Fifty-Five Years of Fiat Failure

Fifty-five years after Richard Nixon closed the gold window on August 15, 1971, Peter Schiff argues that the decision was not a bold reform but a default that turned U.S. currency into what he calls monopoly money. In his telling, the consequences of that break have compounded ever since, and a far more painful inflationary reckoning now lies ahead.

Peter Schiff explains that the dollar was once a fixed weight of gold, and that the Federal Reserve’s paper notes were redeemable for gold by foreign governments until 1971. That promise acted as a discipline on federal spending: without gold backing, the government could not borrow and print without limit. Nixon faced a choice between harsh deflation, a major devaluation, or default, and he chose to close the window, a move that proved permanent.

According to Peter Schiff, the fallout was severe. Gold rose from $35 an ounce to $850 by 1980, oil climbed from under $3 to nearly $40 a barrel, and the economy endured stagflation. The loss of purchasing power forced many American households into two-income arrangements, and the dollar lost roughly 70% of its value against other currencies before stabilizing under Paul Volcker and Ronald Reagan.

Peter Schiff warns that unbacked money fostered long-term structural damage, including the hollowing out of U.S. manufacturing, a shift from saving to borrowing, and a national debt that has soared from under $400 billion in 1971 to over $28 trillion today. He contends that current quantitative easing dwarfs the 1960s program and that gold remains as underpriced now as it was in 1971.

Peter Schiff concludes that the world will eventually move off the dollar standard, with even more devastating consequences for Americans, and he urges listeners to convert their fiat holdings into physical gold before that happens.

Key takeaways

• Peter Schiff argues Nixon’s 1971 closing of the gold window was a default, not a reform, that turned the dollar into unbacked paper.
• Without gold discipline, the government and Federal Reserve could fund deficits through money creation, which Schiff says fueled the 1970s inflation.
• According to Peter Schiff, gold rose from $35 to $850 an ounce by 1980, and oil rose from under $3 to nearly $40 a barrel.
• Peter Schiff links the loss of purchasing power to the decline of the American middle class and the shift from industry to low-wage service jobs.
• He cites the national debt growing from under $400 billion in 1971 to over $28 trillion, and warns of an inflationary collapse ahead.
• Peter Schiff advises converting fiat currency into physical gold before the world moves off the dollar standard.