From SpiegelOnline
Creating Money out of Thin Air
''Until 1971, gold was the benchmark of the US dollar, with one ounce
of pure gold corresponding to $35, and the dollar was the fixed
benchmark of all Western currencies. But when the United States began to
need more and more dollars for the Vietnam War, and the global economy
grew so quickly that using gold as a benchmark became a constraint,
countries abandoned the system of fixed exchange rates. A new phase of
the global economy began, and two processes were set in motion: the
liberation of the financial markets from limited money supplies, which
was mostly beneficial; and the liberation of countries from limited
revenues, which was mostly detrimental. This money bubble continued to
inflate for four decades, as central banks were able to create money out
of thin air, banks were able to provide seemingly unlimited credit, and
consumers and governments were able to go into debt without restraint.''
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