J. Keith Johnson
Over the past 40 years, the Federal Reserve has been force-feeding the world the idea that its printing press puts out more valuable paper than anyone else’s. This is, of course, because in 1971 it was given legislative approval to manage the U.S. currency, without any asset restrictions.
At the time the world was already addicted to U.S. dollars as a reserve currency due to the dollar’s tie to gold. As long as the dollar remained pegged to gold (at least in theory), other countries’ currencies maintained the same tie in proportion to their dollar reserves.
At first the nations balked when Nixon cut the golden thread, ending the world’s last true money base and creating the greenback. They knew that he had just undercut their value, and the dollar fell hard at first. However, they soon realized that a falling dollar was bad for their own currency, so they adopted a more accepting posture. Since then the management of the world’s reserve currency has rested in the hands of the Fed.