Closing the Gold Window Opened the Door to Modern Monetary Theory (MMT)

This year marks the 50th anniversary of the end of the gold standard in the U.S. In August 1971, President Richard Nixon formally unpegged the U.S. dollar from gold, meaning the greenback was no longer convertible into bullion. Overnight, the dollar became a free-floating currency, measurable only by comparing it to other world currencies.

And yet there were still restrictions on private ownership of gold coins, bars and the like. It wouldn’t be until President Gerald Ford signed a bill in December 1974 that Americans could freely buy and trade bullion, for the first time in over 40 years.

A lot happened as a result. Its price no longer fixed, gold exploded 385% from the end of 1974 to 1980, when the metal topped out at $850 an ounce as the U.S. coped with historical levels of inflation.

Over the past 50 years, gold has expanded more than 46 times, with a compound annual growth rate (CAGR) of about 8%.

2021 marks 50 years since Nixon closed the gold window
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The ability to trade gold freely has obviously been good for investors. Today, gold bullion is one of the most liquid assets in the world, its daily volume standing at more than $145 billion, according to the World Gold Council (WGC). Only the S&P 500 and U.S. Treasuries trade more—but not by much.