ 35 an ounce. ( The currencies of other countries were fixed-rate pegged to the dollar. )
Europeans were frantically attempting to exchange money for metal or exchange them for other currencies. With the US progressively unable to fulfill its responsibility, traders expected devaluation.
President Richard Nixon halted the economy’s conversionibility into gold in August of that year in response to the money crisis.
Despite a later established devaluation, speculators continued to attack the money. By 1973, the gold standard and resolved exchange rates were past.
Nixon’s Treasury Secretary John Connally made a wonderfully cynical post that is frequently quoted yet now during the devaluation negotiations in 1971. Connally stated to foreigners,” The money is your problem, but ours.”
In an unexpected way, the money was likewise my problem. In 1971, I was the 24-year-old minesweeping and offer agent on the USS Pivot. The Nixon administration decided to pay for basic rights that by granting Pivot and several other US Navy minesweepers as pay for the money problems.
In preparation, the Pivot’s captain tasked me with teaching our crew Spanish – a language that I did n’t know and that the crew turned out to be uninterested in learning. I called the Pentagon in a desperate attempt to find someone there who could help me compile a lengthy list of minesweeper conditions in Spanish. By pointing at their mimeographed files of the list, the crew successfully overcame the language barrier.
These weeks a strong money is, in many ways, everybody’s issue. It’s particularly difficult for international places.
International Monetary Fund research last year concluded that for emerging-market economies,” a 10 % U. S. dollar appreciation, linked to global financial market forces, decreases economic output by 1.9 % after one year, and this drag lingers for two and a half years”. Development-developed nations are worst hit by their ballooning local currency principal and interest duty.
Higher interest rates are a possible issue for the Federal Reserve Board and Fed Chair Jerome Powell, if that’s one of the reasons for a stronger money. Donald Trump, the president-elect, wants more authority over the Federal Reserve, weaker currencies, and lower interest rates. However, the Fed will keep rates higher, which will tend to keep the buck powerful, if his policies are as many economists and investors predicted. In such a case, Powell may find himself in Trump’s sights again.
A stronger money would be no joy for US exporting companies, pretty little including agriculture. Without the money dwindling more, it’s difficult enough to engage with Brazil and other ag-exporting nations.
The money appears to be strengthening further. Since April 2022, the US Dollar Index has been in solid country, rising above 100, and rising since soon September. Despite the mayor’s choices, Wall Street is betting that it will expand under a Trump presidency.
Trump has significantly reassured markets by appointing hedge-fund director Scott Bessent as treasurer. In recent days, the money and long-term interest rates have both increased slightly. Wall Street’s fears about prices have been fueled by the promise of enormous tariffs. Bessent has criticized taxes less heavily, claiming that they can serve as a bargaining chip and that coordination should be done with US friends.
Bessent furthermore, however, has promised to keep the economy’s position as the nation’s reserve currency. That’s a good thing for any government minister to perform, reserve-currency position affords the US many advantages. Keep in mind, though, that it is one of the factors the money is therefore often strong. With so much of the world’s business and assets denominated in dollars, there’s nearly always require for the divine buck.
Connally was half-right, the money is really our money. But it’s not just their difficulty. It’s about everybody’s.
Past lifelong Wall Street Journal Asia journalist and editor , Urban Lehner , is writer professor of DTN/The Progressive Farmer.
This , content,  , initially published on December 2 by the latter news business and then republished by Asia Times with authority, is © Copyright 2024 DTN/The Progressive Farmer. All rights reserved. Follow , Urban Lehner , on , X @urbanize ,