In 1973, the Nixon administration eliminated the last vestiges of the Bretton Woods gold standard and transitioned the U.S. to a fiat dollar. Given the mind-boggling cost of this economic error, it is tragic (although not surprising) that Keynesians are currently recommending higher inflation as a solution to the economic woes of both the U.S. and Europe.
The latest detailed numbers from the Bureau of Economic Analysis (BEA) cover the years 1951 – 2010, so let’s use these to examine the economic cost of fiat money.