August 15th 1971. The Nixon Shock. When finance took over the global decision making...

August 15th 1971, exactly 40 years ago the Nixon administration, by stopping to back the dollar with gold, made a decision that would affect the dynamics of financial and currency markets forever. What this meant in practical terms (easy to understand also for the many of us unfamiliar with the technicalities of the financial world) is that since then the value of money it begun to be set not by the actual material wealth of a nation, but simply by market opportunistic and speculative factors. Its dangerous unpredictable effects started to show right away (as detailed by the following paragraph from an article written by Roger Lowenstein, recently featured on Businessweek and titled: "The Nixon Shock. How Nixon stopped backing the dollar with gold and changed global finance, a 40-year-old decision that still echoes in Greece, Ireland, and the U.S." ):

"The Nixon Shock was a central cause of the Great Inflation. It also spelled the end of the fixed relationships that had governed the financial universe. Previously, people took out mortgages for set periods and at fixed rates. They had virtually no options for saving money other than in banks, and the interest rates that banks could pay were capped. Floating currencies unleashed a new world of risk and instability. For the first time, investors could bet on the direction of interest rates or the Swiss franc. New financial instruments, new speculative tools, proliferated. The world gravitated from the certainties of Bretton Woods to the dizzying market cycles we’ve lived with since. Donald Kohn, who joined the Fed in 1970 and retired last year as vice-chairman, thinks Bretton Woods was doomed. But bankers have yet to find as rigorous a standard as gold. And they have become ever more apt to please politicians, deferring recessions at the risk of inflating asset bubbles."

Nowadays when the entire globe finds itself confused, uncertain and totally in the hands of the unpredictable, complex behavior of financial markets, we should reflect upon this and link it up to that decision. A decision that basically created a world of finance free to express itself in 'playing with money just for the money sake'. Money becoming no longer a mean to achieve economic and social progress; money becoming an end in itself, numbers generated on a computer screen. Consequently, money becoming the root of an artificial prosperity that nowadays clashes with reality generating the suffering and uncertainties experienced by most of us.

Certainly we cannot go back and reverse that decision; by now the world of finance has taken over and it is managing decisions taken not only by companies but also by countries. What can we do? I think that first of all we should show to our politicians, bankers and the like that we actually understand what is happening and that we no longer what to be part of it. One way to do it is by marginalizing as much as possible the role of financial capital in our lives, defying the materialistic choices corporations have been pushing us to make through their marketing. We need to restore a kind of healthy frugality that helps us to get more in touch with our inner self and we need to do it driven not by the fear of markets and news but by a positive intent to finding ways to regain control of our lives and our future.