Inflation In America

Labor day 1971 Richard Nixon made big promises to Americans, he said in his speech “ I call upon all Americans to dedicate ourselves to a goal we have rarely been able to achieve in the past 40 years- a new prosperity without war and without inflation,” (Address to the Nation on Labor day, 1971). Forty six years later and we have strayed further from that path in America. This is because he took us off the gold standard. The gold standard is a system in which money is backed with gold. Taking the United states off the gold standard caused inflation rates to rise. Inflation is a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency. Inflation rates …show more content…
Foreign investment threatened this system, foreign aid, and military spending. Also because of the United states economic standpoint at the time countries were threatening to turn in their U.S dollars for gold and Nixon did not want that to happen. Trying to support the dollar and sustain the bretton woods agreement Lyndon B. Johnson did a series of things, “Foreign investment disincentives; restrictions on foreign lending; efforts to stem the official outflow of dollars; international monetary reform; and cooperation with other countries. Nothing worked,” ( Nixon, n.d.). Since nothing worked we were taken off the gold standard. Being taken off the gold standard caused problems. Since being removed from the gold standard we have been through three economic recessions. The unemployment rate is above ten percent. Economic growth has also slowed to below 3 percent. It was a contributing factor to the oil shock of 1973. The oil shock of 1973 is when the members of the Organization of Arab Petroleum Exporting Countries proclaimed an oil embargo causing the prices of a barrel of oil to go from three dollars a barrel to nearly twelve dollars. It also contributed to the worse financial crisis since the great depression, the financial crisis of 2008-09. The United States dollar is now a fiat currency. Fiat currency is money established by the government not backed by commodities, such as gold. Rather, fiat currency is back by the relationship between supply and demand. There are many disadvantages to using fiat currency. One is the government's ability to print up money when they want allowing the government to get resources from people and slightly inflate the money. Another problem with fiat currencies is they lose value over time. This is due to the fact that every year money is printed up to replace the money lost in circulation but, most of the