“The Value Of The Dollar Has No Guarantee Whatsoever”

value dollar

The statement above is of course totally accurate for a country running budget and trade deficits for over half a century with a total debt, including unfunded liabilities, in the hundreds of trillions of dollars.

It could have been said today, but it actually dates back to August 1971 when the People’s Daily in China declared the beginning of the end for the monetary system of the capitalist world.

This prescient statement certainly has Cassandra characteristics. Cassandra was the princess of Troy who was given the gift to make prophecies that were true but no one believed. The Chinese government saw already 48 years ago that Nixon’s decision to end the gold backing of the dollar would be the end of the dollar and the Western monetary system. No one believed their prophecy at the time. But they are being proven right.


Starting my working life in a Swiss Bank in Geneva two years before Nixon’s fatal decision, I have experience of that fall of the dollar that the Chinese predicted. In 1970, there were 4.30 Swiss francs to the dollar. Today you get just under one Franc for one US$. That is a catastrophic collapse of 77% of the world’s reserve currency in almost 50 years. If we look at the graph of the dollar against the Swiss franc below, we can see that this currency pair has been in a long consolidation at the bottom since 1987.

The next leg down in the dollar is not far away and the target over the next few years could be anywhere between 0.40 and 0.00 Swiss francs. This means a further fall of 60% to 100% could take place, making the dollar worthless. This confirms Voltaire’s statement that “all currencies eventually reach their intrinsic value of ZERO”. We know that this move to zero is virtually guaranteed measured against gold. But more surprising is that it could also happen against the Swiss currency. The Swiss banking system and the Swiss National Bank also have serious problems, so eventually the franc is likely to reach almost zero against gold too. But the dollar will win that race.


The People’s Daily is the most influential and authoritative newspaper in China. It has been the official voice of the central government of the People’s Republic of China for the last 71 years.

The paper declared in 1971 when Nixon closed the gold window: “These unpopular measures reflect the seriousness of the US economic crisis and the decay and decline of the entire capitalist system.”

The paper further stated that the measures “mark the collapse of capitalist monetary system with the US dollar as its prop” and that “Nixon’s new economic policy cannot extricate the US from financial and economic crisis.” The article predicted instead that the measures would intensify the crisis.

Nixon declared in 1971: “The time has now come for a new economic policy in the United States. Its targets are unemployment, inflation, and international speculation. And this is how we are going to attack those targets……. The time has come for decisive action – action that will break the vicious circle of spiralling prices and costs.”


The Chinese understood already in 1971 that Nixon’s decision would have disastrous consequences, contrary to what Nixon declared. So here we are today with galloping inflation (including asset prices), collapsing currencies and exploding debts. All the things that Nixon said he would prevent.

Nixon stated further in his speech: “We must protect the position of the American dollar as a pillar of monetary stability around the world……..I am determined that the American dollar must never again be a hostage in the hands of international speculators.”

Little did he understand that his decision would have the opposite effect. Without gold backing, the dollar was not in the hands of speculators but instead in the hands of the US government and the Federal Reserve. And that is why the dollar has, since 1971, lost 97% against real money, which is gold, 57% against the DMark/Euro and 77% against the Swiss Franc.

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