The “fictitious capital” that worried Marx over 130 years ago has exploded, especially over the last 40 years. In 1971, Nixon suspended the convertability of dollars into gold and brought about the end of the Bretton Woods agreement. The connection between currency and metal reserves was broken. In the words of Philip Coggan, “From that point on, the final link with gold was removed and the ability of governments to run deficits, on both trade and budget accounts, was vastly increased. Money and debt exploded.” Yet the problem was not so much that money was no longer rooted in gold or silver. Although their value appears to be “natural” or intrinsic, the value of metals is just as much a social construct as paper. What the metallic anchor had ensured, however, was that there was a built-in limit to the system, determined by the natural scarcity of gold.
- Emily Gilbert, Currency in Crisis