Monday, August 15, 2011
Are credit rating agencies credible?
Recently Standard & Poor's downgraded the US' credit score, but people are wondering if this downgrade really means anything? These same agencies gave Lehman Brothers and Bear Stearns excellent credit ratings. What drives the interests of these credit rating agencies? Do they have their own agenda? Karl Denninger, from The Market Ticker, gets to the bottom of this.
40th Anniversary of Nixon closing the Gold Window
Today is the 40th anniversary of Nixon ending the Brenton Woods agreement by the halting convertibility of the US dollar into gold. The 40th anniversary is particularly relevant as the average lifespan of the 3,800 fiat currencies that have been tried is 40 years.
Some background to the 'closing of the Gold Window':
The President of France Charles De Gaulle fearing a future default by the USA on its gold backed dollars instructed the Banque de France to increase the rate at which new US dollars holdings were converted into gold bullion. De Gaulle sent the French navy across the Atlantic to hand over US dollars and bring back gold bullion in exchange. In 1965 alone, the French navy ferried back over $150 million of gold bullion thereby increasing the proportion of French national reserves held in gold from 71.4% to 91.9%.
Due to inflationary pressures on the US$ as a result of printing to many dollars and foreign borrowings to fund the Indo-China (Vietnam) war on August 15, 1971, President Nixon imposed a 90-day wage and price freeze, a 10 percent import surcharge, and, most importantly, “closed the gold window”, ending convertibility between US dollars and gold.
Nixon announcing to the American people that the US Dollar is no longer 'good as gold':
For some light relief, Dr. Ron Paul and some struggling paper bug:
Some background to the 'closing of the Gold Window':
The President of France Charles De Gaulle fearing a future default by the USA on its gold backed dollars instructed the Banque de France to increase the rate at which new US dollars holdings were converted into gold bullion. De Gaulle sent the French navy across the Atlantic to hand over US dollars and bring back gold bullion in exchange. In 1965 alone, the French navy ferried back over $150 million of gold bullion thereby increasing the proportion of French national reserves held in gold from 71.4% to 91.9%.
Due to inflationary pressures on the US$ as a result of printing to many dollars and foreign borrowings to fund the Indo-China (Vietnam) war on August 15, 1971, President Nixon imposed a 90-day wage and price freeze, a 10 percent import surcharge, and, most importantly, “closed the gold window”, ending convertibility between US dollars and gold.
Nixon announcing to the American people that the US Dollar is no longer 'good as gold':
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