Investment Outlook September 2021

03 September 2021

The 15 August 2021 marked the 50-year anniversary of President Nixon taking the US off the “Gold Standard” - a monetary system whereby foreign central banks and governments could exchange their US dollar cash holdings into gold. By breaking the link with gold, commonly known as the “Nixon Shock”, the US could expand its money supply without being constrained by how much bullion was held in reserves. Essentially, this move to a pure fiat money-based regime made it easier to issue more debt to finance growth. President Nixon would not have known it at the time, but that momentous event enabled the US authorities to swiftly deliver unprecedented fiscal and monetary stimulus to support the economy during the pandemic nearly 50 years later. This has led to a very different business cycle from the past in two key ways.

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